Taxation Law II
Dean Manuel Quibod
REMEDIES
(Dean decided to have recitations, so Miss Universe and
peg nito. Q&A portion)
Q: If you earned P 1,000,000.00 in a year, and you want to
file the tax on that income, what do file?
A: An income tax return.
Q: How often do you file an income tax return?
A: Quarterly and Annually.
Q: When you are subject to a donors tax, prior to the
payment of the donors tax, what do you usually do for
purposes of paying the donors tax?
A: You file a Donors Tax Return.
Q: When do you file the donors tax return.
A: You file 30 days after making the donation,
Q: If you are an administrator of the estate, and there is a
tax due on the estate of the decedent, what will you do
for purposes of paying the estate tax due?
A: You will first inform the BIR of the death of the
decedent, then file the Estate Tax Return.
Q: For VAT, if you are also subject to an output VAT, how
do you pay the tax?
A: There is a separate tax return for VAT. You file the VAT
return, and pay the VAT on the basis of the return.
Q: What about percentage tax, like if you are a common
carrier, and you have to pay the percentage tax on that
business?
A: You file a percentage tax return.
Q: If you are a manufacturer, and you have to pay an
excise tax, what do you have to do?
A: You file an excise tax return.
Q: When you are subject to the DST, and the amount is
very large, what do you do to pay the DST?
A: You file a DST return.
You have noticed that all internal revenue taxes require
the filing of tax returns, prior to its payment. This brings us
to the principle that taxes in the NIRC are self-assessing
taxes. The BIR will not accept payment for taxes without
proper filing of the return. Together with the filing of the
return, you pay the tax due based on the return filed.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Q: After the filing of the return, does that mean that you
have no obligation anymore to the Government in so far
as your income tax, since you have already complied
with the filing of the return and the payment of the
annual tax?
A: The tax will still be assessed by the BIR to know if you
paid the correct tax or if you have a deficiency.
Q: What will the BIR do after you have filed you return?
A: Upon the submission of the return, the BIR will examine
the return.
Read Section 203.
SEC. 203. Period of Limitation Upon Assessment and
Collection. - Except as provided in Section 222, internal
revenue taxes shall be assessed within three (3) years
after the last day prescribed by law for the filing of the
return, and no proceeding in court without assessment for
the collection of such taxes shall be begun after the
expiration of such period: Provided, That in a case where
a return is filed beyond the period prescribed by law, the
three (3)-year period shall be counted from the day the
return was filed.
For purposes of this Section, a return filed before the last
day prescribed by law for the filing thereof shall be
considered as filed on such last day.
Q: So what is the period within which the BIR is mandated
to make the assessment?
A: Three years after the last day prescribed by law for the
filing of the return.
Q: In income tax return, the deadline is April 15. If you file
your return on April 1, how will you count the three year
period?
A: The period will begin to run on April 16.
Q: If you file the return on May 1, when will you start
counting?
A: It will start on May 2, since in counting periods, we do
not include the first day.
The general prescriptive period within which the
government is given time to make assessments is three
years. No proceeding in court without assessment for the
collection of said taxes shall be begun after the
expiration of the period.
Q: Can the BIR collect the deficiency tax without an
assessment? When the BIR is given three years to assess,
can it collect the deficiency tax collect without an
assessment?
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A: The BIR cannot collect.
Q: Can the BIR collect after the expiration of the three
year period?
A: The BIR can no longer collect. That is precisely the
reason of the law. You cannot go to court to collect the
taxes if there is no prior assessment. In other words, you
can only collect the deficiency tax against the tax payer
if there is an assessment.
After the return has been filed and the three year period
lapses, the government can no longer run after the
taxpayers. If the taxed year is 2012, the income tax
deadline is April 15, 2013. The BIR is given from April 16,
2013 to April 15, 2016 to collect any deficiency tax. If the
BIR informs you of a deficiency finding on April 16, 2016,
that is already barred because it has already prescribed,
So if the BIR would like to assess you of the deficiency, it
should be made within the three year period. Within the
three year period, the BIR cannot start running after you
without any assessment. The taxpayer must first be
notified of the deficiency.
The word assessment does not contemplate only the
period but also the finding of the BIR of the deficiency
after examining the return. The examination, audit and
inspection, will require the taxpayer to surrender not only
the financial statements, but also the books of accounts
and business records. They will also ask the suppliers to
cross-match the purchases that the taxpayer made is the
same figure that you indicated in the return. If there will
be variance, a deficiency will result.
This is what happens to gasoline dealers. The BIR will ask
the dealers how much gasoline they supply to a certain
entity. If the figures will not match, that would be a
source of a deficiency. You will now be assessed of a
deficiency income tax.
Lets read Section 222.
SEC. 222. Exceptions as to Period of Limitation of
Assessment and Collection of Taxes.
(a) In the case of a false or fraudulent return with intent to
evade tax or of failure to file a return, the tax may be
assessed, or a proceeding in court for the collection of
such tax may be filed without assessment, at any time
within ten (10) years after the discovery of the falsity,
fraud or omission: Provided, That in a fraud assessment
which has become final and executory, the fact of fraud
shall be judicially taken cognizance of in the civil or
criminal action for the collection thereof.
Q: Relate this provision with Section 203.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
A: In case of deficiency, the BIR has 3 years to assess the
return. However, in case of false or fraudulent return with
intent to evade tax or of failure to file a return, the BIR
may assess, or a proceeding in court be filed without an
assessment, within 10 years after the discovery of the
fraud.
Q: What do you understand of the provision that allows
the BIR to file an action in court without an assessment?
A: This means that if there is fraud, falsity or an omission to
pay tax, the BIR can file a criminal case against the
taxpayer even without prior assessment. So even if you
have not received an assessment notice yet, the BIR can
proceed to file a case against you.
In this provision, remember that the general prescriptive
period within which to make an assessment is three years.
But in case of false or fraudulent return or failure to file a
return, the assessment will be longer. The BIR is given 10
years. However, in case the BIR omits to make an
assessment during the 3 year period, and still continue on
assessing a taxpayer by merely saying that there is fraud
or falsity in the return filed, that is improper. The BIR
cannot just do that because they have to show that the
false and fraudulent return was done with intent to evade
paying the tax. Again, the BIR could not just say that
there is fraud in order for them not to be affected of the
prescriptive period. The burden now is with the BIR that
there is falsity and fraud and that there is intent to evade
the tax.
It is not at all times that the government will have the
period of 10 years. Only in the cases stated in Section 222.
Read Section 222 (b).
(b) If before the expiration of the time prescribed in
Section 203 for the assessment of the tax, both the
Commissioner and the taxpayer have agreed in writing to
its assessment after such time, the tax may be assessed
within the period agreed upon.
The period so agreed upon may be extended by
subsequent written agreement made before the
expiration of the period previously agreed upon.
So the three year period can be extended so long as the
taxpayer and the commissioner agreed in writing for such
extension. The period so agreed upon can further be
extended by subsequent written agreements, so long as
such agreement was made before the expiration of the
period previously agreed upon.
Q: If the BIR sends an extension notice to the taxpayer
and the taxpayer agrees to and signs the agreement
approving the extension, is that extension valid?
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Dean Manuel Quibod
A: Yes. The extension notice signed by both the taxpayer
and the commissioner complies with the requirement of
the law for a valid extension.
Q: Would the extension be valid even if the extension
notice has no signature of the commissioner, as long as
the taxpayer agreed to it?
A: In an extension, you have the statutory provision that
both the commissioner and the taxpayer have agreed in
writing. The operative act is their signatures. If the
extension agreement was signed only by the taxpayer, it
is not valid (Johnson case).
Johnson case
When the BIR noticed that the period is not enough to
finish the assessment, they sent an extension notice to the
taxpayer. The taxpayer agreed by signing the notice. BIR
again sent another notice of extension, to which the
taxpayer agreed again. A third extension was again sent.
Taxpayer again agreed. After the assessment, BIR sent
the taxpayer a deficiency notice. The taxpayers now
protested saying that the assessment is already barred by
prescription. The BIR contended that there is no need for
the commissioner to sign because the notice is already in
writing.
Supreme Court said no. The provision is not a unilateral
agreement. It is a bilateral agreement. This is a
mandatory provision. So the agreement to extend must
be in writing and signed both by the commissioner and
the taxpayer.
Therefore, the assessment is already barred
prescription.
Q: How many extensions are allowed?
A: As many as you can. But it is not wise to agree to the
extension, if you are the taxpayer.
Another matter is that if you agree for an extension, the
period must be definite. In one case, the extension was
worded as waiver of the prescriptive period. That is not
allowed. The waiver of the statutory period is not allowed
because for the purposes of the extension, the period
must be definite. It must be clear when the extension
period starts and ends.
Read letter c.
(c) Any internal revenue tax which has been assessed
within the period of limitation as prescribed in paragraph
(a) hereof may be collected by distraint or levy or by a
proceeding in court within five (5) years following the
assessment of the tax.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Q: What is the period within which to assess any
deficiency tax?
A: Within 3 years, as a general rule, or within 10 years if
there is fraud and falsity.
Q: What is the period to collect?
A: 5 years.
So you have to remember these periods: 3,10,5. 3 years to
make an assessment, 10 years if there is falsity or fraud,
and 5 years to collect the deficiency tax.
Q: Can the government and the taxpayer agree to
extend the period of collection?
A: Yes, as provided in paragraph (d).
(d) Any internal revenue tax, which has been assessed
within the period agreed upon as provided in paragraph
(b) hereinabove, may be collected by distraint or levy or
by a proceeding in court within the period agreed upon
in writing before the expiration of the five (5) -year period.
The period so agreed upon may be extended by
subsequent written agreements made before the
expiration of the period previously agreed upon.
Lets read the last paragraph.
(e) Provided, however, That nothing in the immediately
preceding section and paragraph (a) hereof shall be
construed to authorize the examination and investigation
by
or inquiry into any tax return filed in accordance with the
provisions of any tax amnesty law or decree.
Remember the principle of tax amnesty. It operates as an
absolute forgiveness on the part of the taxpayer. Tax
amnesty are usually legislated.
Q: If the taxpayer is under investigation, and during the
pendency of the three year period, congress came up
with a tax amnesty, can the taxpayer avail of the
amnesty despite the fact that he is under investigation?
A: Even if you are under investigation, if the government
legislates a tax amnesty, you are given the opportunity to
avail of such amnesty. If there is an amnesty, the
investigations are suspended, to give way to taxpayers
who likes to relent and avail of the tax amnesty and pay
the deficiency taxes.
If you avail of a tax amnesty, the government cannot run
after you anymore.
Q: Are taxes imprescriptible?
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Taxation Law II
Dean Manuel Quibod
A: Yes, as an exception. The general rule is that it can be
assessed up to three years. Therefore, as a general rule,
taxes prescribe.
Q: What are the instances that taxes are imprescriptible.
A:
SEC. 223. Suspension of Running of Statute of Limitations. -
The running of the Statute of Limitations provided in
Sections 203 and 222 on the making of assessment and
the beginning of distraint or levy a proceeding in court for
collection, in respect of any deficiency, shall be
suspended for the period during which the Commissioner
is prohibited from making the assessment or beginning
distraint or levy or a proceeding in court and for sixty (60)
days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner;
when the taxpayer cannot be located in the address
given by him in the return filed upon which a tax is being
assessed or collected: Provided, that, if the taxpayer
informs the Commissioner of any change in address, the
running of the Statute of Limitations will not be suspended;
when the warrant of distraint or levy is duly served upon
the taxpayer, his authorized representative, or a member
of his household with sufficient discretion, and no property
could be located; and when the taxpayer is out of the
Philippines.
Q: How many instances are there?
A: *Dean is really confusing in this part, but according to
him, the following are the instances when the statute of
limitations is suspended:
1. Shall be suspended for the period during
which the Commissioner is prohibited from
making the assessment or beginning distraint
or levy or a proceeding in court and for sixty
(60) days;
2. When the taxpayer requests for a
reinvestigation which is granted by the
commissioner;
3. When the taxpayer cannot be located in the
address given by him in the return filed.
However, if you notify the BIR of your change
of address, but despite the notice, the BIR still
sent the assessments to your previous
address, it will not toll the running of the
prescriptive period;
4. When the warrant of distraint or levy is duly
served upon the taxpayer and property can
be located;
5. When the taxpayer is out of the Philippines.
The suspension covers both assessment and collection.
This list is exclusive. Only in these grounds and instances
that the assessment and collection of deficiency taxes
are imprescriptible.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
NB: Read Revenue Regulation 12-99 and 18-2013.
The assessment contemplates Section 228.
SEC. 228. Protesting of Assessment. - When the
Commissioner or his duly authorized representative finds
that proper taxes should be assessed, he shall first notify
the taxpayer of his findings: Provided, however, That a
preassessment notice shall not be required in the
following cases:
(a) When the finding for any deficiency tax is the result of
mathematical error in the computation of the tax as
appearing on the face of the return; or(b) When a
discrepancy has been determined between the tax
withheld and the amount actually remitted by the
withholding agent; or(c) When a taxpayer who opted to
claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to
have carried over and automatically applied the same
amount claimed against the estimated tax liabilities for
the taxable quarter or quarters of the succeeding taxable
year; or(d) When the excise tax due on exciseable
articles has not been paid; or(e) When the article locally
purchased or imported by an exempt person, such as,
but not limited to, vehicles, capital equipment,
machineries and spare parts, has been sold, traded or
transferred to non-exempt persons.
The taxpayers shall be informed in writing of the law and
the facts on which the assessment is made; otherwise, the
assessment shall be void.
Within a period to be prescribed by implementing rules
and regulations, the taxpayer shall be required to
respond to said notice.
If the taxpayer fails to respond, the Commissioner or his
duly authorized representative shall issue an assessment
based on his findings.
Such assessment may be protested administratively by
filing a request for reconsideration or reinvestigation
within thirty (30) days from receipt of the assessment in
such form and manner as may be prescribed by
implementing rules and regulations.
Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted;
otherwise, the assessment shall become final.
If the protest is denied in whole or in part, or is not acted
upon within one hundred eighty (180) days from
submission of documents, the taxpayer adversely
affected by the decision or inaction may appeal to the
Court of Tax Appeals within thirty (30) days from receipt of
the said decision, or from the lapse of one hundred eighty
(180)-day period; otherwise, the decision shall become
final, executory and demandable.
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Dean Manuel Quibod
If the assessment pertains to a notice informing the
taxpayer of the finding of the deficiency and determining
that facts and the law to which the assessment is based,
you have Section 228.
Q: In Revenue Regulation 12-99, what is this preliminary
assessment notice?
A:
Q: Which comes first, the notice of informal conference
or the pre-assessment notice?
A: The notice of the informal conference
Q: In Revenue Regulation 12-99, what happens when the
taxpayer is under investigation, and theres now an initial
finding of deficiency?
A: There will be a notice of informal conference. This is
what is initially sent.
Q: What is the option given to the taxpayers upon receipt
of the notice for informal conference?
A: The taxpayer may attend the informal conference or
he may not attend.
Q: When he attends the informal conference, what will
happen?
A: They may enter into a compromise agreement. He will
admit liability in this case, but they will enter into a
compromise agreement for the payment of the
deficiency. He may also refute the findings of the
examiner.
Q: If they wont arrive into an agreement, what will
happen?
A: *Dean did not allow the student to continue
answering* Just read Revenue Regulation 12-99 for the
process.
We go now to RR 18-2013.
Q: What do you understand of this revenue regulation?
A: This is an amendment of the prior revenue regulation.
Q: How is the process done in this revenue regulation?
A: *Not clear if Dean agreed with the student, so lets
read nalang the regulation*
Q: What was eliminated in this amendment?
A: The notice of informal conference.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Q: Does this violate due process?
A: No. the taxpayer is still given the opportunity to
question the assessment.
Q: In Section 228, is there a mention of the informal
conference?
A: None. It only mentions of a pre-assessment notice and
a subsequent notice of assessment.
In RR 18-2013, the BIR removed the notice of informal
conference, but they reiterated that there is no violation
of due process because in the revised rules, the taxpayer
is still given the opportunity to question the validity of the
assessment. Now, once there is a finding of a deficiency,
the BIR will initially send a pre-assessment notice.
Q: What does that assessment notice contain?
A: It should contain in detail the facts and law, rules and
regulations, to which the assessment is based.
Q: When that pre-assessment notice is sent to the
taxpayer, containing the facts and the law, in the hands
of the taxpayers, what will the taxpayers do?
A: The taxpayer has 15 days within which to respond. He
will be considered in default if he does not respond, and
therefore a formal letter of demand shall be issued,
calling for the payment of the tax.
Q: When the taxpayer receives the final letter of
demand, what will he do?
A: The taxpayer can file a protest.
Q: In the hands of the Commissioner, what will he do with
the protest?
A: The Commissioner would act on the protest. He may
either deny or grant the protest.
Q: If the protest is denied, where will the taxpayer go?
A: The taxpayer may either appeal to the CTA within 30
days from the day of receipt of the decision, or elevate
his protest through request for reconsideration to the
Commissioner within 30 days.
So from the denial of the protest, the protest will be
brought to the CTA. In the CTA, the case will be
processed on twio levels. It will be heard by CTA by
division and when there is an adverse decision, the case
will be appealed to the CTA en banc. From the CTA en
banc, you now go to the Supreme Court. That is where
the assessment will become final.
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Dean Manuel Quibod
Q: If the taxpayer fails to respond to the pre-assessment
notice, what is the consequence?
A: When the taxpayer fails to respond, he will be
considered in default.
Q: Will that make the assessment final?
A: No.
Q: What will happen since the assessment will not be final
on the ground of the taxpayers failure to respond?
A: A formal letter of demand and final assessment notice
will be issued. So when a pre-assessment notice is
ignored, it does not make the assessment final. What the
BIR will do is send a final assessment notice.
Q: What will the taxpayer do with that final assessment
notice?
A: The taxpayer may file a protest.
Q: If he fails to protest, what will happen?
A: If the taxpayer fails to protest, the assessment shall
become final and demandable.
Q: When the assessment becomes final, what will the
government do?
A: The BIR will now collect the taxes.
Q: In what cases is the pre-assessment no longer
required?
A: 1) When the filing for a deficiency tax is the result of a
mathematical error in the computation of the tax.
*Dean asked for examples rather than have the student
enumerate each item. Lets just read the revenue
regulation*
The taxpayer will be sent, in these cases, a final
assessment notice.
Only in these five cases that no pre-assessment will be
issued. In all other cases of a finding of a deficiency, it is
required that there is a pre-assessment notice that will be
sent to the taxpayer.
Q: When a final assessment notice is received by the
taxpayer and he contested the assessment, what is the
period within which the commissioner must decide on the
protest?
A: The commissioner is given 180 days to decide on the
protest.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Q: If there is no decision within 180 days, what will the
taxpayer do?
A: The taxpayer may appeal to the CTA within 30 days
from the lapse of the 180 days.
Q: Is he given the option to wait for the decision even if
the 180 day period has already expired?
A: The taxpayer is given the option to go to the CTA or
wait for the decision.
That is the reason why there is a defect in the law when it
states otherwise, the decision will become final and
executor, because since there is an inaction in this case,
there is no such decision to become final to begin with.
In 2004, the CTA came out with the internal rules of
procedure in the CTA saying that the taxpayers could
wait for the decision because there is no decision that will
become final, under Section 228. That is a defect in the
law.
So the taxpayer is allowed to wait pursuant to the rules of
procedure issued by the CTA.
Once you go to the CTA because of the inaction, you
cannot anymore withdraw the petition. Once the
taxpayer avail of the remedy of going to the CTA by
reason of the inaction, he cannot withdraw that
anymore. The remedies are exclusive.
From the CTA division, you appeal to the CTA en banc,
and then to the Supreme Court. No appeals to the CA
anymore because under the new law, RA 9282, the CTA is
now equivalent of the CA. So no tax cases are now
appealed to the CA. But in the CTA, the case shall go
two processed, by division and en banc, before it can
proceed to the Supreme Court.
Once the Supreme Court decides on the protest, the
assessment will become final and collection proceeding
will follow.
For the collection proceedings, you have Section 205.
SEC. 205. Remedies for the Collection of Delinquent Taxes.
- The civil remedies for the collection of internal revenue
taxes, fees or charges, and any increment thereto
resulting from delinquency shall be:
(a) By distraint of goods, chattels, or effects, and other
personal property of whatever character, including
stocks and other securities, debts, credits, bank accounts
and interest in and rights to personal property, and by
levy upon real property and interest in rights to real
property; and
(b) By civil or criminal action.
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Either of these remedies or both simultaneously may be
pursued in the discretion of the authorities charged with
the collection of such taxes:Provided, however, That the
remedies of distraint and levy shall not be availed of
where the amount of tax involve is not more than One
hundred pesos (P100).
The judgment in the criminal case shall not only impose
the penalty but shall also order payment of the taxes
subject of the criminal case as finally decided by the
Commissioner.
The Bureau of Internal Revenue shall advance the
amounts needed to defray costs of collection by means
of civil or criminal action, including the preservation or
transportation of personal property distrained and the
advertisement and sale thereof, as well as of real
property and improvements thereon.
So you have these remedies for the collection of
delinquent taxes. The civil remedies for the collection
resulting from delinquencies consist of administrative and
judicial remedies.
Administrative remedies for collection include destraint
on personal property in Section 206 212; and levy of real
property covered by Section 207 (b), 213, 214, 202 and
215. Section 202 is misplaced in your codal. It must follow
Section 214 because that is the procedure on levy.
Do not be confused of these proceeding, the distraint
and levy, because these are the same proceedings that
you will encounter in the rules of execution (Rule 39).
When the judgment creditor will now collect the award,
the sheriff will run after the debtor, either after the
personal or real properties of the debtor. That is also the
process in collecting taxes when there is deficiency.
In the distraint of personal property, the proceeding may
either be constructive or actual distraint. Section 206 tells
us about constructive distraint. Constructive distraint is
similar to your rules on preliminary attachment. In
constructive distaint, during the assessment proceedings,
to protect the interest of the government, the taxpayer
will be served a warrant of distraint, ordering him to
preserve his properties during the pendency of the
assessment.
In the event that assessment becomes final and
collection proceedings are now pursued against the
taxpayers, actual distraint will follow. In actual distraint,
the personal properties are ceased and sold at public
auction. The proceeds will be applied to the deficient
taxes plus penalties interests and surcharges. Any excess
will be returned to the taxpayer. But if there will still be a
balance, further distraint or levy will be done.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
In levy or real properties, this is similar to extra-judicial
foreclosure of real estate mortgage. They have the same
process. The sheriff will annotate the claim before the
ROD. The ROD will annotate the claim. There will be the
issuance of notice of sale and publication of that notice
of sale setting the auction day. During the auction, the
property will be sold to the highest bidder. The certificate
of sale will be issued to the highest bidder and will be
annotated with the ROD for purposes of counting the one
year redemption period. If there will be no redemption
you will issue a final deed to the purchaser. If there is
redemption, the property will be returned to the
taxpayer. The proceeds of the auction will be applied to
the delinquency. If there be an excess, the excess will be
given back to the taxpayer. If there will still be a balance,
further levy or distraint will be done.
The other remedies include forfeiture under Section 224-
225; the enforcement of a tax lien in Section 119; entering
into compromise in Section 204 these are the remedies
under the NIRC to collect the taxes. You also have the
informers reward under Section 282. You also have the
remedy under Section 5 and 6 of NIRC. The remedies are
not only found in Title VIII, but also in other parts of the tax
code.
NB: You may read the book of de Leon. The aspect of tax
administration is discussed in the book of de Leon. You
have a list there of the administrative remedies.
The other group of collection remedies is judicial actions,
by way of a civil or criminal action.
Q: How do you proceed with a civil action to collect
taxes?
A: File a case of collection of sum of money.
Q: In what court will you file?
A: In depends on the value of the tax to be collected. So
you have to remember the jurisdictional amount.
Q: Can you file a collection case in the CTA?
A: No.
Q: How do you proceed with the filing of a criminal
action to collect the tax?
A: It will start through filing an affidavit-complaint filed by
the BIR in the fiscals office, not in the Department of
Justice. The fiscal will now determine if there is probable
cause through a Preliminary Investigation, to which the
taxpayer will be notified. A copy of the complaint will be
given to the taxpayer for the purpose of filing a counter-
affidavit.
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Q: When you file a criminal action to collect the tax, does
this require a prior assessment?
A: Yes. The BIR cannot collect the tax if there was no
assessment against the taxpayer.
Read Section 220.
SEC. 220. Form and Mode of Proceeding in Actions Arising
under this Code. - Civil and criminal actions and
proceedings instituted in behalf of the Government under
the authority of this Code or other law enforced by the
Bureau of Internal Revenue shall be brought in the name
of the Government of the Philippines and shall be
conducted by legal officers of the Bureau of Internal
Revenue but no civil or criminal action for the recovery of
taxes or the enforcement of any fine, penalty or forfeiture
under this Code shall be filed in court without the
approval of the Commissioner.
Q: In pursuit of the collection remedies on the part of the
government, when the BIR proceeds with administrative
of collecting the tax, is the BIR precluded from
proceeding civilly or criminally against the tax payer?
A: No. Either of the remedies and both simultaneously
can be availed of by the government to collect the
taxes. This means that the government has in its discretion
to pursue either or both of the remedies.
Q: What does this tell us?
A: This tells us that the BIR can proceed on those actions
so that there will be more efficient collection of taxes,
pursuant to the principle that taxes are the lifeblood of
the country.
So, all these remedies, administrative, civil or criminal,
may be pursued at the same time. The government is not
precluded to resort to only one of these remedies.
In the case of a criminal action to collect the tax, there is
no need of a prior assessment. In Section 205, the
judgment in the criminal case shall not only impose the
penalty but shall also order the payment of taxes, subject
of the criminal case. In filing the criminal action, you still
follow the ordinary rules of procedure.
The BIR will file a complaint before the fiscals office, or
they may file it to the Department of Justice. The
taxpayer will be notified so he may file his counter-
affidavit. The preliminary investigation will be conducted
to determine if there is probable cause. If there is a
finding of probable cause, the formal complaint
information will be filed. The proceedings that will later on
take place, will be the same in your criminal procedure.
Even if there is a finding of acquittal, the court shall still
make a determination of the civil liability, since the filing
of the criminal action carried with it the civil aspect.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
One of the principles applicable in collection remedies is
that Taxes are the lifeblood of the government. The
government is allowed to resort to all of these remedies
to collect the taxes. Aside from that, you also have
another principle involving Injunction.
SEC. 218. Injunction not Available to Restrain Collection of
Tax. - No court shall have the authority to grant an
injunction to restrain the collection of any national
internal revenue tax, fee or charge imposed by this Code.
As a rule, the collection of the taxes cannot be subject to
any injunction because of the same principle that taxes
are the lifeblood of the government.
Another remedy aside from distraint and levy, is the
enforcement of a tax lien in Section 219.
SEC. 219. Nature and Extent of Tax Lien. - If any person,
corporation, partnership, joint-account (cuentas en
participacion), association or insurance company liable
to pay an internal revenue tax, neglects or refuses to pay
the same after demand, the amount shall be a lien in
favor of the Government of the Philippines from the time
when the assessment was made by the Commissioner
until paid, with interests, penalties, and costs that may
accrue in addition thereto upon all property and rights to
property belonging to the taxpayer: Provided, That this
lien shall not be valid against any mortgagee purchaser
or judgment creditor until notice of such lien shall be filed
by the Commissioner in the office of the Register of Deeds
of the province or city where the property of the taxpayer
is situated or located.
Q: What is a Tax Lien?
A: A claim against the property of the taxpayer.
Q: How is the tax lien enforced?
A: *Student reads Section 219*
Q: When does the claim arises?
A: When the taxpayer refuses to pay the tax or neglects
to pay the tax, after demand, the government will now
enforce the tax lien.
Q: When the government enforce the tax lien against his
properties, what will the government do?
A: The ROD will annotate the lien.
Q: The ROD told the BIR that they cannot annotate
because this property is already mortgaged with a bank.
What will happen?
A: *Student reads last part of the provision*. So if the title is
clean, the lien can be annotated. But if there Is an
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existing mortgage or encumbrance, the lien will be
annotated but will not be valid against the first mortgage
of judgment-debtor. The lien will be secondary to the first
mortgagees claim. So your claim has the possibility of not
being enforced.
Later, when we go to local tax, take note of what is the
consequence of a tax lien in local taxation. In Real
Property Taxation, the tax lien is superior to all other liens.
So even if there is an existing mortgage on the title,. But if
the lien involves the claim of the LGU for unpaid Real
Property Taxes, such lien will be superior. This is not so in
internal revenue taxes.
Another remedy is the remedy of forfeiture under Section
224 and 225.
SEC. 224. Remedy for Enforcement of Forfeitures. - The
forfeiture of chattels and removable fixtures of any sort
shall be enforced by the seizure and sale, or destruction,
of the specific forfeited property.
The forfeiture of real property shall be enforced by a
judgment of condemnation and sale in a legal action or
proceeding, civil or criminal, as the case may require.
SEC. 225. When Property to be Sold or Destroyed. - Sales
of forfeited chattels and removable fixtures shall be
effected, so far as practicable, in the same manner and
under the same conditions as the public notice and the
time and manner of sale as are prescribed for sales of
personal property distrained for the non-payment of
taxes.
Distilled spirits, liquors, cigars, cigarettes, other
manufactured products of tobacco, and all apparatus
used I or about the illicit production of such articles may,
upon forfeiture, be destroyed by order of the
Commissioner, when the sale of the same for
consumption or use would be injurious to public health or
prejudicial to the enforcement of the law.
All other articles subject to excise tax, which have been
manufactured or removed in violation of this Code, as
well as dies for the printing or making of internal revenue
stamps and labels which are in imitation of or purport to
be lawful stamps, or labels may, upon forfeiture, be sold
or destroyed in the discretion of the Commissioner.
Forfeited property shall not be destroyed until at least
twenty (20) days after seizure.
Q: How is this remedy of forfeiture enforced?
A: The remedy of forfeiture shall be enforced by seizure of
the immovable things that are forfeited and the sale
thereof. In case of real property, there must be a
judgment of condemnation and its subsequent sale.
Q: What is forfeiture?
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
A:
Q: So in case of chattels and immovable properties, what
will you do?
A: You either seize, sale or destroy the property.
Q: What will be done first?
A: You first seize the property. The BIR will then classify the
condition of the properties seized. If it is still fit for sale,
then the properties will be sold. If it cannot anymore be
sold of are already unfit for consumption, the properties
will be destroyed.
Q: In case of real properties, what will you do?
A: First, you should obtain a judgment of condemnation.
Q: What is a judgment of condemnation?
A:
Another remedy is compromise under Section 204.
SEC. 204. Authority of the Commissioner to Compromise,
Abate and Refund or Credit Taxes. - The Commissioner
may -
(A) Compromise the Payment of any Internal Revenue
Tax, when:
(1) A reasonable doubt as to the validity of the claim
against the taxpayer exists; or(2) The financial position of
the taxpayer demonstrates a clear inability to pay the
assessed tax.
The compromise settlement of any tax liability shall be
subject to the following minimum amounts:
For cases of financial incapacity, a minimum
compromise rate equivalent to ten percent (10%) of the
basic assessed tax; and
For other cases, a minimum compromise rate equivalent
to forty percent (40%) of the basic assessed tax.
Where the basic tax involved exceeds One million pesos
(P1,000.000) or where the settlement offered is less than
the prescribed minimum rates, the compromise shall be
subject to the approval of the Evaluation Board which
shall be composed of the Commissioner and the four (4)
Deputy Commissioners.
(B) Abate or Cancel a Tax Liability, when:
(1) The tax or any portion thereof appears to be unjustly
or excessively assessed; or(2) The administration and
collection costs involved do not justify the collection of
the amount due.
All criminal violations may be compromised except: (a)
those already filed in court, or (b) those involving fraud.
(C) Credit or refund taxes erroneously or illegally
received or penalties imposed without authority, refund
the value of internal revenue stamps when they are
returned in good condition by the purchaser, and, in his
discretion, redeem or change unused stamps that have
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been rendered unfit for use and refund their value upon
proof of destruction.
No credit or refund of taxes or penalties shall be allowed
unless the taxpayer files in writing with the Commissioner
a claim for credit or refund within two (2) years after the
payment of the tax or penalty: Provided, however, That a
return filed showing an overpayment shall be considered
as a written claim for credit or refund.
A Tax Credit Certificate validly issued under the provisions
of this Code may be applied against any internal revenue
tax, excluding withholding taxes, for which the taxpayer
is directly liable.
Any request for conversion into refund of unutilized tax
credits may be allowed, subject to the provisions of
Section 230 of this Code: Provided, That the original copy
of the Tax Credit Certificate showing a creditable
balance is surrendered to the appropriate revenue officer
for verification and cancellation: Provided, further, That in
no case shall a tax refund be given resulting from
availment of incentives granted pursuant to special laws
for which no actual payment was made.
The Commissioner shall submit to the Chairmen of the
Committee on Ways and Means of both the Senate and
House of Representatives, every six (6) months, a report
on the exercise of his powers under this Section, stating
therein the following facts and information, among others:
names and addresses of taxpayers whose cases have
been the subject of abatement or compromise; amount
involved; amount compromised or abated; and reasons
for the exercise of power: Provided, That the said report
shall be presented to the Oversight Committee in
Congress that shall be constituted to determine that said
powers are reasonably exercised and that the
government is not unduly deprived of revenues.
Q: In what instances can the Commissioner enter into a
compromise?
A: When there is (1) A reasonable doubt as to the validity
of the claim against the taxpayer exists; or (2) The
financial position of the taxpayer demonstrates a clear
inability to pay the assessed tax.
There are only two instances where the BIR can inquire
into your bank accounts:
1) In the case of estate taxation
2) When the taxpayer will enter into a compromise
on the ground of financial incapacity.
In these cases, the taxpayer must first execute a waiver.
CF: Section 6 of NIRC.
The compromise is still a negotiation, and not an
obligation on the part of the government. However, to
speed up collection the government may enter into a
compromise. In the event of a compromise, there are
limitations. For cases of financial incapacity, a minimum
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
compromise rate equivalent to ten percent (10%) of the
basic assessed tax. For other cases, a minimum
compromise rate equivalent to forty percent (40%) of the
basic assessed tax. Where the basic tax involved exceeds
One million pesos (P1,000.000) or where the settlement
offered is less than the prescribed minimum rates, the
compromise shall be subject to the approval of the
Evaluation Board which shall be composed of the
Commissioner and the four (4) Deputy Commissioners.
Q: When do you abate and cancel tax liability?
A: When the tax or any portion thereof appears to be
unjustly or excessively assessed or when the
administration and collection costs involved do not justify
the collection of the amount due.
Take note that even criminal violations may be
compromised except those already filed in court and
those involving fraud.
The other remedies are found in Section 5 and 6. You also
have Section 15.
In the case of the criminal action, there is no need of a
prior assessment for purposes of pursuing the remedy of
filing the criminal action. But if you proceed with the
remedy of the civil action, it requires prior assessment. To
collect taxes by way of civil action in court, this would
require a prior assessment.
Lets go to Section 281.
SEC. 281. Prescription for Violations of any Provision of this
Code. - All violations of any provision of this Code shall
prescribe after Five (5) years.
Prescription shall begin to run from the day of the
commission of the violation of the law, and if the same be
not known at the time, from the discovery thereof and the
institution of judicial proceedings for its investigation and
punishment.
The prescription shall be interrupted when proceedings
are instituted against the guilty persons and shall begin to
run again if the proceedings are dismissed for reasons not
constituting jeopardy.
The term of prescription shall not run when the offender is
absent from the Philippines.
This provides for the period within which the criminal
action should be pursued.
In Section 222, the assessment is 3 years, and 10 years as
an exception. To collect the tax, you have 5 years,
whether you proceed with administrative remedies or
judicial remedies. Do not be confused of the periods.
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The running of the prescriptive period is tolled when the
offender is out of the country.
Lets now go to informers reward.
SEC. 282. Informer's Reward to Persons Instrumental in the
Discovery of Violations of the National Internal Revenue
Code and in the Discovery and Seizure of Smuggled
Goods. -
(A) For Violations of the National Internal Revenue Code.
- Any person, except an internal revenue official or
employee, or other public official or employee, or his
relative within the sixth degree of consanguinity, who
voluntarily gives definite and sworn information, not yet in
the possession of the Bureau of Internal Revenue, leading
to the discovery of frauds upon the internal revenue laws
or violations of any of the provisions thereof, thereby
resulting in the recovery of revenues, surcharges and fees
and/or the conviction of the guilty party and/or the
imposition of any of the fine or penalty, shall be rewarded
in a sum equivalent to ten percent (10%) of the revenues,
surcharges or fees recovered and/or fine or penalty
imposed and collected or One Million Pesos (P1,000,000)
per case, whichever is lower.
The same amount of reward shall also be given to an
informer where the offender has offered to compromise
the violation of law committed by him and his offer has
been accepted by the Commissioner and collected from
the offender: Provided, That should no revenue,
surcharges or fees be actually recovered or collected,
such person shall not be entitled to a reward:Provided,
further, That the information mentioned herein shall not
refer to a case already pending or previously
investigated or examined by the Commissioner or any of
his deputies, agents or examiners, or the Secretary of
Finance or any of his deputies or agents: Provided,
finally, That the reward provided herein shall be paid
under rules and regulations issued by the Secretary of
Finance, upon recommendation of the Commissioner.
(B) For Discovery and Seizure of Smuggled Goods. - To
encourage the public to extend full cooperation in
eradicating smuggling, a cash reward equivalent to ten
percent (10%) of the fair market value of the smuggled
and confiscated goods or One Million Pesos (P1,000,000)
per case, whichever is lower, shall be given to persons
instrumental in the discovery and seizure of such
smuggled goods.
The cash rewards of informers shall be subject to income
tax, collected as a final withholding tax, at a rate of ten
percent (10%).
The provisions of the foregoing Subsections
notwithstanding, all public officials, whether incumbent or
retired, who acquired the information in the course of the
performance of their duties during their incumbency, are
prohibited from claiming informer's reward.
The informers reward is of two kinds; one for violation of
the NIRC and one for discovery of smuggled goods. The
discovery adnd seizure of smuggled goods is not involved
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
liability for internal revenue taxes like VAT or other excise
taxes on account of importation.
An informer who gives a sworn information not yet known
to the BIR will be given a reward. He shall be rewarded to
a sum equivalent to 10% of the revenue recovered or
1,000,000 whichever is lower. So the information must lead
to collection of the tax in order for the informer to be
rewarded. The reward will still be given even if the
offender will offer to compromise. The reward in this case
will be based in the compromised amount.
For discovery and seizure of smuggled goods, there is no
more exclusion as to who can be an informer. You will
receive 10% of the fair value of the goods, or 1,000,000,
whichever is lower. The cash reward will be subjected to
a withholding tax. Before 1998, this reward is tax free. But
not it is already subject to tax.
Title IX talks about compliance requirements.
SEC. 232. Keeping of Books of Accounts. -
(A) Corporations, Companies, Partnerships or Persons
Required to Keep Books of Accounts. - All corporations,
companies, partnerships or persons required by law to
pay internal revenue taxes shall keep a journal and a
ledger or their equivalents: Provided, however, That those
whose quarterly sales, earnings, receipts, or output do not
exceed Fifty thousand pesos (P50,000) shall keep and use
simplified set of bookkeeping records duly authorized by
the Secretary of Finance where in all transactions and
results of operations are shown and from which all taxes
due the Government may readily and accurately be
ascertained and determined any time of the
year:Provided, further, That corporations, companies,
partnerships or persons whose gross quarterly sales,
earnings, receipts or output exceed One hundred fifty
thousand pesos (P150,000) shall have their books of
accounts audited and examined yearly by independent
Certified Public Accountants and their income tax returns
accompanied with a duly accomplished Account
Information Form (AIF) which shall contain, among others,
information lifted from certified balance sheets, profit and
loss statements, schedules listing income-producing
properties and the corresponding income therefrom and
other relevant statements.
(B) Independent Certified Public Accountant Defined. -
The term"Independent Certified Public Accountant", as
used in the preceding paragraph, means an accountant
who possesses the independence as defined in the rules
and regulations of the Board of Accountancy
promulgated pursuant to Presidential Decree No. 692,
otherwise known as the Revised Accountancy Law.
This talks about the keeping of books of accounts. The
books required are the journals and ledgers or their
equivalent.
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SEC. 233. Subsidiary Books. - All corporations, companies,
partnerships or persons keeping the books of accounts
mentioned in the preceding Section may, at their option,
keep subsidiary books as the needs of their business may
require: Provided, That were such subsidiaries are kept,
they shall form part of the accounting system of the
taxpayer and shall be subject to the same rules and
regulations as to their keeping, translation, production
and inspection as are applicable to the journal and the
ledger.
SEC. 234. Language in which Books are to be Kept;
Translation. - All suchcorporations, companies,
partnerships or persons shall keep the books or records
mentioned in Section 232 hereof in native language,
English or Spanish: Provided, however, That if in addition
to said books or records the taxpayer keeps other books
or records in a language other than a native language,
English or Spanish, he shall make a true and complete
translation of all the entries in suck other books or records
into a native language; English or Spanish, and the said
translation must be made by the bookkeeper, or such
taxpayer, or in his absence, by his manager and must be
certified under oath as to its correctness by the said
bookkeeper or manager, and shall form an integral part
of the aforesaid books of accounts.
The keeping of such books or records in any language
other than a native language, English or Spanish, is
hereby prohibited.
If you will be asked in what language shall the books are
to be kept, Section 234 will give you an answer. They can
be in English, Spanish or in the native language.
If it will be in a language other than this three, you must
keep a separate book that will provide translations.
SEC. 235. Preservation of Books and Accounts and Other
Accounting Records. - All the books of accounts,
including the subsidiary books and other accounting
records of corporations, partnerships, or persons, shall be
preserved by them for a period beginning from the last
entry in each book until the last day prescribed by
Section 203 within which the Commissioner is authorized
to make an assessment.
The said books and records shall be subject to
examination and inspection by internal revenue
officers: Provided, That for income tax purposes, such
examination and inspection shall be made only once in a
taxable year, except in the following cases:
(a) Fraud, irregularity or mistakes, as determined by the
Commissioner;(b) The taxpayer requests
reinvestigation;(c) Verification of compliance with
withholding tax laws and regulations;(d) Verification of
capital gains tax liabilities; and(e) In the exercise of the
Commissioner's power under Section 5(B) to obtain
information from other persons in which case, another or
separate examination and inspection may be made.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Examination and inspection of books of accounts and
other accounting records shall be done in the taxpayer's
office or place of business or in the office of the Bureau of
Internal Revenue.
All corporations, partnerships or persons that retire from
business shall, within ten (10) days from the date of
retirement or within such period of time as may be
allowed by the Commissioner in special cases, submit
their books of accounts, including the subsidiary books
and other accounting records to the Commissioner or
any of his deputies for examination, after which they shall
be returned.
Corporations and partnerships contemplating dissolution
must notify the Commissioner and shall not be dissolved
until cleared of any tax liability.
Any provision of existing general or special law to the
contrary notwithstanding, the books of accounts and
other pertinent records of tax-exempt organizations or
grantees of tax incentives shall be subject to examination
by the Bureau of Internal Revenue for purposes of
ascertaining compliance with the conditions under which
they have been granted tax exemptions or tax
incentives, and their tax liability, if any.
The keeping of the books must be in the same period
within which the action for assessment can be pursued.
So after three years, you are free to throw away the
books.
Ordinarily, you can only be investigated and be
subjected to assessment only once in a taxable year.
When you are under assessment, what generates that
notice informing you that you are under assessment is the
letter of authority (LOA). The LOA is the document of the
examiner served to the taxpayer informing him of the
assessment. The LOA will define the tax period involved.
You cannot be examined for an indefinite tax period. The
period must be definite and must be stated in the LOA.
You can be made to keep the books for more than three
years in the cases enumerated in Section 235. These are
the exception to the general rule.
SEC. 236. Registration Requirements. -
(A) Requirements. - Every person subject to any internal
revenue tax shall register once with the appropriate
Revenue District Officer:
(1) Within ten (10) days from date of employment, or
(2) On or before the commencement of business,or
(3) Before payment of any tax due, or
(4) Upon filing of a return, statement or declaration as
required in this Code.
The registration shall contain the taxpayer's name, style,
place of residence, business and such other information
as may be required by the Commissioner in the form
prescribed therefor.
A person maintaining a head office, branch or facility
shall register with the Revenue District Officer having
jurisdiction over the head office, brand or facility.
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For purposes of this Section, the term "facility" may
include but not be limited to sales outlets, places of
production, warehouses or storage places.
(B) Annual Registration Fee. - An annual registration fee in
the amount of Five hundred pesos (P500) for every
separate or distinct establishment or place of business,
including facility types where sales transactions occur,
shall be paid upon registration and every year thereafter
on or before the last day of January: Provided,
however, That cooperatives, individuals earning purely
compensation income, whether locally or abroad, and
overseas workers are not liable to the registration fee
herein imposed.
The registration fee shall be paid to an authorized agent
bank located within the revenue district, or to the
Revenue Collection Officer, or duly authorized Treasurer
of the city of municipality where each place of business
or branch is registered.
(C) Registration of Each Type of Internal Revenue Tax. -
Every person who is required to register with the Bureau
of Internal Revenue under Subsection (A) hereof, shall
register each type of internal revenue tax for which he is
obligated, shall file a return and shall pay such taxes, and
shall updates such registration of any changes in
accordance with Subsection (E) hereof.
(D) Transfer of Registration. - In case a registered person
decides to transfer his place of business or his head office
or branches, it shall be his duty to update his registration
status by filing an application for registration information
update in the form prescribed therefor.
(E) Other Updates. - Any person registered in accordance
with this Section shall, whenever applicable, update his
registration information with the Revenue District Office
where he is registered, specifying therein any change in
type and other taxpayer details.
(F) Cancellation of Registration. - The registration of any
person who ceases to be liable to a tax type shall be
cancelled upon filing with the Revenue District Office
where he is registered an application for registration
information update in a form prescribed therefor.
(G) Persons Commencing Business. - Any person, who
expects to realize gross sales or receipts subject to value-
added tax in excess of the amount prescribed under
Section 109(z) of this Code for the next 12-month period
from the commencement of the business, shall register
with the Revenue District Office which has jurisdiction over
the head office or branch and shall pay the annual
registration fee prescribed in Subsection (B) hereof.
(H) Persons Becoming Liable to the Value-added Tax. -
Any person, whose gross sales or receipts in any 12-
month period exceeds the amount prescribed under
Subsection 109(z) of this Code for exemption from the
value-added tax shall register in accordance with
Subsection (A) hereof, and shall pay the annual
registration fee prescribed within ten (10) days after the
end of the last month of that period, and shall be liable to
the value-added tax commencing from the first day of
the month following his registration.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(I) Optional Registration of Exempt Person. - Any person
whose transactions are exempt from value-added tax
under Section 109(z) of this Code; or any person whose
transactions are exempt from the value-added tax under
Section 109(a), (b), (c), and (d) of this Code, who opts to
register as a VAT taxpayer with respect to his export sales
only, may update his registration information in
accordance with Subsection (E) hereof, not later than ten
(10) days before the beginning of the taxable quarter and
shall pay the annual registration fee prescribed in
Subsection (B) hereof.
In any case, the Commissioner may, for administrative
reasons, deny any application for registration including
updates prescribed under Subsection (E) hereof.
For purposes of Title IV of this Code, any person who has
registered value-added tax as a tax type in accordance
with the provisions of Subsection (C) hereof shall be
referred to as VAT-registered person who shall be
assigned only one Taxpayer Identification Number.
(J) Supplying of Taxpayer Identification Number (TIN). -
Any person required under the authority of this Code to
make, render or file a return, statement or other
document shall be supplied with or assigned a Taxpayer
Identification Number (TIN) which he shall indicate in
such return, statement or document filed with the Bureau
of Internal Revenue for his proper identification for tax
purposes, and which he shall indicate in certain
documents, such as, but not limited to the following:
(1) Sugar quedans, refined sugar release order or similar
instruments;(2) Domestic bills of lading;(3) Documents to
be registered with the Register of Deeds of Assessor's
Office;(4) Registration certificate of transportation
equipment by land, sea or air;(5) Documents to be
registered with the Securities and Exchange
Commission;(6) Building construction permits;(7)
Application for loan with banks, financial institutions, or
other financial intermediaries;(8) Application for mayor's
permit;(9) Application for business license with the
Department of Trade & Industry; and(10) Such other
documents which may hereafter be required under rules
and regulations to be promulgated by the Secretary of
Finance, upon recommendation of the Commissioner.
In cases where a registered taxpayer dies, the
administrator or executor shall register the estate of the
decedent in accordance with Subsection (A) hereof and
a new Taxpayer Identification Number (TIN) shall be
supplied in accordance with the provisions of this Section.
In the case of a nonresident decedent, the executor or
administrator of the estate shall register the estate with
the Revenue District Office where he is
registered: Provided, however, That in case such executor
or administrator is not registered, registration of the estate
shall be made with the Taxpayer Identification Number
(TIN) supplied by the Revenue District Office having
jurisdiction over his legal residence.
Only one Taxpayer identification Number (TIN) shall be
assigned to a taxpayer.
Any person who shall secure more than one Taxpayer
Identification Number shall be criminally liable under the
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provision of Section 275 on 'Violation of Other Provisions of
this Code or Regulations in General'.
All taxpayers are required to register and pay the annual
registration fee of P500.00. You also have to get a Tax
Identification Number (TIN).
SEC. 237. Issuance of Receipts or Sales or Commercial
Invoices. -All persons subject to an internal revenue tax
shall, for each sale or transfer of merchandise or for
services rendered valued at Twenty-five pesos (P25.00) or
more, issue duly registered receipts or sales or
commercial invoices, prepared at least in duplicate,
showing the date of transaction, quantity, unit cost and
description of merchandise or nature of service: Provided,
however, That in the case of sales, receipts or transfers in
the amount of One hundred pesos (P100.00) or more, or
regardless of the amount, where the sale or transfer is
made by a person liable to value-added tax to another
person also liable to value-added tax; or where the
receipt is issued to cover payment made as rentals,
commissions, compensations or fees, receipts or invoices
shall be issued which shall show the name, business style,
if any, and address of the purchaser, customer or
client: Provided, further, That where the purchaser is a
VAT-registered person, in addition to the information
herein required, the invoice or receipt shall further show
the Taxpayer Identification Number (TIN) of the
purchaser.
The original of each receipt or invoice shall be issued to
the purchaser, customer or client at the time the
transaction is effected, who, if engaged in business or in
the exercise of profession, shall keep and preserve the
same in his place of business for a period of three (3)
years from the close of the taxable year in which such
invoice or receipt was issued, while the duplicate shall be
kept and preserved by the issuer, also in his place of
business, for a like period.
The Commissioner may, in meritorious cases, exempt any
person subject to internal revenue tax from compliance
with the provisions of this Section.
This will guide you in determining the minimum value to
which you have to issue a receipt.
SEC. 238. Printing of Receipts or Sales or Commercial
Invoices. - All persons who are engaged in business shall
secure from the Bureau of Internal Revenue an authority
to print receipts or sales or commercial invoices before a
printer can print the same.
No authority to print receipts or sales or commercial
invoices shall be granted unless the receipts or invoices
to be printed are serially numbered and shall show,
among other things, the name, business style, Taxpayer
Identification Number (TIN) and business address of the
person or entity to use the same, and such other
information that may be required by rules and regulations
to be promulgated by the Secretary of Finance, upon
recommendation of the Commissioner.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
All persons who print receipt or sales or commercial
invoices shall maintain a logbook/register of taxpayers
who availed of their printing services.
The logbook/register shall contain the following
information:
(1) Names, Taxpayer Identification Numbers of the
persons or entities for whom the receipts or sales or
commercial invoices were printed; and
(2) Number of booklets, number of sets per booklet,
number of copies per set and the serial numbers of the
receipts or invoices in each booklet.
This tells you about the requirement on printing receipts.
Lets now go to Section 245.
SEC. 245. Specific Provisions to be Contained in Rules and
Regulations. -The rules and regulations of the Bureau of
Internal Revenue shall, among other thins, contain
provisions specifying, prescribing or defining:
(a) The time and manner in which Revenue Regional
Director shall canvass their respective Revenue Regions
for the purpose of discovering persons and property liable
to national internal revenue taxes, and the manner in
which their lists and records of taxable persons and
taxable objects shall be made and kept;(b) The forms of
labels, brands or marks to be required on goods subject
to an excise tax, and the manner in which the labelling,
branding or marking shall be effected;(c) The conditions
under which and the manner in which goods intended for
export, which if not exported would be subject to an
excise tax, shall be labelled, branded or marked;(d) The
conditions to be observed by revenue officers respecting
the institutions and conduct of legal actions and
proceedings;(e) The conditions under which goods
intended for storage in bonded warehouses shall be
conveyed thither, their manner of storage and the
method of keeping the entries and records in connection
therewith, also the books to be kept by Revenue
Inspectors and the reports to be made by them in
connection with their supervision of such houses;(f) The
conditions under which denatured alcohol may be
removed and dealt in, the character and quantity of the
denaturing material to be used, the manner in which the
process of denaturing shall be effected, so as to render
the alcohol suitably denatured and unfit for oral intake,
the bonds to be given, the books and records to be kept,
the entries to be made therein, the reports to be made to
the Commissioner, and the signs to be displayed in the
business or by the person for whom such denaturing is
done or by whom, such alcohol is dealt in;(g) The manner
in which revenue shall be collected and paid, the
instrument, document or object to which revenue stamps
shall be affixed, the mode of cancellation of the same,
the manner in which the proper books, records, invoices
and other papers shall be kept and entries therein made
by the person subject to the tax, as well as the manner in
which licenses and stamps shall be gathered up and
returned after serving their purposes;(h) The conditions to
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Dean Manuel Quibod III-Manresa (2013)

be observed by revenue officers respecting the volume of business, wage and employment levels, and
enforcement of Title III imposing a tax on estate of a similar economic factors.
decedent, and other transfers mortis causa, as well as on The penalties prescribed under Section 248 of this Code
gifts and such other rules and regulations which the shall be imposed on any violation of the rules and
Commissioner may consider suitable for the enforcement regulations issued by the Secretary of Finance, upon
of the said Title III;(i) The manner in which tax returns, recommendation of the Commissioner, prescribing the
information and reports shall be prepared and reported place of filing of returns and payments of taxes by large
and the tax collected and paid, as well as the conditions taxpayers.
under which evidence of payment shall be furnished the
taxpayer, and the preparation and publication of tax What you have to remember here is the definition of a
statistics;(j) The manner in which internal revenue taxes, large taxpayer.
such as income tax, including withholding tax, estate and
donor's taxes, value-added tax, other percentage taxes, SEC. 244. Authority of Secretary of Finance to Promulgate
excise taxes and documentary stamp taxes shall be paid Rules and Regulations. - The Secretary of Finance, upon
through the collection officers of the Bureau of Internal recommendation of the Commissioner, shall promulgate
Revenue or through duly authorized agent banks which all needful rules and regulations for the effective
are hereby deputized to receive payments of such taxes enforcement of the provisions of this Code.
and the returns, papers and statements that may be filed
by the taxpayers in connection with the payment of the
The authority to make rules and regulations is upon the
tax: Provided, however, That notwithstanding the other
Secretary of Finance, not on the Commissioner. The
provisions of this Code prescribing the place of filing of
commissioner only recommends.
returns and payment of taxes, the Commissioner may, by
rules and regulations, require that the tax returns, papers
SEC. 246. Non-Retroactivity of Rulings. - Any revocation,
and statements that may be filed by the taxpayers in
modification or reversal of any of the rules and
connection with the payment of the tax. Provided,
regulations promulgated in accordance with the
however, That notwithstanding the other provisions of this
preceding Sections or any of the rulings or circulars
Code prescribing the place of filing of returns and
promulgated by the Commissioner shall not be given
payment of taxes, the Commissioner may, by rules and
retroactive application if the revocation, modification or
regulations require that the tax returns, papers and
reversal will be prejudicial to the taxpayers, except in the
statements and taxes of large taxpayers be filed and
following cases:
paid, respectively, through collection officers or through
(a) Where the taxpayer deliberately misstates or omits
duly authorized agent banks: Provided, further, That the
material facts from his return or any document required of
Commissioner can exercise this power within six (6) years
him by the Bureau of Internal Revenue;(b) Where the facts
from the approval of Republic Act No. 7646 or the
subsequently gathered by the Bureau of Internal Revenue
completion of its comprehensive computerization
are materially different from the facts on which the ruling
program, whichever comes earlier: Provided, finally, That
is based; or(c) Where the taxpayer acted in bad faith.
separate venues for the Luzon, Visayas and Mindanao
areas may be designated for the filing of tax returns and
payment of taxes by said large taxpayers. Tax laws and other regulations are prospective in
For the purpose of this Section, "large taxpayer" means a application. Retroactive application only happens in the
taxpayer who satisfies any of the following criteria; instances enumerated in Section 246.
(1) Value-Added Tax (VAT). - Business establishment with
VAT paid or payable of at least One hundred thousand
pesos (P100,000) for any quarter of the preceding taxable LOCAL GOVERNMENT TAXATION
year;
(2) Excise Tax. - Business establishment with excise tax Q: What is the basis of the local governments power of
paid or payable of at least One million pesos (P1,000,000) taxation.
for the preceding taxable year;
(3) Corporate Income Tax. - Business establishment with A: Section 129
annual income tax paid or payable of at least One
million pesos (P1,000,000) for the preceding taxable year;
Section 129. Power to Create Sources of Revenue. - Each
and
local government unit shall exercise its power to create
(4) Withholding Tax. - Business establishment with
its own sources of revenue and to levy taxes, fees, and
withholding tax payment or remittance of at least One
charges subject to the provisions herein, consistent with
million pesos (P1,000,000) for the preceding taxable year.
the basic policy of local autonomy. Such taxes, fees, and
Provided, however, That the Secretary of Finance, upon
charges shall accrue exclusively to the local government
recommendation of the Commissioner, may modify or
units.
add to the above criteria for determining a large
taxpayer after considering such factors as inflation,

Transcribed by: Althea Mae P. Casador Page 15 of 38

Taxation Law II
Dean Manuel Quibod
Q: Is the power of taxation of LGUs inherent?
A: No.
Q: How is the power granted?
A:
Q: What is the role of the LGC in LGUs power of taxation?
A: The LGC provides the scope of the power. But the
power is granted by the constitution. The LGC
Q: What are these Local Government Units?
A: Section 128.
Section 128. Scope. - The provisions herein shall govern
the exercise by provinces, cities, municipalities, and
barangays of their taxing and other revenue-raising
powers.
Read Section 130.
Section 130. Fundamental Principles. - The following
fundamental principles shall govern the exercise of the
taxing and other revenue-raising powers of local
government units:
(a) Taxation shall be uniform in each local government
unit;
(b) Taxes, fees, charges and other impositions shall:
(1) be equitable and based as far as practicable
on the taxpayer's ability to pay;
(2) be levied and collected only for public
purposes;
(3) not be unjust, excessive, oppressive, or
confiscatory;
(4) not be contrary to law, public policy, national
economic policy, or in the restraint of trade;
(c) The collection of local taxes, fees, charges and other
impositions shall in no case be let to any private person;
(d) The revenue collected pursuant to the provisions of
this Code shall inure solely to the benefit of, and be
subject to the disposition by, the local government unit
levying the tax, fee, charge or other imposition unless
otherwise specifically provided herein; and,
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(e) Each local government unit shall, as far as
practicable, evolve a progressive system of taxation.
Q: Are these principles of taxation on the LGUs the same
principles in the states inherent power of taxation?
A: Yes because in our constitution the policy of the state
is that which is mirrored in the provisions herein provided.
Q: What provisions?
A: The principle that the state will promote progressive
system of taxation is also provided in the Constitution.
Q: How about the principle of due process?
A: The levying of taxes must only be for public purposes
and must not be excessive and confiscatory.
Q: What about equal protection?
A: Taxation shall be uniform in each local government
unit and that it shall be equitable and based on the
taxpayers ability to pay.
The principles that you have learned in the states
inherent power of taxation is the same principles as
provided in Section 130. They also apply in local taxation.
These principles are the same but are more defined.
Q: Who is given the authority to exercise local taxation so
far as taxes are concerned?
A: Section 132.
Section 132. Local Taxing Authority. - The power to
impose a tax, fee, or charge or to generate revenue
under this Code shall be exercised by the sanggunian of
the local government unit concerned through an
appropriate ordinance.
Q: What do you mean by Sanggunian?
A: Sangguniang panlalawigan, Sangguniang panlungsod
and Sangguniang bayan.
Q: What do they enact?
A: They pass an ordinance for the imposition of the tax,
fee or charge.
Q: What does Section 133 tell us?
A:
Section 133. Common Limitations on the Taxing Powers of
Local Government Units. - Unless otherwise provided
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Dean Manuel Quibod
herein, the exercise of the taxing powers of provinces,
cities, municipalities, and barangays shall not extend to
the levy of the following:
(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
acquisitions mortis causa, except as otherwise provided
herein;
(d) Customs duties, registration fees of vessel 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 local
government unit concerned;
(e) Taxes, fees, and charges and other impositions upon
goods carried into or out of, or passing through, the
territorial jurisdictions of local government units in the
guise of charges for wharfage, tolls for bridges or
otherwise, or 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 to 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
national Internal Revenue Code, 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 this Code;
(k) Taxes on premiums paid by way or 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 tricycles;
(m) Taxes, fees, or other charges on Philippine products
actually exported, except as otherwise provided herein;
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(n) Taxes, fees, or charges, on Countryside and Barangay
Business Enterprises and cooperatives duly registered
under R.A. No. 6810 and Republic Act Numbered Sixty-
nine hundred thirty-eight (R.A. No. 6938) otherwise known
as the "Cooperative Code of the Philippines" respectively;
and
(o) Taxes, fees or charges of any kind on the National
Government, its agencies and instrumentalities, and local
government units.
Q: Why are these limitations provided?
A: So that the LGU may not exercise the power arbitrarily.
Q: What does this provision tell us?
A: This enumeration includes all taxes that cannot be
imposed by LGUs.
Q: Why are LGUs prohibited from imposing these taxes?
A: Because these are national taxes and thus are already
collected by the national government. They cannot
impose taxes already provided or given to the national
government. These taxes are already provided for in the
NIRC.
Read Section 133 (e).
(e) Taxes, fees, and charges and other impositions upon
goods carried into or out of, or passing through, the
territorial jurisdictions of local government units in the
guise of charges for wharfage, tolls for bridges or
otherwise, or other taxes, fees, or charges in any form
whatsoever upon such goods or merchandise;
Q: What is the reason behind this provision?
A: Because if the imposition will be allowed, that will
constitute restraint of trade which is expressly prohibited
in Section 130 (b)(4).
Just imagine if LGUs will have this ordinance, no business
or trade will flourish because the cost of trade is so high
that there will be no expected profit anymore.
So in Section 133, most of these taxes are already
imposed by the national government, either under the
NIRC or the Tariffs and Customs Code.
Q: In the case of provinces, what are the taxes allowed
to be imposed?
A: Sections 135-141.
Q: What are the taxes allowed to be imposed by
Municipalities?
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Dean Manuel Quibod
A: Sections 143, 147, 148 and 149.
Q: What are taxes fees and charges allowed to be
imposed by Cities?
A: Section 151.
Section 151. Scope of Taxing Powers. - Except as
otherwise provided in this Code, the city, may levy the
taxes, fees, and charges which the province or
municipality may impose: Provided, however, That the
taxes, fees and charges levied and collected by highly
urbanized and independent component cities shall
accrue to them and distributed in accordance with the
provisions of this Code.
The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality
by not more than fifty percent (50%) except the rates of
professional and amusement taxes.
Q: What does this provision mean?
A: The taxing powers of provinces and municipalities
combined constitute the taxing power of cities.
Q: Is there a limit to such exercise of taxing powers?
A: Section 151, second paragraph.
Q: provinces are authorized to imposed professional tax.
How much is the rate?
A:
Section 139. Professional Tax.
(a) The province may levy an annual professional tax on
each person engaged in the exercise or practice of his
profession requiring government examination at such
amount and reasonable classification as the
sangguniang panlalawigan may determine but shall in no
case exceed Three hundred pesos (P300.00).
(b) Every person legally authorized to practice his
profession shall pay the professional tax to the province
where he practices his profession or where he maintains
his principal office in case he practices his profession in
several places: Provided, however, That such person who
has paid the corresponding professional tax shall be
entitled to practice his profession in any part of the
Philippines without being subjected to any other national
or local tax, license, or fee for the practice of such
profession.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(c) Any individual or corporation employing a person
subject to professional tax shall require payment by that
person of the tax on his profession before employment
and annually thereafter.
(d) The professional tax shall be payable annually, on or
before the thirty-first (31st) day of January. Any person first
beginning to practice a profession after the month of
January must, however, pay the full tax before engaging
therein. A line of profession does not become exempt
even if conducted with some other profession for which
the tax has been paid. Professionals exclusively
employed in the government shall be exempt from the
payment of this tax.
(e) Any person subject to the professional tax shall write
in deeds, receipts, prescriptions, reports, books of
account, plans and designs, surveys and maps, as the
case may be, the number of the official receipt issued to
him.
Q: So in view of Section 139, how much professional tax
can the city impose?
A: The City shall impose the same rate as in the province,
which is P300.00.
Q: How about amusement tax?
A:
Section 140. Amusement Tax.
(a) The province may levy an amusement tax to be
collected from the proprietors, lessees, or operators of
theaters, cinemas, concert halls, circuses, boxing stadia,
and other places of amusement at a rate of not more
than thirty percent (30%) of the gross receipts from
admission fees.
(b) In the case of theaters or cinemas, the tax shall first be
deducted and withheld by their proprietors, lessees, or
operators and paid to the provincial treasurer before the
gross receipts are divided between said proprietors,
lessees, or operators and the distributors of the
cinematographic films.
(c) The holding of operas, concerts, dramas, recitals,
painting and art exhibitions, flower shows, musical
programs, literary and oratorical presentations, except
pop, rock, or similar concerts shall be exempt from the
payment of the tax hereon imposed.
(d) The sangguniang panlalawigan may prescribe the
time, manner, terms and conditions for the payment of
tax. In case of fraud or failure to pay the tax, the
sangguniang panlalawigan may impose such
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Dean Manuel Quibod
surcharges, interest and penalties as it may deem
appropriate.
(e) The proceeds from the amusement tax shall be
shared equally by the province and the municipality
where such amusement places are located.
Q: So how much can the Cities impose as amusement
tax?
A: The cities must impose the same rate for amusement
tax as well. So they can only impose 30% of the gross
receipts as amusement tax.
Q: How about in the other taxes?
A: For other taxes, Cities can impose higher than those
imposed by provinces, but such increase shall be limited
to 50% of the amount imposed by provinces.
So except in professional and amusement taxes, cities
can impose higher taxes.
Q: in the case of provinces, what is the rate for the
transfer of real property ownership?
A: Section 135.
Section 135. Tax on Transfer of Real Property Ownership.
(a) The province may impose a tax on the sale ,
donation, barter, or on any other mode of transferring
ownership or title of real property at the rate of not more
than fifty percent (50%) of the one percent (1%) of the
total consideration involved in the acquisition of the
property or of the fair market value in case the monetary
consideration involved in the transfer is not substantial,
whichever is higher. The sale, transfer or other disposition
of real property pursuant to R.A. No. 6657 shall be exempt
from this tax.
(b) For this purpose, the Register of Deeds of the province
concerned shall, before registering any deed, require the
presentation of the evidence of payment of this tax. The
provincial assessor shall likewise make the same
requirement before cancelling an old tax declaration
and issuing a new one in place thereof, Notaries public
shall furnish the provincial treasurer with a copy of any
deed transferring ownership or title to any real property
within thirty (30) days from the date of notarization.
It shall be the duty of the seller, donor, transferor,
executor or administrator to pay the tax herein imposed
within sixty (60) days from the date of the execution of the
deed or from the date of the decedent's death.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Q: If you are the provincial councilor, and you are going
to impose an ordinance under Section 135, what rate will
you impose?
A: .5% of the total amount of the consideration of the
sale.
Q: Can the province impose a rate lesser than that rate?
A: Yes, since the only limitation is that it must not exceed
the rate provided in the LGC.
Q: What about taxes on the business of printing and
publication?
A: Section 136.
Section 136. Tax on Business of Printing and Publication. -
The province may impose a tax on the business of
persons engaged in the printing and/or publication of
books, cards, posters, leaflets, handbills, certificates,
receipts, pamphlets, and others of similar nature, at a rate
not exceeding fifty percent (50%) of one percent (1%) of
the gross annual receipts for the preceding calendar
year.
In the case of a newly started business, the tax shall not
exceed one-twentieth (1/20) of one percent (1%) of the
capital investment. In the succeeding calendar year,
regardless of when 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 receipts from the printing and/or publishing of books
or other reading materials prescribed by the Department
of Education, Culture and Sports as school texts or
references shall be exempt from the tax herein imposed.
Q: How about franchise tax?
A: Section 137.
Section 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 the 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
capital investment. In the succeeding calendar year,
regardless of when the business started to operate, the
tax shall be based on the gross receipts for the preceding
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Dean Manuel Quibod
calendar year, or any fraction thereon, as provided
herein.
Q: Does the province have the authority to immediately
enforce the provisions of the LGC?
A: They first have to enact an ordinance. These powers
given by the LGC are just limitations to the taxing power
of the LGUs. Therefore, the Sanggunian, through an
ordinance will fix the rate. Not all LGUs have inhabitants
who can afford the rates in the LGC. So some LGUs
impose lesser taxes. The rates that they will impose will
depend in the capability of their taxpayers.
January 29 (parehong sira ang recordings namin ni ate
jen sa day na ito, so to follow nalang to ha?
Maghahanap pa ako ng recording na maayos)
REAL PROPERTY TAXATION
Section 197. Scope. - This Title shall govern the
administration, appraisal, assessment, levy and collection
of real property tax.
In the case of Real Property Taxation (RPT), the subjects of
the tax are real properties. When you talk about real
properties, these are the real properties as defined under
you Civil Code. They are movables, which include lands,
buildings, and all other improvement, including those
attached to the land.
For RPT you have appraisal and assessment, levy and
collection.
What is appraised and assessed are the real properties.
What is levied and collected is the tax.
Similar to local taxation, wherein you have the LGUs
having its own taxing powers, wherein the LGC provides
the extent of the power to the kind of taxes they are
allowed to impose, and the imposition of these charges
cannot be done without the passage of a tax ordinance.
In RPT, LGUs also have to enact an ordinance to impose
the taxes authorized to them, principally the provinces
and the cities, under the LGC.
In the case of Metro Manila, the way they enact tax
ordinance, including RPT, since it is composed of different
cities, the different cities are clustered into several
groupings. There are about four clusters. One LGU in a
cluster cannot impose or amend or introduce new taxes
unless with the approval of the other LGUs in the cluster.
So when an LGU gets an approval from the other LGUs
within the cluster, they can now go to the Sanggunian to
propose the ordinance. Without that conformity,
whatever ordinance they enact will be null and void.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
The RPT are what we call non-self assessing taxes, unlike
internal revenue taxes and some local taxes. The tariff
and customs duties are also non-self assessing. The
collector of customs is the one who will compute the
dutiable value and the corresponding duties.
RPT are non-self assessing because the property owner
himself cannot determine the fair market value of his
property. The real property is still subject to appraisal and
assessment to determine the fair market value. It is the
local assessor, whose function is to make the appraisal
and assessment of real properties. The end product is
what we call as the Tax Declaration. This is the document
that will contain the the fair market value of the property,
and the assessed value of the property. These are the
two figures that will be found in your Tax declaration.
What is collected by the LGU through the Local Treasurer,
is the RPT, which is based on the assessed value multiplied
by the rate.
RPT = Assessed Value x rate
The property owner may know the fair market value but
he would not know the assessed value, because there is
a formula for that.
Assessed Value = Fair Market Value x Assessment Level
The law in your RPT provides the percentages, which is
called the assessment level for each kind of real property.
Your tax is based on the assessed value, not the fair
market value.
In sum, your RPT simply involves assessment in determining
the assessed value, and the collection of the tax, except
those properties which are exempted. In the principles,
you have tax exemptions on RPT on the basis of actual
use (religious, charitable, educational).
Section 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;
(b) Real property shall be classified for assessment
purposes on the basis of its actual use;
(c) Real property shall be assessed on the basis of a
uniform classification within each local government unit;
(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.
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The principles here are the same as the states and local
governments power of taxation. The subjects here
however are real properties. Lets go over them one by
one.
a) Real property shall be appraised at its current and fair
market value;
The word appraisal is defined in Section 199(e).
(e) "Appraisal" is the act or process of
determining the value of property as of a
specified date for a specific purpose;
There is an appraisal for purposes of coming up with a fair
market value of the property. The property owner may
himself provide the fair market value. The LGUs may
come up with its own fair market value on the basis of its
zoning. The LGU will be zonified whether they are within
commercial, residential and industrial zones, through an
ordinance. The real properties found in a specific zone
will have their corresponding fair market values.
Q: What is fair market value?
(l) "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;
The fair market value may be arrived through three types
of valuation:
1) Sales approach (Section 199 (l)) this is the
common valuation. This is usually determined
depending on the location.
2) Income Approach (Reyes vs. Omanson (?)) the
property of JBL Reyes was appraised by the City
of Manila, which consist of apartment dwellings.
When it was assessed for RPT purposes, the
assessors made a valuation on the basis of the
sales approach. Reyes questioned that appraisal
claiming that sales approach is not applicable
because the value of the property is being
restricted by the rent control law. It can only earn
so much because of the restrictions imposed by
the law. So you have this income approach.
Under this approach, your property may be
valued on the basis of the income that could be
generated or earned by such property.
3) Replacement/Reproduction Cost (Section 199
(t))
(t) "Replacement or Reproduction Cost" is the
cost that would be incurred on the basis of
current prices, in acquiring an equally desirable
substitute property, or the cost of reproducing a
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
new replica of the property on the basis of
current prices with the same or closely similar
material
The property, under this approach, will be valued on the
basis of replacement/reproduction cost.
The most common approach is the Sales approach.
(b) Real property shall be classified for assessment
purposes on the basis of its actual use;
In the NIRC the taxpayer himself determines the tax
liability. The Commissioner may also come up with an
assessment of a tax deficiency. In local taxation,
assessment is made by the local treasurer. In RPT, you
have Section 199 (f).
(f) "Assessment" is the act or process of
determining the value of a property, or proportion
thereof subject to tax, including the discovery,
listing, classification, and appraisal of properties;
Basically, this is the determination of the value of the
property subject to tax, or what we call the assessed
value
Assessed Value = Fair Market Value x Assessment Level
The Assessment level is the percentage applied to the fair
market value to determine the taxable value of the
property. That taxable value is the assessed value.
Under Section 199 (h), assessed value is defined as:
(h) "Assessed Value" is the fair market value of
the real property multiplied by the assessment
level. It is synonymous to taxable value;
The taxable value of the property is not the fair market
value but the assessed value of the property. The person
doing the assessment and appraisal is the local assessor.
The person who determines the tax to be paid is the local
treasurer, who makes the levy and the collection.
Now let us define actual use.
(b) "Actual Use" refers to the purpose for which
the property is principally or predominantly
utilized by the person in possession thereof;
Whether the real property is exempted from taxation
purposes, the exemption will always be guided by its
actual use. If it is commercial and residential, it will be
taxable. But if it is used for religious, charitable and
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educational purposes, it will be exempted. It is not the
ownership that will determine exemption but its actual
use.
(c) Real property shall be assessed on the basis of a
uniform classification within each local government unit;
In assessing the tax, the LGU shall provide a uniform
classification. They have to enact an ordinance for
purposes of not violating the equal protection clause.
Even if it is zoned as residential, it does not mean that you
cannot put there a commercial building, or have in a
commercial area the residence of the owners. In these
cases, be guided by the actual use of the property. So
you apportion your assessment vis--vis the portion of the
property used as residential and that which is used as
commercial.
(d) The appraisal, assessment, levy and collection of real
property tax shall not be let to any private person; and
Assessment and appraisal must be done by the local
assessor, and the levy and collection must be done by
the local treasurer.
(e) The appraisal and assessment of real property shall be
equitable.
Remember here the principle of ability to pay.
Section 200. Administration of the Real Property Tax. - The
provinces and cities, including the municipalities within
the Metropolitan Manila Area, shall be primarily
responsible for the proper, efficient and effective
administration of the real property tax.
Municipalities outside Metro Manila do not enact
ordinance for RPT. It will be the provinces or the cities.
Section 201. Appraisal of Real Property. - All real property,
whether taxable or exempt, shall be appraised at the
current and fair market value prevailing in the locality
where the property is situated. The Department of Finance
shall promulgate the necessary rules and regulations for
the classification, appraisal, and assessment of real
property pursuant to the provisions of this Code.
This is the basic rule in the appraisal and assessment of
property. This means that all real properties, whether
taxable or exempt, shall be declared for RPT purposes. All
properties must have a real property tax declaration.
Section 202. Declaration of real Property by the Owner or
Administrator. - It shall be the duty of all persons, natural
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
or juridical, owning or administering real property,
including the improvements therein, within a city or
municipality, or their duly authorized representative, to
prepare, or cause to be prepared, and file with the
provincial, city or municipal assessor, a sworn statement
declaring the true value of their property, whether
previously declared or undeclared, taxable or exempt,
which shall be the current and fair market value of the
property, as determined by the declarant. Such
declaration shall contain a description of the property
sufficient in detail to enable the assessor or his deputy to
identify the same for assessment purposes. The sworn
declaration of real property herein referred to shall be
filed with the assessor concerned once every three (3)
years during the period from January first (1st) to June
thirtieth (30th) commencing with the calendar year 1992.
It is the owner who will make the declaration. He will go
to the assessor to declare the value of the property,
whether previously declared or undeclared, whether
taxable or exempt. The declaration must have a
description of the property.
Section 203. Duty of Person Acquiring Real Property or
Making Improvement Thereon. - It shall also be the duty
of any person, or his authorized representative, acquiring
at any time real property in any municipality or city or
making any improvement on real property, to prepare, or
cause to be prepared, and file with the provincial, city or
municipal assessor, a sworn statement declaring the true
value of subject property, within sixty (60) days after the
acquisition of such property or upon completion or
occupancy of the improvement, whichever comes
earlier.
A real property was sold. When the ROD will issue a new
title, the buyer must declare said title to the Assessor so
that the name of the seller in the tax declaration will be
cancelled, and the new owner will be substituted therein.
If the new owner is not aware of the taxes payable for
the property, he will not know that the property has
already been subject of an auction as a result of the
unpaid taxes.
This also covers making an improvement to the property.
Before constructing the house, you need to get a
building permit. After the construction, you have to get
an occupancy permit. This permit you will present to the
local assessor to declare the newly constructed building.
So if you have a house and lot, you have to make a
separate declaration for the lot and the house.
In agricultural lots, if it is vacant, then you have to declare
that it is vacant. But if you start planting corn on the lot,
you have to declare such an improvement as well.
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Section 204. Declaration of Real Property by the
Assessor. - When any person, natural or juridical, by
whom real property is required to be declared under
Section 202 hereof, refuses or fails for any reason to make
such declaration within the time prescribed, the
provincial, city or municipal assessor shall himself declare
the property in the name of the defaulting owner, if
known, or against an unknown owner, as the case may
be, and shall assess the property for taxation in
accordance with the provision of this Title. No oath shall
be required of a declaration thus made by the provincial,
city or municipal assessor.
If the owner fails to make the declaration, the assessor will
do the declaration for the owner.
Section 205. Listing of Real Property in the Assessment
Rolls.
(a) In every province and city, including the
municipalities within the Metropolitan Manila Area, there
shall be prepared and maintained by the provincial, city
or municipal assessor an assessment roll wherein shall be
listed all real property, whether taxable or exempt,
located within the territorial jurisdiction of the local
government unit concerned. Real property shall be listed,
valued and assessed in the name of the owner or
administrator, or anyone having legal interest in the
property.
(b) The undivided real property of a deceased person
may be listed, valued and assessed in the name of the
estate or of the heirs and devisees without designating
them individually; and undivided real property other than
that owned by a deceased may be listed, valued and
assessed in the name of one or more co-owners:
Provided, however, That such heir, devisee, or co-owner
shall be liable severally and proportionately for all
obligations imposed by this Title and the payment of the
real property tax with respect to the undivided property.
(c) The real property of a corporation, partnership, or
association shall be listed, valued and assessed in the
same manner as that of an individual.
(d) Real property owned by the Republic of the
Philippines, its instrumentalities and political subdivisions,
the beneficial use of which has been granted, for
consideration or otherwise, to a taxable person, shall be
listed, valued and assessed in the name of the possessor,
grantee or of the public entity if such property has been
acquired or held for resale or lease.
The assessment roll is the list of the real properties in the
territory of the assessor, and their classifications and their
assessed values. Whether it is owned by a corporation or
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
by the republic, all these must be declared. The
government is also required to make a tax declaration.
Section 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 file with the provincial, city
or municipal assessor within thirty (30) days from the date
of the declaration of real property sufficient documentary
evidence in support of such claim including corporate
charters, title of ownership, articles of incorporation, by-
laws, contracts, affidavits, certifications and mortgage
deeds, and similar documents.
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.
In the case of property tax exemption for religious,
charitable and educational use, the grant is in the
constitution, but it is not automatic. You have to present
proof that you are covered by that exemption.
Read with Section 234.
Section 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;
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for
religious, charitable or educational purposes;
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts and
government owned or controlled corporations engaged
in the supply and distribution of water and/or generation
and transmission of electric power;
(d) All real property owned by duly registered
cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control
and environmental protection.
Except as provided herein, any exemption from payment
of real property tax previously granted to, or presently
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enjoyed by, all persons, whether natural or juridical,
including all government-owned or controlled
corporations are hereby withdrawn upon the effectivity of
this Code.
CASE: Philippine Association of Rural Electric
Cooperatives is a cooperative registered with the
National Electric Administration (NEA). They questioned
the constitutionality of Section 234 (d), as a violation of
the equal protection clause as the exemption only covers
cooperatives registered with Cooperative Development
Authority (CDA). The Supreme Court ruled that there is no
violation of equal protection because there is a
distinction between those cooperative registered with
the NEA and those registered with the CDA. What they
could have done is to lobby in the Congress to include
them in the exemption.
This provision operated to the effect that all RPT
exemption granted prior to the LGC was withdrawn.
However, Congress later on passed a law reinstating the
exemptions. This involved SSS and GSIS.
Section 207. Real Property Identification System. - All
declarations of real property made under the provisions
of this Title shall be kept and filed under a uniform
classification system to be established by the provincial,
city or municipal assessor.
Section 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.
Section 209. Duty of Registrar of Deeds to Appraise
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
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
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.
This is for the purpose of updating both the records of the
ROD and the local assessor. In reality, the records of the
ROD are more updated than the records of the local
assessor.
Paragraph b talks about the Real Property Tax clearance.
The ROD will not issue a new title to the new owner
without this clearance, which would show that you have
paid all taxes on the property.
Section 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.
The building officer must send copies of the buildings
permits it issued to the assessor in order for the latter to
determine whether the construction was completed or
not.
Section 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 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.
So the geodetic engineers shall always furnish the
assessor with blueprints of all surveys they did.
Section 212. Preparation of Schedule of Fair Market
Values. - Before any general revision of property
assessment is made pursuant to the provisions of this Title,
there shall be prepared a schedule of fair market values
by the provincial, city and municipal assessor of the
municipalities within the Metropolitan Manila Area for the
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different classes of real property situated in their
respective local government units for enactment by
ordinance of the sanggunian concerned. The schedule of
fair market values shall be 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.
This is the role also of the assessor, to prepare a schedule
of fair market values. If the owner fails to make a
declaration, it will be the assessor who will make a
declaration in behalf of the owner, and make the
determination of the fair market value. There are times
where the fair market value of the assessor and that of
the owner vary. The owner will always declare a lower
amount.
The schedule so made by the assessor must be approved
by the Sanggunian through the enactment of an
ordinance, after holding public hearings on such subject.
Section 213. Authority of Assessor to Take Evidence. - For
the purpose of obtaining information on which to base the
market value of any real property, the assessor of the
province, city or municipality or his deputy may summon
the owners of the properties to be affected or persons
having legal interest therein and witnesses, administer
oaths, and take deposition concerning the property, its
ownership, amount, nature, and value.
This is on account of disputes on the valuation of real
properties.
Section 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.
Section 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.
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.
The definition of the classes of lands enumerated in the
provision is found in Section 199.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
(d) "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;
(i) "Commercial Land" is land devoted principally
for the object of profit and is not classified as
agricultural, industrial, mineral, timber, or
residential land;
(n) "Industrial Land" is land devoted principally to
industrial activity as capital investment and is not
classified as agricultural, commercial, timber,
mineral or residential land;
(p) "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;
(u) "Residential Land" is land principally devoted
to habitation.
Special land is defined in the next Section.
Section 216. Special Classes of Real Property. - All lands,
buildings, and other improvements thereon actually,
directly and exclusively used for hospitals, cultural, or
scientific purposes, and those owned and used by local
water districts, and government-owned or controlled
corporations rendering essential public services in the
supply and distribution of water and/or generation and
transmission of electric power shall be classified as
special.
In classifying lands among these spcial classes, an
ordinance must be enacted. This ordinance is called as
the Zoning Ordinance.
Section 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.
Section 218. Assessment Levels. - The assessment levels to
be applied to the fair market value of real property to
determine its assessed value shall be fixed by ordinances
of the sangguniang panlalawigan, sangguniang
panlungsod or sangguniang bayan of a municipality
within the Metropolitan Manila Area, at the rates not
exceeding the following:
(a) On Lands:
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CLASS ASSESSMENT LEVELS P300,000.00 500,000.00 35%

Residential 20% 500,000.00 750,000.00 40%

Agricultural 40% 750,000.00 1,000,000.00 50%

Commercial 50% 1,000,000.00 2,000,000.00 60%

Industrial 50% 2,000,000.00 5,000,000.00 70%

Mineral 50% 5,000,000.00 10,000,000.00 75%

Timberland 20% 10,000,000.00 80%

(4) Timberland
(b) On Buildings and Other Structures: Fair Market Value

Over Not Over Assessment Levels

<td P300,000.00 45%
</td
P300,000.00 500,000.00 50%
(1) Residential
Fair market Value 500,000.00 750,000.00 55%
Over Not Over Assessment Levels 750,000.00 1,000,000.00 60%
P175,000.00 0% 5,000,000.00 2,000,000.00 65%
P175,000.00 300,000.00 10% 2,000,000.00 70%
300,000.00 500,000.00 20%
(c) On Machineries
500,000.00 750,000.00 25%

750,000.00 1,000,000.00 30% Class Assessment Levels

1,000,000.00 2,000,000.00 35% Agricultural 40%
2,000,000.00 5,000,000.00 40% Residential 50%
5,000,000.00 10,000,000.00 50% Commercial 80%
10,000,000.00 60% Industrial 80%
(2) Agricultural
Fair Market Value (d) On Special Classes: The assessment levels for
Over Not Over Assessment Levels all lands buildings, machineries and other
improvements;
P300,000.00 25%

P300,000.00 500,000.00 30% Actual Use Assessment

Level
500,000.00 750,000.00 35%
Cultural 15%
750,000.00 1,000,000.00 40%
Scientific 15%
1,000,000.00 2,000,000.00 45%
Hospital 15%
2,000,000.00 50%
Local water districts 10%
(3) Commercial / Industrial
Fair Market Value Government-owned or 10%
controlled corporations
Over Not Over Assessment Levels engaged in the supply and
distribution of water and/or
P300,000.00 30%
generation and transmission of

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electric power
You must also have these assessment levels adopted
through an ordinance. The application of this provision is
not therefore automatic.
*Dean proceeded to read the values*
Remember the formula for assessed value and RPT
Assessed Value = Fair Market Value x Assessment Level
RPT = Assessed Value x rate
The rate is fixed by law, which shall also be embodied in
an ordinance. What is constant here are the rate and the
assessment level. The variable is the Assessed value and
the fair market value.
Example:
Year 1
Assessment level = 20%
FMV=1,000,000
Rate=2%
Assessed value = 1,000,000 x 30%
Assessed value = 200,000
RPT = 200,000 x 2%
RPT = 4,000
Year 5
FMV=1,500,000
Assessed value = 1,500,000 x 30%
Assessed value = 450,000
RPT = 450,000 x 2%
RPT = 9,000
Section 219. General Revision of Assessment 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.
Section 220. Valuation of Real Property. - In cases where
(a) real property is declared and listed for taxation
purposes for the first time; (b) there is an ongoing general
revision of property classification and assessment; or (c) a
request is made by the person in whose name the
property is declared, the provincial, city or municipal
assessor or his duly authorized deputy shall, in
accordance with the provisions of this Chapter, make a
classification, appraisal and assessment or taxpayer's
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
valuation thereon: Provided, however, That the
assessment of real property shall not be increased oftener
than once every three (3) years except in case of new
improvements substantially increasing the value of said
property or of any change in its actual use.
Section 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.
New assessments/valuations/appraisals takes effect on
the beginning of the next year.
If the ordinance on RPT adjusting the rates, the effectivity
will always be on January 1 of the following year, even if it
was approved in the middle of the year.
In local taxation, the ordinance will take effect on the first
day of the quarter following the effectivity of such
ordinance.
Section 222. Assessment of Property Subject to Back
Taxes. - Real property declared for the first time shall be
assessed for taxes for the period during which it would
have been liable but in no case of more than ten (10)
years prior to the date of initial assessment: Provided,
however, That such taxes shall be computed on the basis
of the applicable schedule of values in force during the
corresponding period.
If such 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 thereon; otherwise, such
taxes shall be subject to an interest 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.
Section 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
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barangay to the last known address of the person to be
served.
Section 224. Appraisal and Assessment of Machinery.
(a) The fair market value of a brand-new machinery shall
be the acquisition cost. In all other cases, the fair market
value shall be determined by dividing the remaining
economic life of the machinery by its estimated
economic life and multiplied by the replacement or
reproduction cost.
(b) If the machinery is imported, the acquisition cost
includes freight, insurance, bank and other charges,
brokerage, arrastre and handling, duties and taxes, plus
charges at the present site. The cost in foreign currency of
imported machinery shall be converted to peso cost on
the basis of foreign currency exchange rates as fixed by
the Central Bank.
Section 225. Depreciation Allowance for Machinery. - For
purposes of assessment, a depreciation allowance shall
be made for machinery 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.
ASSESSMENT APPEALS
The usual controversy before the assessors office involves
the valuation of the fair market value of the property. The
owner and the assessor will oftentimes disagree on the
value.
Section 226. Local Board of Assessment Appeals. - Any
owner or person having legal interest in the 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 provincial 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.
This is what will happen if there will be no agreement.
The assessor will issue an assessment notice. This is
different from the assessment in the NIRC. In NIRC, the
assessment pertains to deficient taxes. Here, the
assessment contains the decision of the assessor
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
regarding the valuation of the property. From that notice
of assessment, the taxpayer is given 60 days to appeal
file before the Local board of Assessment Appeals.
Section 227. Organization, Powers, Duties, and Functions
of the Local Board of Assessment Appeals.
(a) The Board of Assessment Appeals of the province or
city shall be composed of the Registrar of Deeds, as
Chairman, the provincial or city prosecutor and the
provincial, or city engineer as members, who shall serve
as such in an ex officio capacity without additional
compensation.
(b) The chairman of the Board shall have the power to
designate any employee of the province or city to serve
as secretary to the Board also without additional
compensation.
(c) The chairman and members of the Board of
Assessment Appeals of the province or city shall assume
their respective positions without need of further
appointment or special designations immediately upon
effectivity of this Code. They shall take oath or affirmation
of office in the prescribed form.
(d) In provinces and cities without a provincial or city
engineer, the district engineer shall serve as member of
the Board. In the absence of the Registrar of Deeds, or the
provincial or city prosecutor, or the provincial or city
engineer, or the district engineer, the persons performing
their duties, whether in an acting capacity or as a duly
designated officer-in-charge, shall automatically
become the chairman or member, respectively, of the
said Board, as the case may be.
This composes the Local Board of Assessment Appeals.
Section 228. Meetings and Expenses of the Local Board of
Assessment Appeals.
(a) The Board of Assessment Appeals of the province or
city shall meet once a month and as often as may be
necessary for the prompt disposition of appealed cases.
No member of the Board shall be entitled to per diems or
traveling expenses for his attendance in Board meetings,
except when conducting an ocular inspection in
connection with a case under appeal.
(b) All expenses of the Board shall be charged against
the general fund of the province or city, as the case may
be. The sanggunian concerned shall appropriate the
necessary funds to enable the Board in their respective
localities to operate effectively.
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Section 229. Action by the Local Board of Assessment
Appeals.
(a) The Board shall decide the appeal within one hundred
twenty (120) days from the date of receipt of such
appeal. The Board, after hearing, shall render its decision
based on substantial evidence or such relevant evidence
on record as a reasonable mind might accept as
adequate to support the conclusion.
(b) In the exercise of its appellate jurisdiction, the Board
shall have the power to summon witnesses, administer
oaths, conduct ocular inspection, take depositions, and
issue subpoena and subpoena duces tecum. The
proceedings of the Board shall be conducted solely for
the purpose of ascertaining the facts without necessarily
adhering to technical rules applicable in judicial
proceedings.
(c) The secretary of the Board shall furnish the owner of
the property or the person having legal interest therein
and the provincial or city assessor with a copy of the
decision of the Board. In case the provincial or city
assessor concurs in the revision or the assessment, it shall
be his duty to notify the owner of the property or the
person having legal interest therein of such fact using the
form prescribed for the purpose. The owner of the
property or the person having legal interest therein or the
assessor who is not satisfied with the decision of the
Board, may, within thirty (30) days after receipt of the
decision of said Board, appeal to the Central Board of
Assessment Appeals, as herein provided. The decision of
the Central Board shall be final and executory.
The decision of the board will either grant or deny the
appeal made by the taxpayers.
In case of a denial, the property owner, or the assessor
will go to the Central Board of Assessment Appeals.
Section 230. Central Board of Assessment Appeals. - The
Central Board of Assessment Appeals shall be composed
of a chairman, and two (2) members to be appointed by
the President, who shall serve for a term of seven (7)
years, without reappointment. Of those first appointed,
the chairman shall hold office for seven (7) years, one
member for five (5) years, and the other member for three
(3) years. Appointment to any vacancy shall be only for
the unexpired portion of the term of the predecessor. In
no case shall any member be appointed or designated in
a temporary or acting capacity. The chairman and the
members of the Board shall be Filipino citizens, at least
forty (40) years old at the time of their appointment, and
members of the Bar or Certified Public Accountants for at
least ten (10) years immediately preceding their
appointment. The chairman of the Board of Assessment
Appeals shall have the salary grade equivalent to the
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
rank of Director III under the Salary Standardization Law
exclusive of allowances and other emoluments. The
members of the Board shall have the salary grade
equivalent to the rank of Director II under the Salary
Standardization Law exclusive of allowances and other
emoluments. The Board shall have appellate jurisdiction
over all assessment cases decided by the Local Board of
Assessment Appeals.
There shall be Hearing Officers to be appointed by the
Central Board of Assessment Appeals pursuant to civil
service laws, rules and regulations, one each for Luzon,
Visayas and Mindanao, who shall hold office in Manila,
Cebu City and Cagayan de Oro City, respectively, and
who shall serve for a term of six (6) years, without
reappointment until their successors have been
appointed and qualified. The Hearing Officers shall have
the same qualifications as that of the Judges of the
Municipal Trial Courts.
The Central Board Assessment Appeals, in the
performance of its powers and duties, may establish and
organize staffs, offices, units, prescribe the titles, functions
and duties of their members and adopt its own rules and
regulations.
Unless otherwise provided by law, the annual
appropriations for the Central Board of Assessment
Appeals shall be included in the budget of the
Department of Finance in the corresponding General
Appropriations Act.
Under RA 9504, the decision of the Central Board is
brought to the Court of Tax Appeals. This is where the
action is converted to a judicial action. From the CTA,
you go to the Supreme Court.
Section 231. Effect of Appeal on the Payment of Real
Property Tax. - Appeal on assessments of real property
made under the provisions of this Code shall, in no case,
suspend the collection of the corresponding realty taxes
on the property involved as assessed by the provincial or
city assessor, without prejudice to subsequent adjustment
depending upon the final outcome of the appeal.
Pending appeal before the local board or the central
board, the collection of the real property tax is not
suspended. But if at the end of all the proceedings the
court will decide in favor of the taxpayer, any excess in
the payments made by him during the pendency of the
action will be considered as tax credits, to be applied to
future tax liabilities.
LEVY AND COLLECTION
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Section 232. Power to Levy Real Property Tax. - A province
or city or a municipality within the Metropolitan Manila
Area my levy an annual ad valorem tax on real property
such as land, building, machinery, and other
improvement not hereinafter specifically exempted.
Section 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.
There is no flexibility provision here. Once you have
reached the maximum value, you cannot go any further.
Section 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;
(b) Charitable institutions, churches, parsonages or
convents appurtenant thereto, mosques, non-profit or
religious cemeteries and all lands, buildings, and
improvements actually, directly, and exclusively used for
religious, charitable or educational purposes;
(c) All machineries and equipment that are actually,
directly and exclusively used by local water districts and
government owned or controlled corporations engaged
in the supply and distribution of water and/or generation
and transmission of electric power;
(d) All real property owned by duly registered
cooperatives as provided for under R.A. No. 6938; and
(e) Machinery and equipment used for pollution control
and environmental protection.
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.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
In RPT, what is collected is the basic RPT and the special
levies. Special levies are provided in Section 235, 236 and
240.
What is regularly collected is the basic RPT and the 1%
SEF. The special levy on idle lands is applied only if the
land is found to be idle.
Section 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).
This is for the benefit of the Local School Board, for the
upkeep of the public schools.
Section 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.
Section 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.
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Section 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.
So even if your land is idle, you can be exempted from
tax for valid reasons enumerated in the provision above.
Section 239. Listing of Idle Lands by the Assessor. - The
provincial, city or municipal assessor shall make and
keep an updated record of all idle lands located within
his area of jurisdiction. For purposes of collection, the
provincial, city or municipal assessor shall furnish a copy
thereof to the provincial or city treasurer who shall notify,
on the basis of such record, the owner of the property or
person having legal interest therein of the imposition of
the additional tax.
Section 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.
Special levies operate as a form of reimbursement to the
LGU for introducing development. Because they
invested, they have the right to recover through this
special assessment. So this special levy is not a tax.
If the development was made in front of your property,
you will be assessed more than those whose property are
father away from the development.
Section 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
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
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 proposed work.
So again, you have to enact an ordinance for this special
levy.
Section 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.
Section 243. Fixing the Amount of Special Levy. - The
special levy authorized herein shall be apportioned,
computed, and assessed according to the assessed
valuation of the lands affected as shown by the books of
the assessor concerned, or its current assessed value as
fixed by said assessor if the property does not appear of
record in his books. Upon the effectivity of the ordinance
imposing special levy, the assessor concerned shall
forthwith proceed to determine the annual amount of
special levy assessed against each parcel of land
comprised within the area especially benefited and shall
send to each landowner a written notice thereof by mail,
personal service or publication in appropriate cases.
Section 244. Taxpayer's Remedies Against Special Levy. -
Any owner of real property affected by a special levy or
any person having a legal interest therein may, upon
receipt of the written notice of assessment of the special
levy, avail of the remedies provided for in Chapter 3, Title
Two, Book II of this Code.
Section 245. Accrual of Special Levy. - The special levy
shall accrue on the first day of the quarter next following
the effectivity of the ordinance imposing such levy.
So you just follow the procedure in Chapter 3 of Title two
for your remedies as a taxpayer against special levies.
In the case of local taxes, any amendment or revisions on
local tax ordinances, the accrual of the tax under the
new ordinance takes effect on the first day of the quarter
following the effectivity of the ordinance. In RPT, if an
ordinance is enacted, the accrual of the tax will begin on
the first day of January of the following year. But in the
case of a special levy, it shall accrue on the first day of
the quarter following the date of the enactment of the
ordinance.
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Section 246. Date of Accrual of Tax. - The real property
tax for any year shall accrue on the first day of January
and from that date it shall constitute a lien on the property
which shall be superior to any other lien, mortgage, or
encumbrance of any kind whatsoever, and shall be
extinguished only upon the payment of the delinquent
tax.
Section 247. Collection of Tax. - The collection of the real
property tax with interest thereon and related expenses,
and the enforcement of the remedies provided for in this
Title or any applicable laws, 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, That the barangay
treasurer is properly bonded for the purpose: Provided,
further, That the premium on the bond shall be paid by
the city or municipal government concerned.
RPT will be collected by the local treasurer. As a rule, the
RPT collected by the LGU is the basic RPT and the SEF.
These are the two RPT that will be collected. The other
special levies, involving idle lands, is a special imposition
to lands which has been declared as idle; and the other
is for reimbursement for development introduced by
LGUs.
Payment of these taxes could be done annually or
quarterly installments, pursuant to Section 250.
The LGC only provides the limits of the power. The LGUs
have to enact an ordinance so that the provisions
allowed to them under the LGC may be imposed.
So the payment of installments and the granting of
discounts shall be embodied in an ordinance.
Section 248. Assessor to Furnish Local Treasurer with
Assessment Roll. - The provincial, city or municipal
assessor shall prepare and submit to the treasurer of the
local government unit, on or before the thirty-first (31st)
day of December each year, an assessment roll
containing a list of all persons whose real properties have
been newly assessed or reassessed and the values of
such properties.
Section 249. Notice of Time for Collection of Tax. - The city
or municipal treasurer shall, on or before the thirty-first
(31st) day of January each year, in the case of the basic
real property tax and the additional tax for the Special
Education Fund (SEF) or any other date to be prescribed
by the sanggunian concerned in the case of any other
tax levied under this title, post the notice of the dates
when the tax may be paid without interest at a
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
conspicuous and publicly accessible place at the city or
municipal hall. Said notice shall likewise be published in
a newspaper of general circulation in the locality once a
week for two (2) consecutive weeks.
Section 250. Payment of Real Property Taxes in
Installments. - The owner of the real property or the
person having legal interest therein may pay the basic
real property tax and the additional tax for Special
Education Fund (SEF) due thereon without interest in four
(4) equal installments; the first installment to be due and
payable on or before March Thirty-first (31st); the second
installment, on or before June Thirty (30); the third
installment, on or before September Thirty (30); and the
last installment on or before December Thirty-first (31st),
except the special levy the payment of which shall be
governed by ordinance of the sanggunian concerned.
The date for the payment of any other tax imposed under
this Title without interest shall be prescribed by the
sanggunian concerned.
Payments of real property taxes shall first be applied to
prior years delinquencies, interests, and penalties, if any,
and only after said delinquencies are settled may tax
payments be credited for the current period.
Section 251. Tax Discount for Advanced Prompt
Payment. - If the basic real property tax and the
additional tax accruing to the Special Education Fund
(SEF) are paid in advance in accordance with the
prescribed schedule of payment as provided under
Section 250, the sanggunian concerned may grant a
discount not exceeding twenty percent (20%) of the
annual tax due.
Section 252. Payment Under Protest.
(a) No protest shall be entertained unless the taxpayer
first pays the tax. There shall be annotated on the tax
receipts the words "paid under protest". The protest in
writing must be filed within thirty (30) days from payment
of the tax to the provincial, city treasurer or municipal
treasurer, in the case of a municipality within Metropolitan
Manila Area, who shall decide the protest within sixty (60)
days from receipt.
(b) The tax or a portion thereof paid under protest, shall
be held in trust by the treasurer concerned.
(c) In the event that the protest is finally decided in favor
of the taxpayer, the amount or portion of the tax
protested shall be refunded to the protestant, or applied
as tax credit against his existing or future tax liability.
(d) In the event that the protest is denied or upon the
lapse of the sixty day period prescribed in subparagraph
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(a), the taxpayer may avail of the remedies as provided
for in Chapter 3, Title II, Book II of this Code.
When the property owner is engaged in a controversy
with the local treasurer involving RPT assessment in
connection with the amount, Section 252 has to be
complied with. You are first made to pay the tax and pay
it under protest. No protest will be entertained unless the
taxpayer pays the tax.
In the RPT involving appeals, you have encountered
protests against the assessment of the local assessor. Your
remedy is to file a petition with the local board of
assessment appeals. From there, you appeal to the
central board of assessment appeals. And then you bring
it to the CTA and to the Supreme Court.
This procedure is the same as those involving special
levies.
In matters involving the payment of the RPT, the venue is
the Office is the Local Treasurer. What is required is you
have to pay under protest and indicate in the receipts
that you are paying under protest. And then you file the
protest with the local treasurer. The local treasurer may
either grant or deny your appeal. In the event the protest
is decided in favor of the taxpayer, the tax paid must be
refunded or applied as tax credit. In the event the protest
is denied or lapse of the 60 day period prescribed, you
now proceed to the local board of assessment appeals.
You would notice that all matters involving RPT will all pass
through the local board, whether the controversy
originated in the assessor or the treasurer.
Section 253. Repayment of Excessive Collections. - When
an assessment of basic real property tax, or any other tax
levied under this Title, is found to be illegal or erroneous
and the tax is accordingly reduced or adjusted, the
taxpayer may file a written claim for refund or credit for
taxes and interests with the provincial or city treasurer
within two (2) years from the date the taxpayer is entitled
to such reduction or adjustment.
The provincial or city treasurer shall decide the claim for
tax refund or credit within sixty (60) days from receipt
thereof. In case the claim for tax refund or credit is
denied, the taxpayer may avail of the remedies as
provided in Chapter 3, Title II, Book II of this Code.
This involves erroneously collected RPT. In the case of a
refund, file the claim with the local treasurer. The treasurer
may either grant the refund or deny it. In case of a
denial, you appeal to the local board of assessment
appeals. The taxpayers may claim a refund within two
years from the date the taxpayer becomes entitled to
such adjustment.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
It is also required that the local treasurer decide within
that period. After which, the taxpayer will bring the
action to the local board of assessment appeals.
There are therefore four types of cases that you bring to
the local board.
Section 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
municipal treasurer shall immediately cause a notice of
the delinquency to be posted at the main 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 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.
This involves delinquency in paying RPT. In the event the
taxpayer fails to pay the RPT, he will be notified. The LGU
will publish in a newspaper the list of delinquent
taxpayers.
It is in this aspect that the RPT will become a lien. That lien
of the LGU is superior to any other liens on that property.
Even if there is an existing encumbrance, in the event of
a delinquency in RPT, the claim of the government will be
superior.
It is also in this manner where if you are a new owner of a
real property, you must have that real property declared
so that you will have a new tax declaration. If you fail to
make a new declaration in the records of the assessor, it
will still be the former owner that will be written there. The
notices will still be sent to the previous owner. The new
owner will not be aware therefore that his property has
already been sold at public auction. And without such
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Dean Manuel Quibod
knowledge, the new owner will also not be able to
redeem the property in case the property has already
been sold.
Section 255. Interests on Unpaid Real Property Tax. - In
case of failure to pay the basic real property tax or any
other tax levied under this Title upon the expiration of the
periods as provided in Section 250, or when due, as the
case may be, shall subject the taxpayer to the payment
of interest at the rate of two percent (2%) per month on
the unpaid amount or a fraction thereof, until the
delinquent tax shall have been fully paid: Provided,
however, That in no case shall the total interest on the
unpaid tax or portion thereof exceed thirty-six (36)
months.
Section 256. Remedies For The Collection Of Real Property
Tax. - For the collection of the basic real property tax and
any other tax levied under this Title, the local government
unit concerned may avail of the remedies by
administrative action thru levy on real property or by
judicial action.
Section 257. Local Governments Lien. - The basic real
property tax and any other tax levied under this Title
constitutes a lien on the property subject to tax, superior
to all liens, charges or encumbrances in favor of any
person, irrespective of the owner or possessor thereof,
enforceable by administrative or judicial action, and may
only be extinguished upon payment of the tax and the
related interests and expenses.
Section 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, 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 municipality within the Metropolitan Manila Area where
the property is located, who shall annotate the levy on
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
the tax 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.
If the property is not enough, you can further levy other
properties.
Section 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.
Section 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
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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 defray the costs of
collection thru the remedies provided for in this Title,
including the expenses of advertisement and sale.
Section 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
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 lien of such delinquent tax,
interest due thereon and expenses of sale.
Section 262. Final Deed to Purchaser. - In case the owner
or person having legal interest 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.
Section 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, 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
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
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 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 vested on the local
government unit concerned.
Section 264. Resale of Real Estate Taken for Taxes, Fees,
or Charges. - The sanggunian concerned may, by
ordinance duly approved, and upon notice of not less
than twenty (20) days, sell and dispose of the real
property acquired under the preceding section at public
auction. The proceeds of the sale shall accrue to the
general fund of the local government unit concerned.
Section 265. Further Distraint or Levy. - Levy may be
repeated if necessary until the full amount due, including
all expenses, is collected.
Section 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.
Section 267. Action Assailing Validity of Tax Sale. - No
court shall entertain any action assailing the validity or
any sale at public auction of real property or rights
therein under this Title until the taxpayer shall have
deposited with the court the amount for which the real
property was sold, together with interest of two percent
(2%) per month from the date of sale to the time of the
institution of the action. The amount so deposited shall be
paid to the purchaser at the auction sale if the deed is
declared invalid but it shall be returned to the depositor if
the action fails.
Neither shall any court declare a sale at public auction
invalid by reason or irregularities or informalities in the
proceedings unless the substantive rights of the
delinquent owner of the real property or the person
having legal interest therein have been impaired.
This contemplates a property already sold at public
auction. You can question the validity of that sale,
subject to some conditions. One of these conditions is for
you to make a deposit. Such amount will be given to the
purchaser is the deed is declared invalid.
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Failure to make the deposit will result to the dismissal of
the action. That is a mandatory provision. If the entity is
exempted from the RPT, and it is questioning the validity
of the sale, the requisite of making a deposit is not
applicable.
Section 268. Payment of Delinquent Taxes on Property
Subject of Controversy. - In any action involving the
ownership or possession of, or succession to, real
property, the court may, motu propio or upon
representation of the provincial, city, or municipal
treasurer or his deputy, award such ownership,
possession, or succession to any party to the action upon
payment to the court of the taxes with interest due on the
property and all other costs that may have accrued,
subject to the final outcome of the action.
Section 269. Treasurer to Certify Delinquencies Remaining
Uncollected. - The provincial, city or municipal treasurer
or their deputies shall prepare a certified list of all real
property tax delinquencies which remained uncollected
or unpaid for at least one (1) year in his jurisdiction, and a
statement of the reason or reasons for such non-
collection or non-payment, and shall submit the same to
the sanggunian concerned on or before December thirty-
first (31st) of the year immediately succeeding the year in
which the delinquencies were incurred, with a request for
assistance in the enforcement of the remedies for
collection provided herein.
Section 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.
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
Take note that in the NIRC the period to collect is also 5
years. In local taxation you also have 5 years. Here, the
period is also 5 years.
Section 271. Distribution of Proceeds. - The proceeds of
the basic real property tax, including interest thereon,
and proceeds from the use, lease or disposition, sale or
redemption of property acquired at a public auction in
accordance with the provisions of this Title by the
province or city or a municipality within the Metropolitan
Manila Area shall be distributed as follows:
(a) In the case of provinces:
(1) Province - Thirty-five percent (35%) shall accrue to the
general fund;
(2) Municipality - Forty percent (40%) to the general fund
of the municipality where the property is located; and
(3) Barangay - Twenty-five percent (25%) shall accrue to
the barangay where the property is located.
(b) In the case of cities:
(1) City - Seventy percent (70%) shall accrue to the
general fund of the city; and
(2) Thirty percent (30%) shall be distributed among the
component barangays of the cities where the property is
located in the following manner:
(i) Fifty percent (50%) shall accrue to the barangay where
the property is located;
(ii) Fifty percent (50%) shall accrue equally to all
component barangays of the city; and
(c) In the case of a municipality within the Metropolitan
Manila Area:
(1) Metropolitan Manila Authority - Thirty-five percent
(35%) shall accrue to the general fund of the authority;
(2) Municipality - Thirty-five percent (35% shall accrue to
the general fund of the municipality where the property is
located;
(3) Barangays - Thirty percent (30%) shall be distributed
among the component barangays of the municipality
where the property is located in the following manner:
(i) Fifty percent (50%) shall accrue to the barangay where
the property is located;
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(ii) Fifty percent (50%) shall accrue equally to all
component barangays of the municipality.
(d) The share of each barangay shall be released, without
need of any further action, directly to the barangay
treasurer on a quarterly basis within five (5) days after the
end of each quarter and shall not be subject to any lien
or holdback for whatever purpose.
Section 272. Application of Proceeds of the Additional
One Percent SEF Tax. - The proceeds from the additional
one percent (1%) tax on real property accruing to the
Special Education Fund (SEF) shall be automatically
released to the local school boards: Provided, That, in
case of provinces, the proceeds shall be divided equally
between the provincial and municipal school boards:
Provided, however, That the proceeds shall be allocated
for the operation and maintenance of public schools,
construction and repair of school buildings, facilities and
equipment, educational research, purchase of books
and periodicals, and sports development as determined
and approved by the Local School Board.
Prior to the LGC, SEF is used to address salary adjustments
of public school teachers.
Section 273. Proceeds of the Tax on Idle Lands. - The
proceeds of the additional real property tax on idle lands
shall accrue to the respective general fund of the
province or city where the land is located. In the case of
a municipality within the Metropolitan Manila Area, the
proceeds shall accrue equally to the Metropolitan Manila
Authority and the municipality where the land is located.
Section 274. Proceeds of the Special Levy. - The proceeds
of the special levy on lands benefited by public works,
projects and other improvements shall accrue to the
general fund of the local government unit which financed
such public works, projects or other improvements.
Section 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 real
property assessment 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.
Section 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
Transcribed by: Althea Mae P. Casador
III-Manresa (2013)
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.
Section 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.
This power is shared by the LGU with the President. In case
if a calamity, the Sanggunian can condone RPT through
an ordinance. This can also be done by the President. The
President has broader scope than that of the
Sanggunian.
Section 278. Duty of Registrar of Deeds and Notaries
Public to Assist the Provincial, City or Municipal Assessor. -
It shall be the duty of the Registrar of Deeds and notaries
public to furnish the provincial, city or municipal assessor
with copies of all contracts selling, transferring, or
otherwise conveying, leasing, or mortgaging real
property received by, or acknowledged before them.
Section 279. Insurance Companies to Furnish
Information. - Insurance companies are hereby required
to furnish the provincial, city or municipal assessor copies
of any contract or policy insurance on buildings,
structures, and improvements insured by them or such
other documents which may be necessary for the proper
assessment thereof.
Section 280. Fees in Court Actions. - All court actions,
criminal or civil, instituted at the instance of the
provincial, city or municipal treasurer or assessor under
the provisions of this Code, shall be exempt from the
payment of court and sheriff's fees.
Section 281. Fees in Registration of Papers or Documents
on Sale of Delinquent Real Property to Province, City or
Municipality. - All certificates, documents, and papers
covering the sale of delinquent property to the province,
city or municipality, if registered in the Registry of
Property, shall be exempt from the documentary stamp
tax and registration fees.
Section 282. Real Property Assessment Notices or Owner's
Copies of Tax Declarations to be Exempt from Postal
Charges or Fees. - All real property assessment notices or
owner's copies of tax declaration sent through the mails
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by the assessor shall be exempt from the payment of

postal charges or fees.

Section 283. Sale and Forfeiture Before Effectivity of

Code. - Tax delinquencies incurred, and sales and
forfeitures of delinquent real property effected, before the
effectivity of this Code shall be governed by the
provisions of applicable laws then in force.

Transcribed by: Althea Mae P. Casador Page 38 of 38