LOCAL TAXATION

Basis/Foundation: Sec. 5, Article X of

the 1987 Constitution and Sec. 129 of
the Local Government Code

1
 The fundamental principles of local taxation are:
a. Uniformity;
b. Taxes, fees, charges and other impositions
shall be equitable and based on ability to pay, for
public purposes, not unjust, excessive, oppressive
or confiscatory, not contrary to law, public policy,
national economic policy or in restraint of trade;
c. The levy and collection shall not be left to
any private person;
d. Inures solely to the local government unit
levying the tax;
e. The progressivity principle must be
observed. (Sec. 130, NIRC)

2
Scope of Local Taxation:
1. Local government taxation covering the
imposition of license taxes, fees, and other
impositions, including community tax.
2. Real property taxation a system of levy on
real property imposed on a country-wide basis
but authorizing, to a limited extent and within
certain parameters, LGUs to vary the rates of
taxation.
Nature of the taxing power of LGUs
3. Not inherent but a direct grant
4. Limited
5. Legislative
6. Territorial 3
The LGU has the power to:

1. Create its own source of revenue

2. Levy taxes, fees, and charges
3. Prescribe penalties for the tax violations
4. Grant local tax exemptions
5. Adjust local tax rates
6. Residual powers

Local Taxing Authority

The power to tax in the local government is
vested and exercised by the Sanggunian.

Every tax imposed must be levied pursuant to a

valid ordinance. 4
 The ultimate reference for local taxation is the
local ordinance.

LGUs may exercise the power to levy taxes,

fees, or charges on any bases or subject NOT
otherwise specifically enumerated in the LGC or
the taxed under the NIRC, or other applicable
laws (residual powers).

Enactment and Effectivity of Local Tax

Ordinance:

1. Passage due process & public hearing

2. Approval
3. Effectivity publication and/or posting
5
Limitations on the Power to Tax (Secs. 186 and
133, LGC)

Section 186, which gives a general view of the

limitations,

1. Those that already subject to tax under the

NIRC or other applicable laws cannot be taxed
again

2. Local taxes shall not be unjust, excessive,

confiscatory or contrary to national policy

3. No ordinance can be enacted without any prior

public hearing conducted for the purpose
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Section 133, which enumerates specific instances
where an LGU cannot impose a tax.
They are:
1. Income tax,
-Except when levied on banks and other
financial institutions.
2. Documentary stamp tax
3. Taxes on estates, inheritance, legacies or other
acquisitions mortis causa,
-Except as otherwise provided.
4. Customs duties, registration of vessel and
wharfage on wharves, tonnage dues, and all
other kinds of customs fees, charges ad dues
-Except wharfage on wharves constructed and
maintained by the LGU. 7
5. 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
-An ordinance imposing fees on goods and the
vehicles passing through a municipality for police
surveillance is invalid. It violates this limitation.
-It is irrelevant if the fees imposed are
actually for police surveillance, because any other
form of imposition on goods passing through the
territorial jurisdiction of the municipality is clearly
prohibited. (Palma v Municipality of Malangas)
8
6. Taxes, fees, and charges on agricultural
products or aquatic products when sold by marginal
farmers or fishermen
7. 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
8. Section 133 (h) covers two distinct limitations:
Excise taxes on articles enumerated under the
NIRC, and
Taxes, fees or charges on petroleum products.
9. Percentage or VAT on sales, barters or
exchanges or similar transactions on goods or
services
-Except as otherwise provided
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LGC authorized imposition:

a. Manufacturer
- Gross sales P6.5M or more
- Percentage tax 37.5% of 1% based on the
preceding years sales
b. Wholesaler, Distributors, Dealers
- Sale or receipts for the preceding calendar
year P2M or more
- Percentage tax 50% of 1% based on the
gross sales or receipts
c. Contractors
- Gross receipts P2M or more
- Percentage tax 50% of 1% on their gross
receipts
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10. Taxes on the gross receipts of transportation
contractors and persons engaged in the
transportation of passengers or freight by hire
and common carriers by air, land or water
-Except as provided in the Code
11. Taxes on premiums paid by way of reinsurance
or retrocession
12. 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
13. Taxes, fees, or other charges on Philippine
products actually exported,
-Except as otherwise provided
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14. Taxes, fees, or charges, on Countryside and
Barangay Business Enterprises and cooperatives
duly registered under R.A. No. 6810 and the
Cooperatives Code of the Philippines

15. Taxes, fees or charges of any kind on:

-the National Government,
-its agencies and instrumentalities,
-and local government units.

-Exception: In Section 234 (A), there is the

exception to the exemption clause which taxes the
national government when the beneficial use of its
real properties is given to a taxable entity. (More
on this when we reach real property tax)
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Taxation power of the LGUs:

1. Common Revenue-Raising Powers of LGUs

- Sec. 153, LGC
- Sec. 154, LGC
- Toll fees or charges
2. Specific Power of LGU to impose taxes
Provinces
a. Tax on transfer of real property
ownership (Sec. 135)
b. Tax on business of printing and publication
c. Franchise tax (Sec. 137)
d. Tax on sand, gravel and other quarry
resources extracted from public land (Sec. 138)
e. Professional tax (Sec. 139)
f. Amusement tax (Sec. 140)
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 g. annual fixed tax for every delivery truck
or van of manufacturers or producers,
wholesalers of, dealers, or retailers in, certain
products. (Sec. 141)

Municipalities may levy on those taxes, fees

and charges NOT otherwise levied by provinces.

a. Business taxes (Sec. 143)

b. Fees and charges

Cities except as otherwise provided in the

LGC, the city may levy taxes, fees, and
charges which the province or municipality may
impose. (Sec. 151)
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SITUS (Sec. 150):

1. When sale was made in a certain municipality or city

If there is a branch where the sale was made, the
sale shall be recorded in the said branch, and the
tax shall accrue and be paid to the municipality (or
city) where the branch is located.
If there is no branch where the sale was made, the
sale shall be recorded in the principal office and
taxes shall accrue and be paid to the municipality (or
city) where the principal office is located.

2. If there is no branch, and the company has a factory,

plants, plantations, etc
30% of sales taxable where principal office is
located
70% of sales taxable where factory, etc is located
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3. Sales allocation in case factories and
plantations located in different places

30% of sales taxable where principal office

is located
70% distributed as follows:
- 60% taxable where factory is located
- 40% taxable where plantation is located

4. In case there are 2 or more factories and

plantations located in different localities

Prorate the 70% according to the volume of

production
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5. In case of route sales

Made in a locality where a manufacturer,

producer, wholesaler, retailer or dealer has a
branch or sales office or warehouse, the sale
are recorded in the branch, sales office or
warehouse and the tax due thereon is paid to
the LGU where such branch, sales office or
warehouse is located

Made in a locality where a manufacturer,

producer, wholesaler, retailer or dealer has no
branch, sales office or warehouse the sales
are recorded in the branch, sales office or
warehouse from where the route trucks
withdraw their products for sale 17
 Barangays may levy, to the exclusion of the
LGUs the following on those taxes, fees and
charges which shall exclusively accrue to them:

(a) Taxes - On stores or retailers with fixed

business establishments with gross sales or
receipts of the preceding calendar year of Fifty
thousand pesos (P50,000.00) or less, in the
case of cities and Thirty thousand pesos
(P30,000.00) or less, in the case of
municipalities, at a rate not exceeding one
percent (1%) on such gross sales or receipts.

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 (b) Service Fees or Charges - barangays may
collect reasonable fees or charges for services
rendered in connection with the regulation or
the use of barangay-owned properties or
service facilities such as palay, copra, or
tobacco dryers.

(c) Barangay Clearance - No city or municipality

may issue any license or permit for any business
or activity unless a clearance is first obtained
from the barangay where such business or
activity is located or conducted. For such
clearance, the sangguniang barangay may impose
a reasonable fee. The application for clearance
shall be acted upon within seven (7) working
days from the filing thereof. In the event that
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 the clearance is not issued within the said
period, the city or municipality may issue the
said license or permit.

(d) Other Fees and Charges - The barangay

may levy reasonable fees and charges:

(i) On commercial breeding of fighting cocks,

cockfights and cockpits;
(ii) On places of recreation which charge
admission fees; and
(iii) On billboards, signboards, neon signs,
and outdoor advertisements.

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Summary of rules on distribution of tax proceeds
between LGUs
General Rule: Revenues shall inure solely to the
benefit of the LGU levying the tax.
Exceptions:
1. Tax on sand, gravel and other quarry resources
30% - Province
30% - Component city/municipality
40% - barangay (Sec. 138)
2. Amusement tax shared equally by the province
and municipality (Sec. 140)
3. Community tax (in case the tax is collected by
barangay treasurer)
50% - municipality
50% - barangay
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3. Power to Levy Community Tax
Community tax - it is imposed on all inhabitants in
a community who are eighteen years old and
above as well as to juridical persons doing
business in the community or whose office or
establishment is located in the community.
-levied by cities or municipalities (Sec. 156

Community taxpayers:
1. Individuals
-18 yrs and above;
- regularly employed for at least 30
consecutive working days during any calendar
year;
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 - engaged in trade, business, or occupation; or
- owner of property with an aggregate assessed
value of P1,000 or more;
-required by law to file an ITR

2. Juridical persons

Exempt from community tax:

1. Diplomatic and consular representatives

2. Transient visitors when their stay in the
Philippines does not exceed 3 months

Community tax rates:

Individual P5.00
Juridical Person P500
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Additional Community tax

Individual P1.00 for every P1,000 of income

from business, exercise of profession or income
from property which in no case shall exceed
P5,000.

Juridical person P2.00 for every P5,000 of:

Assessed value of real property in the
Philippines
Gross receipts or earnings from business in
the Philippines
which in no case shall exceed P10,000.

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4. Powers under Miscellaneous Provisions

a. Power to prescribe penalties for tax

violations and limitations thereon (Sec. 516)
Sanggunian
Fines = not less than P1,000 nor more than P5,000
Imprisonment = not less than 1 mo. nor more than
6 mos.
Sanguniang Barangay
Fines = not less than P100 nor more than P1,000

b. Power to adjust local tax rate (Sec. 191) -

should not be oftener than once every 5
years and in no case shall such adjustment
exceed 10% of the rates fixed under the
LGC. 25
c. Power to impose surcharges and interest
(Sec. 168)
-the Sanggunian may impose a surcharge
not exceeding 25% of the taxes, charges, or
fees not paid on time and an interest rate of
not more than 2% per month of unpaid tax,
charge, or fee including the surcharge
thereon, but in no case shall the same total
36 months.

d. Power to grant local tax exemptions (Sec.

192)
-not applicable to regulatory fees
-tax exemptions existing before the
effectivity of the LGC has been abolished
(Sec. 193)
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LOCAL TAX REMEDIES:

Remedies of the LGU

I. Civil remedies to effect collection of taxes
A. Local governments lien
B. Civil remedies
1. By administrative action
i. Distraint
ii. Levy
2. Judicial action
II.Judicial remedies
A. Court action
B. Declaratory relief
C. injunction
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 Court Jurisdictional Amount
MTC
ORIGINAL Principal amount does not exceed P300,000 or P400,000 in
Metro Manila
RTC
ORIGINAL Principal amount exceeds P300,000 or P400,000 in Metro Manila
Provided, the amount is less than P1M
APPELATE All cases decided by the MTC, MeTC, MCTC, MTCC in their
respective territorial jurisdiction.
CTA DIVISION
ORIGINAL Principal amount is P1M or above.
APPELATE Over appeals from the judgments, resolutions, or orders of the
RTC in tax collection cases originally decided by them in their
respective jurisdiction
CTA EN BANC
APPELATE 1. Decisions or resolutions over petitions for review of the Court
in Divisions in the exercise of its exclusive appelate
jurisdiction over local taxes decided by RTC
2. Decisions or resolutions over petitions for review of the RTC
in the exercise of its appelate jurisdiction28over tax collection
Remedies of the Taxpayer
I. Administrative
A. Before Assessment
1. Question the constitutionality
2. Declaratory relief
B. After Assessment
1. Protest
2. Claim for refund
3. Redemption
II.Judicial remedies
A. Court action
B. Declaratory relief
C. injunction

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REAL PROPERTY
TAXATION

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Fundamental Principles of Real Property Taxation:

1. Appraisal at current and fair market value;

2. Classification for assessment on the basis of
actual use;
3. Assessment on the basis of uniform
classification;
4. Appraisal, assessment, levy and collection shall
not be let to a private person;
5. Appraisal and assessment shall be equitable.

(Sec. 198, LGC)

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Real property taxes direct taxes imposed on the
privilege to use real property such as land,
building, machinery, and other improvements
unless specifically exempted.

Nature and Characteristics of Real Property Tax:

1. Direct tax
2. Indivisible single obligation
3. Ad valorem tax tax base: assessed value
4. Local tax
5. Imposed on the use and not on the ownership
6. Progressive/proportionate in character

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Policy of taxing real property

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. (Sec. 217, LGC)

- Real properties shall be appraised at the

current and fair market value prevailing in the
locality where the property is situated and
classified for assessment purposes on the basis
of its actual use. (Allied Banking Corporation,
etc., v. Quezon City Government, et al., G. R.
No. 154126, October 11, 2005)
33
Actual use refers to the purpose for which
the property is principally or predominantly
utilized by the person in possession thereof.
(Sec. 199b, LGC)

- The reasonable market value is determined by

the assessor in the form of a schedule of fair
market values. The schedule is then enacted by
the local sanggunian.

- 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, taking into consideration
all uses to which the property is adopted and
might in reason be applied.
34
 - The criterion established by the statute
contemplates a hypothetical sale. Hence, the
buyers need not be actual and existing
purchasers. (Allied Banking Corporation, etc.,
v. Quezon City Government, et al., G. R. No.
154126, October 11, 2005 citing Army and
Navy Club, Manila v. Trinidad, 44 Phil. 383 )

-Unpaid realty taxes attach to the property

and is chargeable against the person who had
actual or beneficial use and possession of it
regardless of whether or not he is the owner.
(Manila Electric Company v. Barlis, G.R. No.
114231, May 18, 2001)

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Administration of Real Property Tax:
LGUs responsible (Sec. 232)
1. Provinces
2. Cities
3. Municipalities in Metro Manila
Extent of Taxing Power
LGUs do not only have the power to levy real
estate taxes but they may also fix real estate
tax rates. However, the power to fix real
estate tax rates does not extend to
municipalities outside Metro Manila, since the
only local bodies authorized to fix tax rates are
the provincial board in the case of province,
and city council in the case of a city.
36
- public hearing shall be required before the
enactment of a local tax ordinance levying the
basic real property tax. (Figueres v. Court of
Appeals, et al., March 25, 1999) and (Reyes v.
Estrada, December 10,1999)
- while an LGU is authorize under several laws
to collect real estate tax on properties falling
under its territorial jurisdiction, it is imperative
to first show that these properties are
unquestionably within it geographical boundaries.
(Sta. Lucia Realty & Devt., Inc. v. City of Pasig,
15 June 2011)
- Proposed fair market values of real property
in a local government unit as well as the
ordinance containing the schedule must be
published in full for three (3) consecutive days
37
 of local circulation, where available, within ten
(10) days of its approval, and posted in at lease
two (2) prominent places in the provincial
capitol, city, municipal or barangay hall for a
minimum of three (3) consecutive weeks.
(Figuerres v. Court of Appeals, et al,. G.R. No.
119172, March 25, 1999)
Types of Real Property Tax
1. Basic real property tax

Formula: Market Value P xxx

Multiply: Assessment level (x%)
Assessed Value xxx
Multiply: Rate of tax (x%)
Real Property tax P xxx
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Assessment level - is a fraction or a percentage
of the market value of the land to determine
the taxable value of the property. (Sec. 199g)
Land use Assessment Levels:
Residential 20%
Agricultural 40%
Commercial, Industrial and Mineral 50%
Timberland 20%
Special classes: cultural, scientific 15%
Hospital, and water districts 10%
2. Special levies
In addition to the basic real property tax,
special levies MAY be imposed by the same LGU
on real property.
39
a. Special Education Fund (SEF) 1% additional
real estate tax to finance the Special Education
Fund (Sec. 235)
b. Additional ad valorem on Idle lands not
exceeding 5% of to the assessed value of the
property. (Sec. 236)
c. For public works (Special Assessments) on
lands specially benefited by public works,
projects, or improvements funded by the LGU.
i. Special levy shall not exceed 60% of the actual
cost of such projects and improvements, including
the cost acquiring land and such other real
property in connection therewith.
ii. Exception:
- lands exempt from basic real property tax
- remainder of the land portions donated the LGU
concerned for the construction of 40
said projects.
d. Imposed by other laws
Socialized Housing Tax (R.A. 7279) LGUs
are authorized to imposed an additional one
half percent on the assessed value of all
lands in urban areas in excess of P50,000
except those lands which are exempted from
the coverage of R.A. 7279.
Property Subject to Real Property Tax
1. For Basic Property Tax and Special Levy for
the Special Education Fund:
a. Land
b. Building
c. Machinery
d. Other improvements not specifically
exempted (Sec. 232) 41
2. For Special Levy on Idle Lands and Special Levy
on Public Works
- land only
Personal property under the civil law that may
be considered as real property for purposes of
taxes:
1. Underground tanks are essential to the conduct
of the business of a gasoline station without
which it would not be operational. (Caltex Phils.,
Inc. v. Central Board of Assessment Appeals, et
al., 114 SCRA 296)
2. Light Rail Transit (LRT) improvements such as
buildings, carriageways, passenger terminals
stations, and similar structures do not form
part of the public roads since the 42
former are
 constructed over the latter in such a way that
the flow of vehicular traffic would not be
impaired. The carriageways and terminals serve
a function different from the public roads.
Furthermore, they are not open to use by the
general public hence not exempt from real
property taxes.Even granting that the national
government owns the carriageways and terminal
stations, the property is not exempt because
their beneficial use has been granted to LRTA a
taxable entity. (Light Rail Transit Authority v.
Central Board of Assessment Appeals, et al., G.
R. No. 127316, October 12, 2000)

3. Barges on which were mounted gas turbine

power plants designated to generate electrical
43
 power, the fuel oil barges which supplied fuel oil
to the power plant barges, and the accessory
equipment mounted on the barges are subject to
real property taxes.(FELS Energy, Inc., v.
Province of Batangas, G. R. No. 168557,
February 16, 2007)
Special classes of real property: Lands, buildings,
and improvements, ACTUALLY, DIRECTLY,AND
EXCLUSIVELY used for the following purpose:
1. Hospitals
2. Cultural and scientific purposes;
3. Owned and used by local water districts;
4. Owned and used by GOCCs rendering essential basic
services in the supply and distribution of water
and/or generation or transmission of electric
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Properties exempt from 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 to a taxable person for a
consideration or otherwise (GSIS v. City
Treasurer and City Assessor of Manila 23
December 2009, PFDA v. CBAA, 15 December
2010) ;
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 and educational purposes . (Lung
45
Center of the Philippines v. Quezon City, et al.,
c. Machineries and equipment, actually, directly and
exclusively used by local water districts; and
government owned and controlled corporations engaged
in the supply and distribution of water and generation
and transmission of electric power (NPC v. Prov. Of
Quezon and Municipality of Pagbilao, 25 January
2010);

d. Real property owned by duly registered

cooperatives (R.A. 6938);

e. Machinery and equipment used for pollution

control and environmental protection (R.A. 7942).

Cases: (Manila International Airport Authority v. City of

Pasay, et al., G. R. No. 163072, April 2, 2009 citing
Manila International Airport Authority v. Court of
Appeals, et al., G. R. No. 155650, July 20,
46 2006 and
Nature of a tax declaration
-As a rule, tax declarations or realty tax payments
of property are not conclusive evidence of ownership,
nevertheless, they are good indicia of possession in the
concept of owner.
-They constitute at least proof that the holder has
a claim of title over the property.
-The voluntary declaration of a piece of property
for taxation purposes manifests not only ones sincere
and honest desire to obtain title to the property and
announces his adverse claim against the State and all
other interested parties, but also the intention to
contribute needed revenues to the government. Such
an act strengthens ones bona fide claim of acquisition
of ownership. (Buenaventura, et al., v. Republic,
March 2, 2007 citing Heirs of Simplicio Santiago v.
Heirs of Mariano E. Santiago, 17 June 2003)
47
Procedure for refund of real property taxes based on
unreasonableness or excessiveness of amounts collected.

a. Payment under protest at the time of payment or

within thirty (30) days thereafter, protest being lodged
to the provincial, city or in the case of a municipality
within the Metro Manila Area the municipal treasurer.
b. The treasurer has a period of sixty (60) days from
receipt of the protest within to decide.
c. Within thirty (30) days from receipt of treasurers
decision or if the treasurer does not decide, within
thirty (30) days from the expiration of the sixty (60)
period for the treasurer to decide, the taxpayer should
file an appeal with the Local Board of Assessment
Appeals.
d. The Local Board of Assessment Appeals has 120
days from receipt of the appeal within which to decide.
48
e. The adverse decision of the Local Board of
Assessment Appeals should be appealed within thirty
(30) days from receipt to the Central Board of
Assessment Appeals.
f. The adverse decision of the Central Board of
Assessment Appeals shall be appealed to the Court of
Tax Appeals (En Banc) by means of a petition for
review within thirty (30) days from receipt of the
adverse decision.
g. The decision of the CTA may be the subject of a
motion for reconsideration or new trial after which an
appeal may be interposed by means of a petition for
review on certiorari directed to the Supreme Court on
pure questions of law within a period of fifteen (15)
days from receipt extendible for a period of thirty (30)
days.

49
 Procedure for refund of real property taxes based on
validity of the tax measure or solutio indebeti.

a. Payment under protest not required, claim must be

directed to the local treasurer, within two (2) years from
the date the taxpayer is entitled to such reduction or
readjustment, who must decide within sixty (60) days
from receipt.

b. The denial by the local treasurer of the protest

would fall within the Regional Trial Courts original
jurisdiction, the review being the initial judicial cognizance
of the matter. Despite the language of Section 195 of
the Local Government Code which states that the remedy
of the taxpayer whose protest is denied by the local
treasurer is to appeal with the court of competent
jurisdiction, labeling the said review as an exercise of
50
appellate jurisdiction is inappropriate since the denial of
the protest is not the judgment or order of a lower court,
but of a local government official. (Yamane , etc. v. BA
Lepanto Condominium Corporation, G. R. No. 154993,
October 25, 2005)

c. The decision of the Regional Trial Court should be

appealed by means of a petition for review directed to the
Court of Tax Appeals (Division).

d. The decision of the Court of Tax Appeals (Division)

may be the subject of a review by the Court of Tax
Appeals (en banc).

e. The decision of the Court of Tax Appeals (en banc)

may be the subject of a petition for review on certiorari
on pure questions of law directed to the Supreme Court.
51
BAR EXAMS QUESTIONS:
2010
1. What is the basis for the computation of business tax
on contractors under the Local Government Code?
(2%)
2. How are retiring businesses taxed under the Local
Government Code? (2%)
3. On May 15, 2009, La Manga Trading Corporation
received a deficiency business tax assessment of
P1,500,000.00 from the Pasay City Treasurer. On June
30, 2009, the corporation contested the assessment
by filing a written protest with the City Treasurer.
On October 10, 2009, the corporation received a
collection letter from the City Treasurer, drawing it to
file on October 25, 2009 an appeal against the
assessment before the Pasay Regional Trial Court
52
(RTC).
4. Ferremaro, Inc., a manufacturer of handcrafted shoes,
maintains its principal office in Cubao, Quezon City. It
has branches/sales offices in Cebu and Davao. Its
factory is located in Marikina City where most of its
workers live. Its principal office in Quezon City is also a
sales office.
Sales of finished products for calendar year 2009 in the
amount of P10 million were made at the following
locations:

Cebu branch 25%

Davao branch 15%
Quezon City branch 60%
Total 100%

Where should the applicable local taxes on the shoes be

paid? Explain. (3%)
53
5. XYZ Shipping Corporation is a branch of an
international shipping line with voyages between
Manila and the West Coast of the U.S. The companys
vessels load and unload cargoes at the Port of Manila,
albeit it does not have a branch or sales office in
Manila. All the bills of lading and invoices are issued
by the branch office in Makati which is also the
companys principal office.

The City of Manila enacted an ordinance levying a 2%

tax on gross receipts of shipping lines using the Port of
Manila.

Can the City Government of Manila legally impose said

levy on the corporation? Explain. (3%)

54
6. A inherited a two-storey building in Makati from his
father, a real estate broker in the 60s. A group of
Tibetan monks approached A and offered to lease the
building in order to use it as a venue for their Buddhist
rituals and ceremonies. A accepted the rental of P1
million for the whole year.

The following year, the City Assessor issued an

assessment against A for non-payment of real
property taxes.

Is the assessor justified in assessing As deficiency real

property taxes? Explain. (3%)

55
 2014
1. The City of Liwliwa assessed local business taxes
against Talin Company. Claiming that there is double
taxation, Talin Company filed a Complaint for Refund
or Recovery of Illegally and/or Erroneously-collected
Local Business Tax; Prohibition with Prayer to Issue
Temporary Restraining Order and Writ of Preliminary
Injunction with the Regional Trial Court (RTC). The RTC
denied the application for a Writ of Preliminary
Injunction. Since its motion for reconsideration was
denied, Talin Company filed a special civil action for
certiorari with the Court of Appeals (CA). The
government lawyer representing the City of Liwliwa
prayed for the dismissal of the petition on the ground
that the same should have been filed with the Court of
Tax Appeals (CTA). Talin Company, through its lawyer,
Atty. Frank, countered that the CTA cannot entertain a
petition for certiorari since it is not one 56
of its powers
2. In accordance with the Local Government Code (LGC),
the Sangguniang Panglungsod (SP) of Baguio City
enacted Tax Ordinance No. 19, Series of 2014,
imposing a P50.00 tax on all the tourists and travellers
going to Baguio City. In imposing the local tax, the SP
reasoned that the tax collected will be used to
maintain the cleanliness of Baguio City and for the
beautification of its tourist attractions.
Claiming the tax to be unjust, Baguio Travellers
Association (BTA), an association of travel agencies in
Baguio City, filed a petition for declaratory relief
before the Regional Trial Court (RTC) because BTA was
apprehensive that tourists might cancel their bookings
with BTAs member agencies. BTA also prayed for the
issuance of a Temporary Restraining Order (TRO) to
enjoin Baguio City from enforcing the local tax on their
customers and on all tourists going to Baguio City.
The RTC issued a TRO enjoining Baguio City57 from
3. Madam X owns real property in Caloocan City. On July
1, 2014, she received a notice of assessment from the
City Assessor, informing her of a deficiency tax on her
property. She wants to contest the assessment. (4%)

(A) What are the administrative remedies available to

Madam X in order to contest the assessment and their
respective prescriptive periods?

(B) May Madam X refuse to pay the deficiency tax

assessment during the pendency of her appeal?

58
4. Doa Evelina, a rich widow engaged in the business of
currency exchange, was assessed a considerable
amount of local business taxes by the City
Government of Bagnet by virtue of Tax Ordinance No.
24. Despite her objections thereto, Doa Evelina paid
the taxes. Nevertheless, unsatisfied with said Tax
Ordinance, Doa Evelina, through her counsel Atty.
ELP, filed a written claim for recovery of said local
business taxes and contested the assessment. Her
claim was denied, and so Atty. ELP elevated her case
to the Regional Trial Court (RTC).

The RTC declared Tax Ordinance No. 24 null and void and
without legal effect for having been enacted in
violation of the public ation requirement of tax
ordinances and revenue measures under the Local
Government Code (LGC) and on the ground of double
taxation. On appeal, the Court of Tax Appeals
59
(CTA)
(A) If you are Atty. ELP, what advice will you give Doa
Evelina so that she can recover the subject local business
taxes?

(B) If Doa Evelina eventually recovers the local business

taxes, must the same be considered as income taxable by
the national government?

60