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Updated 17 Mar 2013

PM REYES NOTES ON TAXATION II:


LOCAL TAXATION
1. General Principles, Definitions, and taxes is exercised through the appropriate ordinance
Limitations enacted by the Sanggunian and not by the LGC.

Q1.2. Enumerate the fundamental


(Read Sections 128-133 and 186, LGC; Art.
principles that shall govern the
217-287, IRR of the LGC)
exercise of the taxing power of the
LGUs? Section 130, LGC
Q1.What is the basis of the local
government’s  taxing  power? 1. Taxation shall be uniform in each LGU
2. Taxes, fees, charges and other imposition
It is only granted by the Constitution and is not shall:
inherent in the Local Government. a. Be equitable and based as far as
practicable on the taxpayer’s   ability  
In MERALCO V. PROVINCE OF LAGUNA [MAY 5, 1999], to pay
the Supreme Court explained that prior to the 1987 b. Be levied and collected only for
Constitution; the taxing power of LGUs was exercised public purposes
under limited statutory authority. Under the present c. Not be unjust, excessive, oppressive,
Constitution, the taxing power of LGUs is deemed to or confiscatory
exist, subject only to specific exceptions that the law d. Not be contrary to law, public policy,
may prescribe. Otherwise stated, the taxing power of national economic policy or in
LGUs is a direct grant of the Constitution, and is not a restraint of trade
delegated power of Congress. 3. The collection of local taxes, fees, charges
and other impositions shall in no case be let
Q1.1. Who exercise the power of to any private person
taxation for LGUs? 4. The revenue collected shall inure solely to
the benefit of and be subject to disposition by
the LGU levying the tax, fee, charge, or other
It is exercised by the Sanggunian through the
imposition unless otherwise specifically
passage of local ordinance (see SECTION 132, LGC)
provided;
5. Each LGU shall, as far as practicable, evolve
Q1.1.1. What is the significance of a
a progressive system of taxation.
local tax ordinance?

What determines tax liability is the tax ordinance. The Q1.3. What are the limitations on the
LGC is simply the enabling law for the local taxing power of LGUs?
legislative body. In YAMANE V. BA LEPANTO
CONDOMINIUM CORP [OCTOBER 25, 2005], at issue As provided in SECTION 133, LGUs cannot impose the
was whether the City Government of Makati can hold following:
condominium corporations liable to pay business
taxes. The Supreme Court noted that the City a. Income tax (except on bank and financial
Treasurer did not make any reference to any entities)
provision of the Makati City Revenue Code which b. DST
would serve as legal authority for the collection of c. Estate  and  Donor’s  taxes
business taxes from condominiums in the city. The d. Customs Duties
Supreme Court pointed out that in issuing a notice of e. Taxes on goods passing through the LGU
assessment, reference to the local tax ordinance is f. Taxes on agricultural and aquatic products
vital because the power of LGUs to impose local sold by marginal farmers and fisherman

PM REYES NOTES ON TAXATION II: LOCAL TAXATION


BY PIERRE M ARTIN DE LEON REYES

This reviewer is a compilation of personal notes in Taxation Two and notes and lectures from Atty. Gruba and Atty. Montero. References have
also been made to the following books: DE LEON & DE LEON, J R. THE FUNDAMENTALS OF TAXATION (2012); DE LEON & DE LEON, JR.
COMPREHENSIVE REVIEW OF TAXATION (2010); VITUG & ACOSTA. TAX LAW AND JURISPRUDENCE (2006); DOMONDON, TAXATION VOLUME II: INCOME
TAX (2009); CO-UNTIAN, JR. TAX DIGEST (2009); MAMALATEO , REVIEWER ON TAXATION (2008). This reviewer is best used with SACDALAN-
CASASOLA, NIRC AND OTHER LAWS (2012).

Possessors are granted the right to reproduce and distribute this reviewer as well as the right to convert the work to any medium for the
purpose   of   preservation   and/or   continued   distribution   provided   that   the   author’s   name   remains   clearly   associated   with   the   work and that no
alterations of the form and content are made.
Updated 17 Mar 2013
PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
g. Taxes on BOI-registered enterprises on minerals from private lands because it is an excise
h. Excise taxes on articles under the Tax Code tax on an article already covered by the Tax Code.1
and taxes on petroleum products
i. Percentage tax and VAT
j. Taxes on gross receipts of transportation
contractors Q1.3.3. Petron maintains a depot or bulk
k. Taxes on premium paid by way of plant at the Navotas Fishport
reinsurance Complex where it engages in the
l. Taxes on registration of motor vehicles selling of diesel fuels to vessels
m. Taxes on Philippine products actually used in commercial fishing.
exported Navotas City levied business taxes
n. Taxes on Countryside and Barangay on its sale of petroleum products.
Business Enterprises and cooperatives Can the LGU levy the business tax
o. Taxes and fees on the National Government on the sale of petroleum?

As provided in SECTION 186, LGUs cannot impose No, the LGU cannot impose any local tax on
taxes that are specifically enumerated or taxed under petroleum products. As held in PETRON CORP. V.
the provisions of the Tax Code. T IANGCO [APRIL 16, 2008], the prohibition with respect
to petroleum products extends not only to excise
Section 133(e) taxes but all taxes, fees, and charges. Section 133(h)
provides for two possible bases for exemption: (1)
Q1.3.1. Is a municipal ordinance excise tax on articles enumerated under the Tax
imposing fees on goods (corn) Code; and (2) taxes, fees, and charges on petroleum
that pass through a products. In the latter, the exemption refers not only
municipality’s  territory  valid? to direct or excise taxes to be levied by the LGUs on
petroleum products but on all types of taxes on
No. As held in PALMA DEVELOPMENT CORP V. petroleum products including business taxes.
ZAMBOANGA DEL SUR [OCTOBER 16, 2003], LGUs,
through their Sanggunian, may impose taxes for the Section 133(j)
use of any public road such as a service fee imposed
on vehicles using municipal roads to a wharf. Q1.3.4. What is the rationale for the
However, Section 133(e) prohibits the imposition in exemption of common carriers
the guise of wharfage, of fees as well as other taxes from local taxes?
or charges in any form whatsoever on goods or
merchandise. In this case, the LGU cannot tax the As held in FIRST PHILIPPINE I NDUSTRIAL CORP V. CA
goods even in the guise of police surveillance fees. [DECEMBER 29, 1998], the legislative intent in
excluding from the taxing power of the LGU the
Section 133(h) imposition of business tax against common carriers is
to prevent a duplication of the so-called common
Q1.3.2. The Province of Bulacan passed carrier’s  tax.
an ordinance imposing tax on
minerals extracted from public Section 186
lands but went on to collect tax
on minerals extracted from Q1.3.5. Are broadcasting and
private lands. Since the LGC telecommunication companies
only provides for tax on public liable to pay local transfer
lands, is the action of the taxes?
Province of Bulacan valid?
No. As held in both SMART COMMUNICATIONS V. T HE
No. As held in PROVINCE OF BULACAN V. CA CITY OF DAVAO [SEPTEMBER 16, 2008] and QUEZON
[NOVEMBER 27, 1998], generally, the LGU can impose
such tax even if not in LGC since Section 186 of the 1
This applies the Preemption or Exclusionary Rule wherein the
Code is sweeping. However, the province cannot levy national government elects to tax a particular area, impliedly
withholding from the LGU the delegated power to tax the same
field.

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PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
CITY V. ABS-CBN BROADCASTING CORPORATION admission fees; and (c) billboards,
[OCTOBER 6, 2008], these franchise holders are now signboards and outdoor advertisements
2
subject to VAT.
Common only to Cities and Municipalities
2. Taxing Power of LGUs 1. Community tax

(Read Sections 134-144, 146-149 and 151-164, Common to all LGUs


LGC; Art. 223-240, 241 and 244-252, IRR of the 1. Service fees and charges for services
LGC) rendered
2. Public utility charges
Q2.What is the scope of the taxing power of 3. Toll fees or charges
the following LGUs: (a) province; (b)
Municipalities; (c) Cities; and (d)
Barangays? Q2.1. Who are covered by the local
business tax?
Province
1. Manufacturers, assemblers and producers
1. Local Transfer Tax
2. Business Tax on Printing and Publication 2. Wholesalers, dealers and distributors
3. Local Franchise Tax 3. Exporters, manufacturers of essential
4. Tax on Sand, Gravel and Other Quarry commodities
Resources 4. Retailers (if both wholesale and retail, then
5. Professional Tax pay both taxes)
6. Amusement Tax 5. Contractors
7. Tax on Route Delivery Truck or Vans 6. Banks and other financial institutions3
7. Peddlers
8. Other business not specified4
Municipalities
1. Local Business Tax Q2.1.1. Can an LGU tax a condominium
2. Fees on business and occupation corporation?
3. Fees on sealing and licensing of weights and
measures No. As held by the Supreme Court in YAMANE V. BA
4. Fishery Rentals, Fees and charges LEPANTO CONDOMINIUM CORP [OCTOBER 25, 2005],
condominium   corporations   are   not   “businesses”   as  
Cities the same is defined under the LGC which is a
They may levy taxes which the province and “commercial  activity  regularly  engaged  with  a  view  to  
municipality may impose profit.”   Even   if   a   condominium   corporation   can   levy  
fees, these are used merely to finance the expenses
Barangays of the condominium and nothing more.

1. Taxes on stores with fixed business Q2.1.2. What is the tax base of the local
establishments (gross receipts of P50,000 or business tax?
less for cities, P30,000 for municipalities)
2. Service fees for use of barangay-owned The local business tax is imposed on gross receipts.
properties and services rendered In ERICSSON T ELECOMMUNICATIONS V. CITY OF PASIG
3. Barangay clearance [NOVEMBER 22, 2007], Ericsson was assessed for
4. Other fees and charges for (a) commercial
breeding of fighting cocks, cockpits and 3
DOF LOCAL FINANCE CIRCULAR 01-93 provides for the guidelines
cockfighting; (b) on places of recreation with governing the power of municipalities and provinces to impose a
business tax on banks and other banking institutions. DOF LOCAL
FINANCE CIRCULAR 2-93 provides for the guidelines for insurance
2
The   Supreme   Court   ruled   in   both   cases   that   the   “in   lieu   of   all companies. DOF LOCAL FINANCE CIRCULAR 3-93 provides for
taxes”   clause   in   their   franchises   applies   only   to   national   internal   guidelines for financing companies.
4
revenue taxes and not to local taxes. As such, they would have Those already subject to tax under (1) to (7) can no longer be
been liable to pay local transfer taxes. However, with the advent of subject to tax under (8) otherwise it will be deemed as double
the VAT law, such franchise holders are instead liable to pay VAT. taxation.

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PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
deficiency local business tax but countered that the (Read Section 150, LGC; Art. 243, IRR of the
assessment was erroneous for having been based on LGC)
is gross revenue rather than just its gross receipts.
The Supreme Court ruled that the local business tax Q3.Give the rule on situs as stated in Section
must be imposed on gross receipts. In the said case,
150 of the LGC.
the Supreme Court differentiated gross receipts and
gross revenue. Gross receipts include money or its
Section 150(a) –
equivalent actually or constructively received in
consideration of services rendered or articles sold,
If there is branch/sales office in the municipality or
exchanged, or leased, whether actual or constructive
city where the sale or transaction is made, the tax
whereas gross revenue covers money or its
shall accrue and shall be paid where such branch or
equivalent actually or constructively received,
sales outlet is located.
including the value of services rendered or articles
sold, exchanged or leased, the payment of which is
If there is no branch/sales office in the city or
yet to be received.
municipality where the sale or transaction is made,
the sale shall be recorded in the principal office and
Q2.2. ABC Mining was issued a mining the taxes shall accrue and shall be paid to such city
lease contract which granted it the or municipality (where the principal office is located)
right to extract and use for its
purposes all mineral deposits With Recorded at Allocation
within the boundary lines of its branch/sales
mining claim in Benguet. Later, the office
Provincial Treasurer demanded Yes Branch/sales None
payment of sand and gravel tax for office
the quarry materials that ABC No Principal office None
extracted. ABC countered that the
sand and gravel tax applied only to Section 150(b) –
commercial extractions. Is ABC
The following sales allocation shall apply to
correct? manufacturers with factories, plants and plantations,
etc.:
No. In LEPANTO CONSOLIDATED MINING COMPANY V.
AMBANLOC [JUNE 29, 2010], the Supreme Court found If the plantation and factory are located in the same
that under the Revised Benguet Revenue Code, only place
gratuitous permits were exempt from the sand and
gravel  tax,  and  Lepanto’s  permit  was  not  a  gratuitous   1. 30% of all sales recorded in the principal
permit. Hence, Lepanto was liable to pay the office shall be taxable by the city or
provincial sand and gravel tax. municipality where principal office is located
2. 70% shall be taxable by the city or
Q2.3. Is the amusement tax on municipality where
admission tickets to PBA games a
national or local tax? If the plantation and factory are not located in the
same place, the 70% above shall be divided as
It is a national tax. In PBA v CA [AUGUST 8, 2000], follows
the Supreme Court held that it was the National
Government which could collect amusement taxes 1. 60% to the city or municipality where the
from the PBA. While Section 13 of the Local Tax factory is located
Code   mentions   “other   places   of   amusement,”   2. 40% to the city or municipality where the
professional basketball games are definitely not plantation is located
within its scope under the principle of ejusdem
generis.
3. Situs of Local Taxes
Plantation & Allocation to Allocation to
factory in principal factory, etc

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same location Pasig where all transactions are
Yes 30% 70% made. However, MI also maintains
No 30% The 70% a warehouse in Mandaluying
above shall be which serves as its storage area
divided: and no transactions are made
therein. What is the situs of
1. Factory –
60%
taxation  of  the  sale  of  MI’s  books?
2. Plantation –
40% As held in BUREAU OF LOCAL GOVERNMENT OPINION
DATED MARCH 29, 1993, Mi should be liable for gross
If two or more sales tax to the then Municipality of Pasig. On the
factories, etc = other hand, Mandaluyong, where the warehouse is
70% is prorated located but where no transactions are made, may
only   collect   Mayor’s   permit   fee   and   other   regulatory  
Note that Section 150(b) is only resorted to if there is fees.
no branch or sales office. In addition, the allocation
shall be applied irrespective of whether or not the Q3.3. How are the sales of route trucks
sales are made in the locality where the factory, plant and vans taxed?
or plantation is located.
If the sale is made in a place with a branch office, the
Q3.1. ABC is engaged in manufacturing sale is reported in the LGU where the branch office is
If one jurisdiction who household products. It secured the located. However, if the sale is made in a place
services of an independent without a branch office, the sale is reported in the
has the right to collect,
contractor XYZ to provide local LGU where the sales are withdrawn.
and they don’t, the other
physical distribution facilities
jurisdictions won’t have within the specified places in the Q3.3.1. The City of Cebu imposed a
right to claim that which Philippines. XYZ has a warehouse gross sales tax on sales of
matches stored by Philippine
the rightful jurisdiction in Tacloban City and makes Match Co. in Cebu City but
has. deliveries   to   ABC’s   customers   delivered to customers outside
outside the city. Under the the city. Id the imposition valid?
contract, ABC can also make
deliveries of its products in other Yes. As held in PHILIPPINE MATCH CO. V. CITY OF
places of the country from its own CEBU [JANUARY 18, 1978], the city can validly tax the
warehouse in Makati. What is the sales of matches to customers outside of the city as
situs of taxation of the sales made long as the orders were booked and paid for in the
by ABC and XYZ? company’s   branch   office   in   the   city.   Those   matches  
can be regarded as sold in the city because the
matches were delivered to the carrier in Cebu City.
As held in BUREAU OF LOCAL GOVERNMENT OPINION
Generally, delivery to the carrier is delivery to the
DATED MARCH 7, 1994, the products taken from the
buyer. A different interpretation would defeat the tax
warehouse of PBE in Tacloban City and delivered to
ordinance and encourage tax evasion.
CPI's customers outside the city should be recorded
and the tax thereon paid in Tacloban City where said
Q3.3.2. ABC Bottlers Inc. maintained a
warehouse is situated. As to the deliveries or sales
bottling plant in Pavia, Iloilo but
made by CPI of products taken from its warehouse in
sold softdrinks in Iloilo City by
Makati to places where it does not have any branch,
means of a fleet of delivery
sales office, or another warehouse, the same should
trucks called rolling stores
be recorded in Makati where its principal office is
which went directly to
located and the taxes due thereon should likewise be
customers. Iloilo City passed an
paid to said municipality.
ordinance imposing a municipal
license tax on
Q3.2. MI is a corporation engaged in distributors/sellers in the area.
trading books. It holds an office in

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Is ABC liable under the tax year. If the tax paid during the year be less than the
ordinance? tax due on the said gross sales or receipts of the
current year, the difference shall be paid before the
Yes. In ILOILO BOTTLERS INC. V. CITY OF ILOILO business is considered officially retired.
[AUGUST 19, 1988], the Supreme Court found that the
bottling company was engaged in the business of Q7.1. Are the local tax payments paid for
selling/distributing softdrinks in Iloilo City through its the privilege of carrying on
rolling stores where sales transactions with business in the year paid or for
customers were entered into and sales were having engaged in business the
perfected and consummated by route salesmen,
previous year?
Hence, the company was subject to municipal license
tax.
It is paid for the privilege of carrying on business in
the year paid. In MOBIL PHILIPPINES V. T HE CITY
4. Collection of Local Taxes T REASURER OF MAKATI [JULY 14, 2005], for the year
1998, Mobil paid a total of P2,262,122.48 to the City
(Read Sections 165-171, LGC; Art. 253-259, IRR of Treasurer of Makati as business taxes for the year
the LGC) 1998. The amount of tax as computed based on
Mobil’s   gross   sales   for   1998   is   only   P1,331,638.84.  
Q4.When do local taxes accrue? Since the amount paid is more than the amount
computed   based   on   Mobil’s   actual   gross   sales   for  
General Rule: On January 1 1998, Mobile upon its retirement is not liable for
additional taxes to the City of Makati. The Supreme
Exception: New taxes which will accrue on the 1st Court found that the City Treasurer erroneously
day of the next quarter following effectivity of the reated the assessment and collection of tax as if it
ordinance. were an income tax by rendering an additional
assessment of P1,331,638.84 for the revenue
Q5.When are local taxes paid? generated for the year 1998.5

General Rule: Within the first 20 days of January or 6. Remedies for the Collection of Local
of each subsequent quarter, as the case may be Taxes
Exception: For justifiable reason or cause, the
(Read Sections 172-191, LGC; Art. 260-281,
Sanggunian may extend the time for payment without
surcharge or penalties but only for a period not
IRR of the LGC)
exceeding 6 months.
Q8.What are the remedies available to the
Q6.What penalties are imposable on failure local government? Period to assess will always be on the due
to pay local taxes? date(?)
1. By administrative action through distraint and
The penalty of 25% and 2% interest per month not to levy6
exceed 36 months (or a maximum of 72%) may be 2. By judicial action for collection of the unpaid
imposed taxes

5
5. Retirement of Business Another example: A corporation whose gross sales was 10
million in 2008 and 20 million in 2009, the local business tax
payable in January 2009 is based on 10 million (gross receipts for
(Read Sections 145, LGC and Article 241, IRR of the 2008) but the same is payment for the right to do business in 2009.
LGC) Thus, on the year of retirement, the company will only be liable if
the actual local business tax on the basis of current year sales is
more   than   the   local   business   tax   paid   based   on   previous   year’s  
Q7.What is the rule on local taxes when a sales. To continue the example, if the sales of the company are
business retires? also P10 million as of the date of retirement in 2010, this means
that the payment made in January 2010 based on the 2009 gross
receipts is sufficient to cover the local business tax due upon
The business upon termination shall submit a sworn retirement.
statement of its gross sales or receipts for the current 6
Note that under Section 185, there are certain persona lroperties
that are exempt from distraint or levy.

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Either of these remedies or all may be pursued Q10.1. Can an ordinance with has been The remedy is
concurrently and simultaneously. declared void for failure to publish to pass a new
for 3 weeks be remedied by ordinance
Your business Q8.1. Is closure of business a remedy passing another ordinance with altogether
permit is available to LGUs? NO. But it indirectly happens taxing the
by non-issuance of BP.
purports to amend the ordinance object they
necessary for
operations, and
that has been declared null and want to tax.
No. In RURAL BANK OF MAKATI V. MUNICIPALITY OF void?
the same They cannot
MAKATI [JULY 2, 2004], the Supreme Court ruled that
necessarily simply amend.
under the Local Tax Code (which was the applicable
requires
law in this case) and the LGC, LGUs may resort to No. The new ordinance is still void since it
payment of tax
administrative action and/or judicial action. Neither cannot cure something which had never existed
prior to its in the first place as the same was void ab initio
issuance.
the Local Tax Code nor the LGC provides for a
closure of business as a remedy available to LGUs.7 (see COCA-COLA BOTTLERS V. CITY OF MANILA
[JUNE 27, 2006]).
Q9.What is the nature of the public hearings
under Section 187 of the LGC? Q10.2. Is publication/posting of an
ordinance fixing the assessment
In HAGONOY MARKET VENDOR ASSOCIATION V. levels for different classes of real
MUNICIPALITY OF HAGONOY, BULACAN [FEBRUARY 2, property in an LGU necessary?
2002], the discussed the nature of the public hearings
on  proposed  tax  ordinances  in  this  light:  “To  be  sure,   Yes. In FIGUERRES V. CA [MARCH 25, 1999], the
public hearings are conducted by local legislative Supreme Court held that the publication/posting
bodies to allow interested parties to ventilate their requirement under Section 188 of the LGC must be
views on a proposed law or ordinance. These views, complied with in case of an ordinance imposing real
however, are not binding on the legislative body and property taxes, as well as an ordinance fixing the
it  is  not  compelled  by  law  to  adopt  the  same.” assessment levels for different classes of real
property. The latter is in the nature of a tax
Q9.1. Can a public hearing conducted ordinance.
after the passage of a tax
ordinance cure the defect in its Q11. Outline the process on how an appeal
enactment (for failure to hold one involving questions of constitutionality
prior to the enactment)? or legality of tax ordinances.

No. As held in ONGSUCO V. MALONES [OCTOBER 27, 1. Appeal to the Secretary of Justice within 30
2009], the Supreme Court held that a public hearing days from effectivity
conducted after the passage of a tax ordinance does 2. The Secretary of Justice has 60 days to
not cure the defect in its enactment. The LGC decide but an appeal does not suspend the
requires that public hearings be held prior to the effectivity of the ordinance
enactment by the LGU of the ordinance levying 3. Within 30 days from the Secretary of
taxes, fees, and charges. Justice’s   decision   or   after   60   days   inaction,
an appeal may be filed with the RTC/
Q10. What is the effect of non-compliance
with the publication/posting Q11.1. Is compliance with the 30-60-30
requirements of tax ordinances laid day period rule mandatory?
down in Section 188 of the LGC?
Yes. In REYES V. CA [DECEMBER 10, 1999], the
Failure to follow the procedure in enactment of Secretary of Justice dismissed an appeal assailing
tax ordinances renders the same null and void. the constitutionality of the tax ordinances of the
Municipality of San Juan on the ground that it was
filed out of time. The Supreme Court ruled that
7
Note, however, that LGUs may order closure on the basis of the compliance with the three separated periods is
general welfare clause as when the entity is engaged in illegal or
immoral activities.
mandatory. The failure of the petitioners in the case

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to appeal to the Secretary within 30 days from the the appeal of the ordinance. The Secretary may not
date of effectivity is fatal to their cause. abdicate his authority to review tax ordinances.

Q11.2. Is payment under protest required 7. Exemption for Local Taxes


before a party may appeal to the
Secretary of Justice? (Read Sections 192-193, LGC; Art. 282-283,
IRR of the LGC)
No. As held in JARDINE DAVIS INSURANCE V. ALIPOSA
[FEBRUARY 27, 2003], prior payment under protest is Q12. Who has the authority to grant tax
not required when the taxpayer is questioning the exemption privileges for local taxes?
very authority and power of the assessor to impose
the assessment and of the treasurer to collect the tax The Sanggunian by passing ordinances granting
(as opposed to questioning the increase or decrease exemptions, incentives or reliefs.
in the tax to be paid).
Q12.1. Give the requirements for the
Q11.3. What authority is given to the
Sanggunian to grant exemptions
Secretary of Justice with respect
from local business tax?
to review of tax ordinances?
1. Natural calamities, civil disturbance, failure of
The Secretary of Justice can declare an ordinance crops
void for not having followed the requirements of the 2. Through an ordinance
law but he cannot replace it with his own law or he 3. Shall similarly apply to all businesses
cannot say that is is unwise. In DRILON V. LIM similarly situated
[AUGUST 4, 1994], then Secretary of Justice Drilon set 4. Shall only take effect for the next calendar
aside the Manila Revenue Code on two grounds, year and not to exceed 12 months.
namely the inclusion of certain ultra vires provisions
and its non-compliance with the prescribed procedure
Q12.2. Is the 6-year exemption from local
in its enactment. In ruling that the act of then
Secretary Drilon was proper, the Supreme Court
business taxes for BOI-registered
noted that when the Secretary alters or modifies or enterprises reckoned from the
sets aside a tax ordinance, he is not allowed to date of BOI registration or from
substitute his own judgment for the judgment of the start of commercial operations?
LGU that enacted the measure. In the said case,
Secretary Drilon only exercised supervision and not The exemption starts from registration with the BOI
control. even if the actual operations started some time after
due to force majeure. (see BATANGAS POWER
Q11.4. Olongapo City enacted an CORPORATION V. BATANGAS CITY [APRIL 28, 2004])
ordinance fixing monthly rental
fees for the different stalls in the Q13. What is the effect of Section 193 of the
new public market. A questioned LGC?
the validity of the said ordinance
by filing an appeal with the Under Section 193, all existing tax exemption
privileges granted to or presently enjoyed by all
Secretary of Justice. The Secretary
persons whether natural or juridical including GOCCs
deferred rendering a decision on (except local water districts, cooperatives registered
the appeal and advised A to file his under RA 6938, non-stock and non-profit hospitals
appeal with the RTC. Is the act of and educational institutions) were withdrawn upon
the Secretary proper? effectivity of the LGC.

No. As held in CITY OF OLONGAPO V. STALLHOLDERS In MERALCO V. PROVINCE OF LAGUNA [MAY 5, 1999],
OF EAST BAJAC-BAJAC PUBLIC MARKET [OCTOBER 19, the Supreme Court noted that indicative of the
2000], the act of the Secretary of Justice was legislative intent to carry out the Constitutional
tantamount to an abdication of his jurisdiction over mandate of vesting broad tax powers to LGUs, the

PIERRE MARTIN DE LEON REYES 8


Updated 17 Mar 2013
PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
LGC has effectively withdrawn tax exemptions and 6. Appeal to the SC within 15 days from receipt
incentives theretofore enjoyed by certain entities. of resolution. The treasurer can rule on everything
(see also NAPOCOR V. CITY OF CABANATUAN [APRIL except the validity of the ordinance or
9, 2003]. Q17. What is the rule on refunds? the authority issuing it.

8. Taxpayer’s  Remedies The taxpayer must file a written claim within 2 years
from the date of payment of tax or from the date
(Read Sections 194-196, LGC; Art. 284-287, when the taxpayer is entitled to refund.9
IRR of the LGC) An ordinance came out and you were assessed, but you contest the validity of the ordinance. What is your
remedy? Just contest the assessment on you first, and later na yung ordinance. Because if you prioritize
Q14. What are the rules on assessments? disputing the ordinance, then you might run out of time for disputing the assessment. You can also just
simultaneously dispute both the assessment (Treasurer) and the ordinance (DOJ) - Jardin Davies v. Aliposa.
General Rule: An assessment must be made within — If the ordinance is vacated, there is no certainty for the assessment will be vacated. All the more reason to
5 years from the date they become due. pursue both in order to preserve both remedies.
- There can be consolidation of both cases in the RTC level.
Exception: If there is fraud or intent to evade
payment of the tax, the assessment may be made REFUND:
within 10 years from discovery of fraud or intent to - The 2year period is the same as that provided for national taxes.
evade -The reckoning period is from payment OR when the taxpayer is entitled to refund (supervening clause).
-You file refund with the treasurer, but there is no period within which the treasurer should act. It appears

Q15. What is the rule on collection? SUSPENSION:


1. not in the ph.
Collection must be within 5 years from 2. cannot be bound.
assessment. You can also extend on the ground of fraud. 3. legal prevention of
the treasurer to make
an assessment.
Q15.1. May regular court issue an 4. taxpayer is
injunction to restrain LGUs from applying for
collecting taxes? reinvestigation and
signs a waiver. The
Yes. In ANGELES CITY V. ANGELES ELECTRIC law requires that the
CORPORATION [JUNE 29, 2010], the Supreme Court reinvestigation MUST
held that the LGC does not specifically prohibit an ALWAYS come with a
injunction enjoining the collection of local taxes (as waiver. (In contrast,
compared to the Tax Code which has an express for national taxes,
prohibition). Nevertheless, the Court noted that your request for
injunctions enjoining the collection of local taxes are reinvestigation is not
frowned upon and should therefore be exercised with always accompanied
by a waiver. They are 2
extreme caution.
separate things.)

Q16. Outline the procedure in contesting a


local tax assessment. 60-60-30

1. Assessment notice issued by local treasurer


2. File written protest with the local treasurer
within 30 days from date of payment
3. The Treasurer has to decide within 60 days
4. An appeal to the RTC is then available upon
denial or 60-day inaction by the treasurer
5. The RTC decision is appealable to the CTA
En Banc8

8 9
The mode is Rule 43 The supervening cause doctrine applies.

PIERRE MARTIN DE LEON REYES 9