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Local Taxes
1. Tax on transfer of real property – sale/donation/barter or other mode of transferring
- includes merger/consolidation
-seller/donor/transferor/executor/administrator is liable
-provinces: not to exceed 50% of 1% of the total consideration or FMV
-cities/municipalities within MM: not to exceed 75% of 1%
-RA 7279 (Socialized Housing Act) – exempt from transfer tax

2. Tax on Sand
Lepanto v. Ambanloc (June 29, 2010)
Can the Province of Benguet under the Benguet Revenue Code impose a sand and gravel tax on
Lepanto? Yes.

3. Franchise Tax
-imposed by provinces and cities/municipalities
-even if there is exemption prior to Jan. 1, 1992 (effectivity of LGC) because of blanket exemption
under Sec. 193
-tax base is gross receipts or capital investment
-Doctrine of Preemption – “except as otherwise provided in this Code.”
-may be imposed with the local business tax. Not direct double taxation. Different in character
and purpose.
-exemptions: holders of certificate of public convenience of operators of PUV

*BLGF Opinions are not binding. Not even persuasive.

4. Local business tax (Sec. 143)

-excise tax on the privilege of doing business
-tax on current year based on gross sales/receipts for the preceding year
-8 business types/clusters
i. manufacturers
-if maintaining a sales office to sell the products and it is incidental, then no need to be taxed
ii. wholesalers and distributors
-wholesale means a sale where the purchaser buys or imports the commodities for resale to
persons other than the end user regardless of the quantity of the transaction
-distributors are the middleman between manufacturers and retailers
iii. exporters/dealers/nillers/producers/wholesalers/distributors of essential commodities
-tax is 50% less
iv. retailers
v. contractors
vi. banks and other FIs
vii. peddlers
viii. others
-graduate fixed %
-Sec. 143 (a) to (g) not equal to Sec 143 (h) = catch all provision
-where business is conducted

Clusters already subject to excise tax, VAT, % tax

-cities and municipalities in MM – 3%

4 steps in computing LBT

1. Classify business

*Gross sales/receipts
-money or equivalent received, actually or constructively.
-but EXCL:
i. discounts, if determinable at the time of sales
ii. sales return
iii. excise tax
iv. VAT

Payment of Tax
Accrual – Jan. 1
When due – annual (Jan. 20); quarterly (within 20 days of the 1st month)

Surcharges and Penalties

1. 25% surcharge – not paid on time
2. 2% interest/month of taxes, fees, charges including surcharge (max. 36 mos. or 72%)

*define branches/sales office – ma’am’s favorite question

When does a warehouse become a sales office?
-when it accepts orders or issues sales invoice or both

Situs of Tax
1. Sales made by branches/sales outlets – 100% recorded in branch/outlet; pay 100%
2. Sales made by head/principal office – 100% recorded in HQ/PO; pay 30% - where HQ/PO is
located; pay 70% where factory, plant or plantation is located (when plantation is located in a
place other than the location of factory, 60% - factory 40% plantation); if more than 1 factory,
divide pro rata based on volume of production

Assessment – see Sec. 194 and Sec. 195

Claim for refund – see Sec. 196
Coca-Cola Bottlers v. City of Manila
-entitlement to refund is reckoned from the date the SC declares a tax ordinance void.
Not refunded in cash. Only tax credit to be applied in future obligations.

Real Property
-includes lands, buildings, machineries and other improvements
-definition of improvements and machineries are in Sec. 199
-Art. 415, NCC (nos. 1, 3, and 5)

1. Basic RPT (Sec. 232) – 1% province; 2% MM
2. Special Education Funds (Sec. 235) – 1%
3. Idle Land Tax (Sec. 236) – not more than 5%
Not really RPT
4. Special levies (Sec. 240)

*Study Sec. 234.


Real Property Tax

Lands, buildings, machinery, and other improvements attached to RP

Taxing authorities
Municipalities within MM

City or municipal treasurer
Deputized barangay treasurer

Tax declaration
A document filed to be made basis for the assessment of tax.
Must be in the name of the possessor (if owner of property is exempt but beneficial use is granted
to a taxable person).

Within 30 days from the filing of tax declaration, a property must be declared to be exempt if it
really is. Otherwise, it shall be listed as taxable.

Under Sec. 234 (b), machineries are not included.

Sec. 238 – idle lands exempt from tax.

Rules for machinery under DOF Local Finance Circular No. 01-02
1. If permanently attached to land and buildings, then subject to RPT even though it is not
actually, directly, and exclusively used for religious, charitable or educational purposes.
2. If not permanently attached to real estate:
-subject to RPT if it is an essential and principal element of an industry, work or activity
without which such industry, work or activity cannot function
-not subject to RPT if is not essential and principal element of an industry, work or activity
3. If used actually, directly, and exclusively for educational purposes by non-stock, non-profit
educational institutions, not subject to RPT.

Classes of RP for assessment purposes

1. Residential
2. Agricultural
3. Industrial
4. Commercial
5. Timberland
6. Mineral
7. Special
Actual use is the basis of classification. Current and fair market value is the basis for assessment.

Improvement vs. Machinery

Rates of RPT
1. Basic RPT
Provinces – not more than 1% of assessed value
Cities/Municipalities within MM – not more than 2% of assessed value

2. Special Levies
SEF – 1% of AV
On idle lands – not more than 5% of AV
Special levy – not more than 60% of the AV

FMV xx
Assessment level x x%
Assessed value xx
(tax base)

RPT rates
Basic 2%
SEF x 1%

Special classes/properties
-land, buildings, machinery, and other improvements

Collection and payment

Accrual – Jan. 1
Payment – 4 equal installments (Mar. 31, June 30, Sept. 30, Dec. 31)

Two kinds of discounts:

1. For prompt payment – payment of RPT before due date of installment (max of 10%)
2. For advance payment – payment of entire RPT before end of Q1 (max of 20%)

Prescription of assessment
5 years from due date
10 years from discovery of fraud

Local assessor – for appraisal and assessment

Local treasurer – for collection
Tax Payer’s remedies
1. Reasonableness or
-pay under protest
-file a written protest before the local treasurer

2. Pure question of law

LBAA – (appeal) CBAA – (appeal) CTA en banc

Condonation or reduction of real property tax by the President (Sec. 277, LGC)
Remission of tax by the Sanggunian (Sec. 276, LGC)
Tariff and Customs Law
Tariff – schedule of duties/rates on importe/exported goods.

1. Revenue tariff
2. Protective tariff
3. Customs
4. Import

Sec. 100
Duty due on all imports unless exempt.

Ordinary sense
-bringing merchandise within the limits of the port with intent to unload.

Legal sense
-see Sec. 1202, TCC

Feeder v. CA (1991)
Mere intent to unload is sufficient to commence an importation.
Ma’am: Take note of this case.

-Secs. 1301 and 1801, TCC
-see Chevron v. Commissioner of Customs
-triple meaning (1) the documents filed at the customs house; (2) the submission and acceptance
of the documents and (3) the procedure of passing goods through the customs house.

Classifications of Imported Articles

1. Freely importable – commodities the importation of which is neither regulated nor prohibited.
Not necessarily exempt.
2. Regulated – requires clearances or permits from appropriate government agencies.
3. Prohibited – Sec. 101

Rates of Import Duty

Sec. 104 – dutiable
Sec. 105 – conditionally free

Drawback – a refund of duties collected in imported goods. See Sec. 106.

-3 types

Ways of determining Dutiable Value

1. Transaction value
2. TV of identical merchandise
3. TV of similar merchandise
4. Deductive value
5. Computed value
6. Fallback value

Transaction Value = PAP (price actually paid) + additions (packing costs, commission/brokerage
fees except buying commissions

Transfer Taxes

Onerous – for valuable consideration
e.g. VAT, % tax

Gratuitous – no valuable consideration; based on pure benevolence

e.g. Estate tax (at death), donor’s tax (during lifetime)

Estate tax
1. excise tax
2. direct tax
3. purpose is to generate fiscal revenue
4. estate bears the burden
5. amount is based on FMV of estate
6. progressive tax

Theories of Estate Taxation:

1. Benefit-received
2. Privilege or state partnership
3. Ability to pay
4. Redistribution of wealth

Reasons for Donor’s Tax:

1. To prevent avoidance of estate tax
2. To protect the income tax from the practice of high bracket taxpayers who minimize the tax
by making gifts within the family.

Property transfers

Gross Estate computation

Gross estate
Less: Allowable deduction
=taxable net estate
Estate tax due

“All property” = beneficial ownership of which belongs to the decedent at the time of death.

Composition of Gross Estate

1. Citizen or resident decedent (i.e. resident and non-resident citizen and resident alien)
i. RP wherever situated
ii. TPP wherever situated
iii. IPP wherever situated

2. Non-citizen and non-resident decedent (i.e. non-resident alien)

i. RP situated in the Philippines
ii. TPP situated in the Philippines
iii. IPP with situs in the Philippines (subject to reciprocity)

Inclusions in Gross Estate:

1. Properties owned at death
-actually and physically present
-interests in property owned or possessed by the decedent

2. Taxable transfers
-personal, real, immovable, movable properties transferred by decedent during lifetime but in
the nature of testamentary dispositions.
i. transfers in contemplation of death.
ii. revocable transfer
iii. under general power of appointment
iv. for insufficient consideration
v. with retention or reservation of certain rights

Power of appointment
-power to determine who shall become owner of the property or recipient of the income.
-could be general or special/limited