1. What is the extent of the taxing
What are the common limitations
power of the LGU?
Answer:
Sec. 120 provides that each local
government unit shall exercise its power
to create its own sources of revenue and
to levy taxes, fees, and charges subject
to the provisions herein, consistent with
the basic policy of local autonomy. Such
taxes, fees, and charges shall accrue
exclusively to the local government units.
2. Can the LGU impose penalties for
the non-payment of taxes?
Answer:
Yes. Under Section 516, the sanggunian
of a local government unit is authorized
to prescribe fines or other penalties for
violation of tax ordinances but in no case
shall such fines be less than One
thousand pesos (P1,000.00) no more
than Five thousand pesos (P5,000.00)
nor shall imprisonments be less than one
(1) month nor more than six (6) months.
Such fine or other penalty, or both, shall
be imposed at the discretion of the court.
The sanggunian barangay may prescribe
a fine of not less than One hundred
pesos (P100.00) nor more than One
thousand pesos (P1,000.00).
3. What is your understanding of pre-
emption or exclusionary rule
Answer:
Preemption in taxation refers to an
instance wherein the National
Government elects to tax a particular
area, impliedly withholding from the local
government the delegated power to tax
the same field. This doctrine principally
rests upon the intention of Congress.
Conversely, should Congress allow
municipal corporations to cover fields of
taxation it already occupies then the
doctrine of pre-emption will not apply.
4. Is there pre-emption between the
NIRC and the LGC
5.
of the exercising power of the
LGU?
Answer:
Sec. 133 of the LGC prescribes a number
of statutory limitations on the local taxing
power. Known as “common limitations”
because they apply to all local
government units i.e. provinces, cities,
municipalities and barangays, these are
actually taxes or impositions which said
Code excludes from the taxing power of
LGUs.
These are:
a. Income tax except when levied on
banks and other financial
institutions;
b. Documentary stamp tax;
c. Taxes on estates, inheritance,
gifts, legacies and other
acquisition mortis causa except as
otherwise provided in the LGC;
d. Custom duties, registration fees of
vessels and wharfage on
wharves, tonnage dues and all
other kinds of customs fees,
charges and dues except
wharfage on wharves constructed
and maintained by the LGU
concerned;
e. Taxes, fees, and charges and
other impositions upon good
carried into or out of, or passing
through, the territorial jurisdictions
of the LGU in the guise of charges
for wharfage, tolls for bridges or
otherwise, or other taxes, fees or
charges in any form whatsoever
upon such goods or merchandise;
f. Taxes, fees or charges on
agricultural and aquatic products
when sold by marginal farmers or
fishermen;
g. Taxes on business enterprises
certified by the Board of
Investments as pioneer or non-
pioneer for a period of six (6) and
 four (4) years, respectively, from
the date of registration.
h. Excise taxes on articles
enumerated under the NIRC, as
amended, and taxes, fees or
charges on petroleum products;
i. Percentage or value-added tax
(VAT) on sales, barters or
exchanges or similar transactions
on goods or services except as
otherwise provided herein;
j. Taxes on the gross receipts of
transportation contractors and
persons engaged in the
transportation of passengers or
freight by hire and common
carriers by air, land or water,
except as provided in the LGC;
k. Taxes on premiums paid by way
of reinsurance or retrocession;
l. Taxes, fees or charges for the
registration of motor vehicles and
for the issuance of all kinds of
licenses or permits for the driving
thereof, except tricycle,
m. Taxes, fees or other charges on
Philippine products actually
exported, except as otherwise
provided in the LGC
n. Taxes, fees or charges on
countryside and barangay
business enterprises and
cooperatives duly registered
under RA 6810 and RA 6938,
otherwise known as the Magna
Carta for Countryside and
Barangay Business Enterprises”
and “Cooperatives Code of the
Philippines,” respectively; and
o. Taxes, fees or charges of any kind
on the National Government, its
agencies and instrumentalities,
and LGUs
These excluded impositions may be
classified into the following categories:
1. Taxes, which are levied under the
NIRC. These are pre-empted
taxes except in some cases.
2. TFC, which are imposed under the
Tariff and Customs Code and
other special laws. Preemption
applies in this instance also.
3. TFC, where the imposition of
which contravenes existing
governmental policies or which
are violative of the fundamental
principles of taxation.
4. TFC imposed under special laws
Fundamental Principles of Local Taxing
Power
1. Principles which are either
inherent of constitutional
limitations on the taxing power, in
general –
a. Uniformity of taxation
b. Equitability and progressivity
of taxation;
c. Public purpose of taxes; and
d. Taxes must accrue exclusively
to the benefit of the LGU.
2. Principles which are statutory in
origin –
a. Local taxes must not be unjust,
excessive, oppressive or
confiscatory;
b. They must not be contrary to law,
public policy, national economic
policy or in restraint of trade; and
c. The collection of local taxes, fees,
charges and other impositions
shall in no case be let to any
private person.
6. Who is authorized to collect local
taxes? May that officer can also
compromise?
Answer:
Under Section 170, all local TFC shall be
collected by the provincial, city,
municipal, or barangay treasurer, or their
duly authorized deputies.
The provincial, city or municipal treasurer
may designate the barangay treasurer as
his deputy to collect local TFC. In case a
bond is required for the purpose, the
provincial, city or municipal government
shall pay the premiums thereon in
addition to the premiums of bond that
may be required under this Code.
General Rule. No
Exception. Under Section 148 on fees for
sealing and licencing of weights and
measures, the sanggunian concerned
may authorize the municipal treasure to
settle an offense not involving the
commission of fraud before a case
therefor is filed in court, upon payment of
a compromise penalty of not less than
two hundred pesos (P200.00)
7. Assessment of Local taxes (hindi
alam yun buong question)
8. Statute of limitation of collection
and assessment of the taxes, fees
and charges (TFC)
Answer:
Under Sec. 194 of the LGC, the following
are the statute of limitations in Local
Taxation:
a. Prescriptive Period of
Assessment. Local TFC shall be
assessed within 5 years from the
date they become. No action for
collection of such TFC whether
administrative or judicial shall be
instituted after the expiration of
such period.
b. Prescriptive Period of Collection.
Local TFC may be collected within
5 years from the date of
assessment by administrative or
judicial action. No such action
shall be instituted after the
expiration of such period.
c. Suspension of the Running of the
Prescriptive Period. The running
of the periods of prescription
stated above shall be suspended
for the time during which
(1) the treasurer is legally
prevented from making the
assessment or collection of the
tax;
(2) the taxpayer requests for a
reinvestigation and executes
waiver in writing before the
expiration of the period within
which to collect; and
(3) the taxpayer is out of the
country or otherwise cannot be
located
9. Scope of the taxing power of the
LGUs
10. Do barangay have taxing power?
Answer:
Yes. Barangay may levy TFC, as
provided in Article 4, Title 1, Book 4 of the
LGC, which shall exclusively accrue to
them:
1. Taxes. On stores or retailers with
fixed business establishments
with gross sales or receipts of the
preceding calendar year of
P50,000.00 or less, in the case of
cities and P30,000.00 or less, in
the case of municipalities, at a rate
of not exceeding 1% on the gross
sales or receipts.
2. Service Fees or Charges BRGY
may collect reasonable fees or
charges for services rendered in
connection with the regulation or
the use of barangay-owned
properties or served facilities such
as palay, copra, or tobacco dryers.
3. Barangay Clearance. No city or
municipality may issue any
licence or permit for any business
or activity unless a clearance is
first obtained from the barangay
where such business or activity is
located or conducted. For such
clearance , the sangguniang
barangay may impose a
reasonable fee. The application
 for clearance shall be acted upon
within 7 working days from the
filing thereof. In the event that the
clearance is not issued within the
said period, the city or municipality
may issue the said license or
permit.
4. Other fees and charges. The
barangay may levy reasonable
fees and charges:
a. On commercial breeding fighting
cocks, cockfights and cockpits;
b. On places of recreation which
charge admission fees; and
c. On billboards, signboards, neon
sign, and outdoor advertisements.
11. What are the requisites for a valid
ordinance?
Answer:
An ordinance to be valid, it must not only
be within the corporate powers of the
local government unit to enact and must
be passed according to the procedure
prescribed by law, it must also conform to
the following substantive requirements:
a. must not contravene the
Constitution or any statute;
b. must not be fair or oppressive;
c. must not be partial or
discriminatory;
d. must not prohibit by may regulate
trade;
e. must not be unreasonable; and
f. must be general and consistent
with public policy
The following are the important
requirements that govern the enactment
of local tax ordinances:
a. The LGC mandates that the
procedure for the approval of local
tax ordinances and revenue
measures should be in
accordance with the provisions of
said Code, meaning to say, the
procedure applicable to local
government ordinances, in
general, shall also apply to tax
ordinances – Sec 187.
The procedural details bearing on
local ordinances in general relate
to matters like the necessity of a
quorum in various sanggunian or
local legislative councils,
submission for approval of the
ordinance to the local chief
executive , the matter of veto and
overriding the same as well as
their publication and effectivity –
Secs 54, 55 abd 59.
b. Public hearings are required
before nay local tax ordinance
may be enacted – Sec 187.
c. Within 10days after their approval,
certified copies of all provincial,
city and municipal tax ordinances
or revenue measures are
published in full for 3 consecutive
days in a newspaper of local
circulation.
However, in provinces, cities,
municipalities and barangays
where there are no newpapers of
local circulation, the same may be
posted in at least 2 conspicuous
and publicly accessible places –
Sec 188
d. Copies of all provincial, city,
municipal and barangay tax
ordinances and revenue
measures shall be furnished to the
respective local treasurers for
public dissemination – Sec 189.
LOCAL TAXATION
 Consti Basis
- Art. X, 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 - Taxing of LGUs shall not extend to
the local governments. levy of ff:
 Provided that taxes, fees, or 1. Income tax, except when levied on
charges shall not be unjust, banks and other financial
excessive, oppressive, institutions;
confiscatory or contrary to 2. Documentary stamp tax
declared national policy 3. Taxes on estates, inheritance,
 Provided that the gifts, and other acquisitions mortis
ordinance levying such causa
TFC shall not be enacted 4. Customs duties and all other kinds
without any prior public of customs fees, except wharfage
hearing conducted for the on wharves constructed and
purpose maintained by the LGU
 Fundamental principles 5. TFCOI upon goods carried into or
a. Taxes shall be uniform in each out of territorial jurisdictions of
LGU; LGU
b. TFC and other impositions shall 6. TFC on agricultural and aquatic
be equitable, for public purpose, products sold
not confiscatory and not be 7. Taxes on business enterprises
contrary to law; certified to by Board of
c. Collection of local TFCOI shall not Investments
be let to ant private person; 8. Excise taxes on articles
d. The revenue collected shall inure enumeration in NIRC
solely to the benefit of the LGU 9. Percentage or VAT on sales or
levying; and similar transactions
e. Each LGU shall evolve a 10. Taxes on gross receipts of
progressive system of taxation transportation
 The power to impose TFC and to 11. Taxes on premiums paid
generate revenue under the Code 12. TFC for registration of motor
shall be exercised by the Sanggunian vehicles and issuance of all kinds
of the LGU concerned through an of licenses
appropriate ordinance 13. TFC on PH products exported
 Dissatisfied taxpayer question validity 14. TFC on cooperatives and
1. File appeal to Sec of Justice within 30 enterprises
days from effectivity 15. TFC on any kind of National
1.1. In case Sec decided the Government
appeal, 30 days for the  Taxation is the rule and exemption is
aggrieved party to go to court the exception
1.2. If Sec did not act on the - Intention to make an exemption must
appeal, 60 days after the party be expressed in clear and
can already go to court unambiguous terms
 Public hearings are required to be - Burden is on person claiming
conducted prior to enactment of  Kinds of Franchise Tax
ordinance imposing taxes 1. Franchise tax in lieu of all other taxes-
- However, in accordance with based on special laws/ special
presumption of validity in favor of franchises
ordinance, legality should be upheld 2. Local franchise tax under Sec. 137 of
in the absence of evidences against LGC- rate not exceeding 50% of 1%
 Burden of proof is on party of gross annual receipts for preceding
asserting unconstitutionality calendar year
 Common Limitations on Taxing  Upon effectivity of LGC on Jan. 1,
Power of LGUS 1992, all exemptions granted before
 are revoked except those mentioned
in Sec. 193
 Transfer Taxes (Tax on Real
Property)
1. Province- may impose 50% of 1% of
FMV or total consideration involved
on a sale or any other mode of
transferring ownership
2. City- may exceed maximum rates
allowed for province by not more than
50%
3. Municipality- cannot impose transfer
tax on real properties
 Common Revenue-Raising Powers
1. Service Fees and Charges
2. Public Utility Charges
3. Toll Fees or Charges
 Cities or municipalities may levy a
community tax
- Persons liable:
1. Individuals (18 or over):
 Regularly employed for at least 30
consecutive working days during
any calendar year
 Engaged in business
 Own real property with an
aggregate assessed value of
1000php
 Required by law to file income tax
return
 5php- annual community
tax
 1php- plus for every
1000php
 Not to exceed 5000php
2. Juridical persons
 Domestic corporation
 Resident foreign doing business
 500php- annual community tax
plus
 2php- for every 5000php worth
of real property owned during
the preceding year
 2php- for every 5000php of
gross receipts derived from
business during the preceding
year
3. Persons exempted
 Diplomatic and consular
representatives
 Transient visitors staying not more
than 3 months in Philippines
- Place of Payment
1. Place of residence of individual
2. Place where principal office of
juridical entity is located
- Community tax certificate shall be
issued to every person or corporation
upon payment
 Professional Tax
- Province may levy annual
professional tax engaged in practice
of profession requiring government
examination at amount to be
determined by sangguniang
panlalawigan in no case shall exceed
300php
- Every person authorized to practice
profession shall pay professional tax
to:
 Province where he practices
profession
 Where he maintains his principal
office in case of several places
 Those employed shall pay tax on
his profession before employment
and annually thereafter
 Professional tax shall be paid on
31st of January. Any person first
beginning to practice after
January shall pay the full tax
before engaging. Government
professional are exempted
 Person subject shall write the
number of official receipt issued to
him
TAX ORDINANCE
 Procedure for Approval
1. Public hearings
2. Appeal, if any, must be made
within 30 days from effectivity to
the Sec of Justice
3. Such appeal shall not have effect
of suspending effectivity of
ordinance
4. Within 30 days after receipt of
decision or lapse of 60days with
the Sec acting, aggrieved can file
with the court
5. File declaratory relief under Rule
63 of ROC
6. Within 10 days after approval,
CTC of tax ordinances shall be
published in 3 consecutive days in
newspaper of general circulation
 Attempt to enforce void tax ordinance 2. Tax on business of printing and
shall be sufficient ground for publication
administrative sanctions 3. Franchise tax
 LGUs may, through ordinance, grant 4. Tax on sand, gravel and other quarry
tax exemptions, incentives or reliefs resources
5. Professional tax
REAL PROPERTY TAXATION 6. Amusement tax
 Direct tax on ownership of lands and 7. Annual fixed tax for every trucks or
buildings or other improvements producers of certain products
thereon  Municipalities may only impose
 Imposition of real property tax is on taxes not imposed by provinces
LGUs  Barangays can levy taxes:
 Exemptions from Real Property Tax 1. Taxes on stores with gross sales not
1. Real property owned by RP and its exceeding 50k for cities and 30k for
political subdivision municipalities- at rate not exceeding
2. Charitable institutions and all lands, 1%
buildings and improvements ade 2. Service fees or charges in connection
used for religious, charitable or with regulation or use of barangay-
educational purposes owned properties or service facilities
3. Local water districts 3. Barangay clearance for a reasonable
4. All real property owned by duly fee
registered cooperatives under RA 4. Other fees and charges- commercial
6938 breeding of cocks, places of
5. Machinery and equipment used for recreation and billboard
environmental protection advertisements
 LGUs may levy an annual ad valorem
tax on real properties:
1. Province
2. City
3. Municipality within Metro Manila
 Kinds of Real Property Tax
1. Real estate tax
 Province- rate not exceeding 1%
of assessed value of real property
 Metro Manila- rate not exceeding
2% of assessed value of real
property
2. Additional levy on education fund
 Province, City, Metro Manila- not
exceeding 1% of assessed value
3. Additional levy on idle funds
 Province, City, Metro Manila- not
exceeding 5% of assessed value
 May exempt by reason of force
majeure
4. Additional levy on public works
 Province, City, Municipality- not
exceeding 60% of actual cost
 Taxes imposed by Provinces and
Cities
1. Tax on transfer of real property