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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF.

CABANEIRO) A2011 1

Chapter 11: REAL PROPERTY TAXATION Ad valorem tax


Ad valorem tax is a levy on real property on the basis of a fixed
IN GENERAL proportion of the value of the property. [Section 199, Local
Government Code]
Real property tax and special levies
Nature and scope of power to impose realty tax
1. Basic real property tax The taxing power of local governments in real property taxation is a
2. Additional levy on real property for the Special Education Fund 1% delegated power.
3. Additional ad valorem tax on the idle lands 5% The real estate tax is not a local tax. It has always been imposed by
4. Special levy by local government units. the law- making body before the 1973 Constitution, and later, the
defunct Batasang Pambansa before the advent of Aquino
IMPOSITION OF REAL PROPERTY TAX Administration in 1986. The tax is imposed throughout the
Philippines, levied on every real property that is located thereat
Real property tax (Meralco Securities Industrial Corp. Vs Central Board of Assessment,
Real property tax has been defined as a direct tax on the ownership Mar 31, 1982).
of lands and buildings or other improvements thereon not specially However, there seems to be no question that the realty tax is
exempted and is payable regardless or whether the property is used veritably a local tax.
or not, although the value may vary in accordance with such factor. The previous case was ruled that way because Real Property Tax
Real property tax is a fixed proportion of the assessed value of the Code (PD 464, as amended) provides that real property tax were not
property being taxed and requires, therefore, the intervention of levied by local government.
assessors.
Note however that the Supreme Court decided that taxing real Who has the power to impose realty tax?
property is on the basis of actual use, even if the user is not the 1. provinces
owner of the property. 2. cities
3. municipalities within the Metro Manila area [Section 232, Local
Real property tax receipts Government Code]
Real property tax receipts are not evidence of ownership, but merely
evidence of rightful possession. Rates of levy
A province or city or a municipality within the Metro Manila area shall
Characteristics of real property tax fix a uniform rate of basic real property tax applicable to their
1. It is a direct tax on the ownership or use of real property. respective localities as follows:
2. it is an ad valorem tax. Value is the tax base. 1. In the case of a province, at the rate not exceeding 1% of the
3. It is proportionate because the tax is calculated on the basis of a assessed value of real property; and
certain percentage of the value assessed. 2. In the case of a city or a municipality within the Metro Manila
4. It creates a single, indivisible, obligation. area, at the rate not exceeding 2% of the assessed value of real
5. It attaches on the property (lien) and is enforceable only against property. [Section 233, Local Government Code]
property.
6. It is a local tax

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 2

Power to prescribe penalties for tax violations govt seems to be bereft of this authority insofar as realty taxes are
Local governments have the power to impose penalties for tax concerned.
violations. By specifying in Sec 234 of LGC on what particular properties are
Penalty: exempt, it follows by clear implication that the law has withheld the
Fine: not less than 1000 but not more than 5000 local govts the power to exempt.
Imprisonment:not less than 1 month but not more than 6mo The Latin maxim expressio unius est exclusion alterius applies.
Power to fix penalties applies only to provinces, cities and
municipalities of Metro Manila. Properties exempt from real property taxes (Sec 234, LGC)
Reason: 1. Real property owned by the Republic of the Philippines or any of its
It is only the Sanggunians of these local government units political subdivisions except when the beneficial use thereof has
that can levy real property taxes (Sec. 232, LGC) been granted for consideration or otherwise to a taxable person.
2. Charitable institutions, churches, parsonages, or convents
Fundamental principles governing real property taxation appurtenant thereto, mosques, non-profit or religious cemeteries,
1. Real property shall be appraised at its current and fair market value and all lands, buildings, and improvements actually, directly and
2. Real property shall be classified for assessment purposes on the exclusively used for religious, charitable, or educational purposes.
basis of its actual use. 3. All machineries and equipment that are actually, directly and
3. Real property shall be assessed on the basis of a uniform exclusively use by local water utilities and government-owned or
classification within each local government unit. controlled corporations engaged in supply and distribution of water
4. The appraisal, assessment, levy and collection of real property tax and/or generation and transmission of electric power.
shall not be let to any private person. 4. All real property owned by duly registered cooperatives as provided
5. The appraisal and assessment of real property shall be equitable. for under Republic Act No. 6938.
[Section 197, Local Government Code] 5. Machinery and equipment used for pollution control and
environmental protection. [Section 234, Local Government Code]
Ty, et al vs Trampe (December 1, 1995)
The Supreme Court declared illegal the 400% to 570% increase in Property owned by the Republic of the Philippines and its political
real estate taxes imposed on landowners in Pasig City because the subdivisions
new schedule of taxes did not comply with the provision of PD 921 MCIA v. Marcos : MCIA, which is a government owned or
which mandates that real estate taxes shall not unduly burden the controlled corporation, mandated to control, manage and supervise
taxpayers. the Mactan International Airport, is not exempt from real property
The exhaustion of administrative remedies was not necessary before tax. It is a GOCC and not an instrumentality of the government.
they could raise the issue judicially because the complainants raised
purely legal issues which the Board of Assessment Appeals has no National Development Co. V. Cebu City : It may therefore be
competence to decide since it can deal only with findings of facts. stated that tax exemption of property owned by the Republic of the
Philippines refers to properties owned by the government and by its
Do local governments have the power to exempt real property from agencies which do not have separate and distinct personalities, as
taxation? distinguished from GOCCs which have separate and distinct
Unlike in the case of local taxes where Sec 192 of LGC explicitly personalities.
authorizes them to grant tax exemptions, incentives, or reliefs
under such terms and conditions as they may deem necessary, local City of Baguio V. Busuego : While the GSIS may be exempt from
real estate tax under its charter and Real Property Tax Code, said

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 3

property is taxable of the beneficial use or actual possession thereof by right of accession, [Board of Assessment Appeals of
is granted for a consideration or otherwise to a taxable person. Zamboanga del Sur v Samar Mining Co.]

Province of Nueva Ecija V. Imperial Mining Co. : The policy of


taxing real property is on the basis of actual use even if the user is Proof of exemptions
not is not the owner. Although real property owned by the RP, any Taxpayer claiming exemption must submit sufficient documentary
of its political subdivisions, and any government-owned corporation evidence to the local assessor within 30 days from the date of the
is exempt from tax but the exemption shall not apply to real declaration of real property; otherwise, it shall be listed as taxable in
property of the abovenamed entities, the beneficial use of which has the assessment roll (Sec 206, LGC).
been granted for consideration or otherwise to a taxable person.
Real properties subject to tax
National Development Co. V. Province of Nueva Ecija : The Real property tax is imposed on lands, buildings, machineries and
NDC is neither the government nor the Republic nor a branch or other improvements.
subdivision thereof but a government-owned and controlled The Local Government Code contains no definition of real property.
corporation, which cannot be said to exercise a sovereign function. Therefore, it is necessary to fall back on the definition of real
It does not exercise sovereign powers and, hence, cannot invoke the property of Art. 415 of the Civil Code.
exemptions thereof, but is an agency for the performance of purely
corporate, proprietary or business function. It is therefore subject to Improvement
real estate tax. It is a valuable addition made to a property or an amelioration in its
condition amounting to more than a repair or replacement of parts
Exempt government property involving capital expenditures and labor which is intended to
The exemption from tax of property owned by the government enhance its value, beauty, or utility or to adopt it for a new or
obtains even as to properties owned in a private, proprietary or further purposes. [Section 199(m), Local Government Code]
patriamonial character. The law makes no distinction between
property held in government capacity and those possessed in a Machinery
proprietary capacity, [Board of Assessment Appeals of Laguna Machinery embraces machines, equipment, mechanical contrivances,
v CTA] instruments, appliances or apparatus, which may or may not be
attached, permanently or temporarily, to the real property. [Section
Properties of government agencies, whether exercising purely 199(o), Local Government Code]
sovereign, political or constituent functions or only ministrant or
proprietary functions, like the SSS are tax exempt. What is decisive SOME COURT RULINGS ON THE QUESTION OF THE TAXABILITY OF
is that properties possessed by the SSS although devoted to private REAL PROPERTY
or proprietary purposes are in fact owned by the Government. It is
axiomatic that when public property is involved, exemption is the Mindanao Bus Co. V City Assessor and Treasurer and the
rule and taxation is the exception, [SSS v City of Bacolod] Board of Tax Appeals of Cagayan de Oro City: Machineries and
equipment sitting on cement which can be moved around and about
A 42 km road constructed by respondent from its mining claim to the in the repair shop maintained by a land transportation company in
loading pier which is on public land, is not subject to the real order to service its buses that are in need of repairs are not taxable.
property tax. The ownership of the road belongs to the government They are not immobilized by destination, being only incidental to the
taxpayers business of transportation.
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 4

Caltex Phils Inc V Central Board of Assessment Appeals: USE AND OWNERSHIP IN REAL PROPERTY TAXATION
Underground tanks, elevated water tanks, gasoline pumps, Two interrelated concepts that are important factors in determining
computing pumps, water pumps, car washer, truck hoists, air whether real property tax is tax-exempt or not.
compressors and tireflators of a gasoline station located on leased Tax-exempt properties enumerated in Sec. 28(3) art VI of the
land are taxable as necessary fixtures to the gasoline station witgout Constitution, the tax exemptions thereunder rest on the premise that
which the gasoline station would be useless. The ruling in Davao they are actually, directly and exclusively used by said entities or
Sawmill v Castillo which states that machinery which is movable by institutions for their stated purposes, and not necessarily because
nature becomes immobilized when placed by the owner of the they are owned by religious, charitable or educational institution.
property but not so when placed by a tenant, a usufructuary or a Once the use of those properties lose their tax-exempt character
person having a temporary right is not applicable. Machinery because they are neither essentially nor incidentally used for
installed by the lessee of leased land is not real property for religious, charitable or educational purposes, their tax exempt status
purposes of execution of a final judgment only. The issue on the likewise ceases even if there is no corresponding change in
taxability of improvements is, however, a different matter. ownership.
If property is tax exempt at the beginning of the year because its
Manila Electric Co. V Central Board of Assessment of use at the time is confined actually, directly and exclusively to
Appeals: Oil storage tanks while not embedded in the land or religious, charitable or educational purposes, the exemption covers
attached to any part of the foundation by bolts, screws or similar the entire year, even assuming that sometime during that year the
devices are nevertheless be considered as improvements on the land use of that property ceases to be for the above-mentioned purposes.
enhancing its utility and rendering it useful to the oil industry. If at the beginning of the year, the property is taxable because at
Hence, taxable. that point in time, the use is for non-exempt purpose, the taxable
status continues for that entire year even if at a certain time during
Fernandez v Shearer: Sugar mills with appropriate machinery on that year it is used for religious, charitable or educational purposes.
real estate are improvements subject to real estate tax.

Meralco Securities Industrial Corp v CBAA: Pipeline system RULE APPLIED WHERE THE PERSON ASSESSED IS NEITHER
consisting of cylindrical steel pipes to carry oil from Batangas to OWNER NOR USER CONCORDIA LIM CASE
Manila is taxable. The court applying Art 415 par 1 and 3 of the civil In the case of Testate Estate of Concordia Lim V. City of Manila, it
code, ruled that the pipeline system is a construction adhering to the was held that the unpaid tax attaches to the property and is
soil because it is attached to the land in such a way that it cannot be chargeable against the person who had actual or beneficial use and
separated therefrom without breaking the material or deterioration possession of it regardless of whether or not he is the owner. To
of the object. impose the real property tax on the subsequent owner who was
neither the owner nor the beneficial user of the property during the
Board of Assessment Appeals v Manila Electric Co: Steel designated periods would not only be contrary to law but also
towers constructed by Manila electric on land belonging to it at unjust.
intervals from its hydroelectric plant in Laguna to the City of Manila Therefore the tax liability that was paid by the heir of Concordia Lim
are not subject to real estate tax. They do not constitute buildings under protest maybe refunded by the city government, however
or constructions adhered to the soil under Art 415 par 1 of the CC, they are not entitled to reimbursement from respondent GSIS
nor are they attached to an immovable in a fixed manner under par because 1. GSIS is exempt from payment of real property tax and 2.
3. They are also cannot be considered as immobilized by destination The tax should be on actual use of the property. If there is anyone
under par 5 of the same article. liable, the law and applicable jurisprudence point to the lessees of
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 5

land owned by the government-owned and controlled corporations. Real property shall be listed, valued, and assessed in the name of
In this case, the court can only declare the non-liability of a right to the owner or administrator, or anyone having legal interest in the
refund. The court cannot rule on the liability of the lessees whose property.
identities are not even clear because they were never impleaded.
Schedule of fair market values
APPRAISAL AND ASSESSMENT Local assessors shall prepare a schedule of fair market values for the
different classes of property situated in their respective LGUs for
Appraisal enactment by ordinance of the sanggunian concerned.
Appraisal is the act or process of determining the value of property The schedule shall be published in a newspaper of general
as of a specific date for a specific purpose, [Sec. 199(e), Local circulation in the locality or, in the absence thereof, posting in two
Government Code] conspicuous and publicly accessible places, [Sec. 212, Local
Government Code].
Appraisal of real property Assessment is the act or process of determining the value of a
All Real property, whether taxable or exempt, shall be appraised at property, or proportion thereof, subject to tax, including the
the current and fair market value prevailing in the locality where discovering, listing, classification, and appraisal of properties, [Sec.
such property is situated. 199(f), Local Government Code].

Declaration of Real property Assessment level


1. Declaration by owner or administrator once every three years during Assessment level is the percentage applied to the fair market value
the period from January 1 to June 30, [Sec. 202, Local Government to determine the taxation value of the property, [Sec. 199(g), Local
Code]. Government Code].
2. Declaration of property by assessor when taxpayer refuses or fails
for any reason to make declaration within the time prescribed, [Sec. Assessment value
204, Local Government Code]. Assessed value is the fair market value of the real property
3. Declaration covering acquired real property or improvements within multiplied by the assessment level. It is synonymous to taxable
60 days after the acquisition of such property or upon completion or value. [Sec. 199(h) Local Government Code].
occupancy of the improvement, whichever comes earlier, [Sec. 203,
Local Government Code]. Fair Market Value
4. Notice of transfer of real property ownership within 60 days from Fair market value is the price at which a property may be sold by a
date of transfer, [Sec. 208, Local Government Code]. seller who is not compelled to sell, and bought by buyer who is not
5. Other administrative requirements. compelled to buy, [Sec. 199 (l) Local Government Code].

Assessment Roll Reyes v. Almanzo: Both the income approach and the comparative
This is a listing of all real property, whether taxable or exempt, sales approach are valid methods of ascertaining proper tax.
located within the territorial jurisdiction of the local government unit However, in the case at bar, the income approach should have been
concerned. used due to the effect of the Rent Control Law on the lease of the
All provincial, city, or municipal assessors are required to prepare involved properties. The use of the comparative sales approach
and maintain in every province and city an Assessment Roll. would lead to inequitable results.

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 6

Actual use as basis for assessment Mineral land


Real property shall be classified, valued, and assessed on the basis Lands in which minerals, metallic, or non-metallic, exist in sufficient
of its actual use regardless of where located, whoever owns it, and quantity or grade to justify the necessary expenditures to extract
whoever uses it, [Sec. 217, Local Government Code]. and utilize such materials, [Sec. 199(p) Local Government Code].

Actual use Special classes of real property


Actual use refers to the purpose for which the property is principally All lands, buildings, and other improvements thereon actually,
or predominantly utilized by the person in possession thereof, [Sec. directly, and exclusively used for hospitals, cultural or scientific
199(b) Local Government Code]. purposes, and those owned and used by local water districts, and
government-owned and controlled corporations rendering essential
Classes of real property for assessment purposes public services in the supply and distribution of water and/or
1. Residential generation and transmission of electric power shall be classified as
2. Agricultural special,[Sec. 216, Local Government Code].
3. Commercial
4. Industrial Assessment of property subject to back taxes
5. Mineral Real property declared for the first time shall be assessed for taxes
6. Timberland for the period during which it would have been liable but in no case
7. Special for more than 10 years prior to the date of initial assessment.

Residential land Assessment of machinery


Land principally devoted to habitation, [Sec. 199(u) Local The fair market value of a brand new machinery is its acquisition
Government Code]. cost.
In other cases, its adjusted value (depreciation).
Agricultural land
Land devoted principally to the planting of trees, raising of crops, Lopez v City of Manila enumerated the procedural steps in computing real
livestock and poultry, dairying, salt making, inland fishing and similar property tax, as follows:
aquacultural activities, and other agricultural activities, [Sec. 199(d) 1. Ascertain the assessment level of the property
Local Government Code]. 2. Multiply the market value by the applicable assessment level of the
property
Commercial land 3. Find the tax rate which corresponds to the class of the property and
Land devoted principally for the object of profit and is not classified multiply the assessed value by the applicable tax rates.
as agricultural, industrial, mineral, timber, or residential land, [Sec.
199(i) Local Government Code]. FORMULAE:
Market Value x Assessment Level = Assessed Value
Industrial Land Assessed Value x Rate of Tax = Real Property Tax
Land devoted principally to industrial activity as a capital investment
and is not classified as agricultural, commercial, timber, mineral or
residential land, [Sec. 199(n) Local Government Code].

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 7

COLLECTION OF TAX Remedies for collection

Date of accrual of tax and tax lien 1. administrative action through levy
The real estate tax for any year shall accrue on the first day of The remedy of levy can be pursued by putting up for sale only the
January and from that date it shall constitute a lien on the property real property subject to tax. The personal liability is on the owner of
which shall be superior to any other lien, mortgage or encumbrance the real property at the time the tax accrues.
of any kind whatsoever and shall be extinguished only upon the
payment of the delinquent tax. [Section 246, Local Government 2. judicial action
Code] A formal demand for the payment of the delinquent tax is not
required for the initiation of either remedy.
Payment of real property tax in installments The collection of local taxes may be enforced through either or both
The owner of the real property or the person having legal interest the above mentioned remedies, alternatively or simultaneously, and
therein may pay the basic real property tax and the additional tax for the use or non-use of either remedy shall not be a bar to avail of the
the special education fund thereon without interest in four (4) equal other remedy.
installments; except the special levy, the payment of which shall be
governed by an ordinance of the sanggunian concerned. [Section Procedure for levy
250, Local Government Code] 1. Notice of delinquency- Posted and published
2. Warrant of levy Mailed and served
Tax discount 3. Advertisement After 30 days from service of Warrant of Levy
In case of payment in advance of the basic real property tax and - Posting and Publication
additional SEF tax, sanggunian may grant a discount in an amount 4. Auction sale
not exceeding 20% of the annual tax due. [Section 251, Local
Government Code] Notes on levy on real property
Notices and publication, as well as the legal requirement for the sale
Prescriptive periods of collection are mandatory, the failure of which can invalidate the sale.
The basic real property tax and any other tax levied under the Local An auction sale, even if preceded by posting, publication and
Government Code shall be collected within five (5) years from the advertisement, but without actual notice to the delinquent taxpayer,
date they become due. is void. The notice must be given to the person who had therefore
In case of fraud or intent to evade payment of the tax, such action declared the property for tax purposes.
may be instituted for the collection of the same within ten (10) years Redemption of one who is not entitled thereto is ineffectual.
from the discovery of such fraud or intent to evade payment.

Interruption of the prescriptive period for collection


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.
3. The owner of the property or the person having legal interest therein
is out of the country or otherwise cannot be located.

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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 8

REMEDIES OF THE TAXPAYER Tax refund or credit


Assessment appeals Taxpayer may file tax refund or credit when assessment is illegal or
Procedure for protest of imposition of real property tax erroneous and the tax is accordingly reduced or adjusted.
1. Payment under protest File a written claim for refund or credit for taxes and interests with
No protest shall be entertained unless the taxpayer first pays the local treasurer within two (2) years from the date the taxpayer is
tax. [Section 252(a), Local Government Code] entitled to such reduction or adjustment.
The protest in writing must be filed with the local treasurer within The treasurer must decide the claim for refund or credit within 60
thirty (30) days from payment of the tax. [Section 252(a), Local days from receipt thereof.
Government Code] If denied, taxpayer has same remedies as protest. (LBAA, CBAA,
Treasurer must decide the protest within sixty (60) days from receipt CA, SC)
thereof. [Section 252(a), Local Government Code]
ADDITIONAL LEVIES ON REAL PROPERTY
2. Appeal to the Local Board of Assessment Appeals (LBAA)
Section 252(d) provides that In the event that the protest is denied Special levies authorized
or upon the lapse of the sixty-day period prescribed in subparagraph (a), the
taxpayer may avail of the remedies as provided for in Chapter 3, Title Two, 1. Additional levy on real property for the special education fund or SEF
Book II of this Code, which refers to the procedure for assessment appeals. [Section 235, Local Government Code]
Any owner or person having legal interest in the property who is not 2. Additional ad valorem tax on idle lands [Section 236, Local
satisfied with the action of the local treasurer may, within sixty (60) days Government Code]
from date to receipt of the written notice of assessment, file a petition under 3. Special levy by local government units [Section 240, Local
oath with the Local Board of Assessment Appeals. [Section 226, Local Government Code]
Government Code]
The LBAA shall decide the appeal with one hundred twenty (120) Additional levy on real property for the special education fund
days from the date of receipt of such appeal. [Section 229, Local
Government Code] A province, city or a municipality within the Metro Manila area may
levy and collect an annual tax of one percent (1%) on the assessed
3. Appeal to the Central Board of Assessment Appeals (CBAA) value of real property which shall be in addition to the basic real
Owner or person having legal interest may appeal decision of the property tax.
LBAA to the CBAA within thirty (30) days from receipt of the decision of the The proceeds thereof shall exclusively accrue to the Special
LBAA. [Section 229, Local Government Code] Education Fund created under Republic Act NO. 5447.

4. Appeal to the Court of Appeals Additional ad valorem tax on idle lands


Decision of the CBAA may be appealed, through a verified petition A province or city or a municipality within the Metro Manila area may
for review, to the Court of Appeals within fifteen (15) days from receipt of levy an annual tax on idle lands at the rate not exceeding five
CBAA decision. [Rule 43, Rules of Court] percent (5%) of the assessed value of the property which shall be in
addition to the basic real property tax.
5. Appeal to the Supreme Court
Decision of the Court of Appeals may be appealed, through a verified
petition for review, to the Supreme Court within fifteen (15) days from
receipt of decision of the CA. [Rule 45, Rules of Court]
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 9

What are considered idle lands?


1. For agricultural lands Who may remit tax? (Condonation of Real Property Taxes)
a. One hectare and one half (1/2) of which remain
uncultivated or unimproved is considered idle land. 1. President public interest so requires
b. However, agricultural land with at least 50 planted trees to 2. Sanggunian resolution
a hectare or used for grazing purposes are not considered a. failure of crops
idle lands. b. substantial decrease in the price of products
2. Non-agricultural lands c. calamity
a. Where land is more than 1,000 square meters and one half
(1/2) of which remain unutilized or unimproved, it is EXERCISES (LOCAL TAXATION AND REAL PROPERTY TAXATION):
considered idle land. Local Taxation: Power to Impose (2003)
b. The same is applicable to residential lots in subdivisions In order to raise revenue for the repair and maintenance of the newly
constructed City Hall of Makati, the City Mayor ordered the collection of P1.00,
which remain unutilized and unimproved.
called "elevator tax", every time a person rides any of the high-tech elevators in
the city hall during the hours of 8:00 a.m. to
Exemption from idle lands tax 10:00 a.m. and 4:00 p.m. to 6:00 p.m. Is the "elevator tax"
Exemptions are given due to: a valid imposition? Explain.
1. force majeure, No. The imposition of a tax, fee or charge or the generation of revenue under
2. civil disturbance; the Local Government Code shall be exercised by the SANGUNIAN of the
3. natural calamity; or local government unit concerned through an appropriate ordinance (Section
132 of the Local Government Code). The city mayor alone could not order the
4. any cause or circumstances which physically or legally prevents collection of the tax; as such, the "elevator tax" is an invalid imposition.
the owner or person having legal interest from improving, Considering the provisions of Article X, Section 5 of the 1987 Constitution,
utilizing or cultivating the same. can we now say that in the Philippines, local government units have the
inherent power to tax? Discuss
Special levy by local government units No. While the power of local government units to tax is a power that is
A province, city or municipality may impose a special levy on the expressly granted, vested, and guaranteed by the 1987 Constitution, still, the
lands compromised within its territorial jurisdiction specially power of local government units to tax could not be considered as inherent.
Inherent taxing power belongs only to the State, not to its political subdivisions.
benefited by public works projects or improvements by the LGU
It is only the State which may exercise the power of taxation even absent any
concerned. Constitutional grant.
The special levy shall not exceed (60%) of the actual cost of such What is the principle of pre-emption in local taxation?
projects and improvements, including the costs of acquiring land and The principle of pre-emption states that when the national government
such other real property in connection therewith. (through Congress) elects to tax a particular area, it is impliedly withholding from
It shall not apply to lands exempt from basic real property tax and the local government the power to tax the same field (Victorias Milling Co., Inc.
v. Municipality of Victorias, Negros Occidental, No. L-21183, 27 September
the remainder of the land, portions of which have been donated to 1968).
the LGU concerned for the construction of such projects or Under the present local government code, the principle of pre-emption
improvements. was explicitly made to apply, as evidenced by Section 133 thereof (Common
Need for public hearing and publication before enactment of Limitations of the Local Taxing Power).
ordinance imposing special levy. What is the Residual Power to Tax of Local Government Units?
Special levy accrue on the first day of the quarter next following the The residual power to tax is provided under Section 186 of the
Local Government Code, viz.:
effectivity of the ordinance imposing the levy. [Section 240, Local
Local government units may exercise the power to levy taxes, fees or charges
Government Code] on any base or subject not otherwise specifically enumerated herein or taxed
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TAX REVIEWER: LAW OF BASIC TAXATION IN THE PHILIPPINES BY: Benjamin B. Aban JUICY NOTES (PROF. CABANEIRO) A2011 10

under the provisions of the National Internal Revenue Code, as amended, or SUGGESTED ANSWER:
other applicable laws: Provided, That the taxes, fees, or charges shall not be The following properties are exempt from the real property
unjust, excessive, oppressive, confiscatory or contrary to declared national tax (Section 234, Local Government Code):
policy: Provided, further, That the ordinance levying such taxes, fees or (1) Real property owned by the REPUBLIC OF THE PHILIPPINES or any of its
charges shall not be enacted without any prior public hearing conducted for political subdivisions except when the beneficial use thereof has been granted for
the purpose. consideration or otherwise to a taxable person;
The City of Cebu passed an ordinance imposing a tax of P5.00 on every (2) CHARITABLE INSTITUTIONS, churches, parsonages or convents appurtenant
kilo of lechon taken out of the City. Is the tax valid? thereto, mosques,
No, it is not valid. Section 133 of the Local Government Code clearly non-profit or religious cemeteries, and all lands, buildings, and improvements
proscribes the imposition of a tax by local government units concerning all articles actually, directly and exclusively used for religious, charitable or educational
that are going in or out, or passing through, the territorial jurisdiction of the local purposes;
government unit. (3) All machineries and equipment that are actually, directly and exclusively used by
K is engaged in the business of producing mineral water. In order to trim LOCAL WATER UTILITIES and government-owned or controlled corporations
down the cost of operations, K decided to produce her own plastic bottles engaged in the supply and distribution of water and/or generation and transmission of
for her mineral water. K is producing the said plastic bottles exclusively electric power;
for her mineral water business. (4) All real property owned by duly REGISTERED COOPERATIVES as provided
The City of Cebu, where K has her principal place of business, enacted an for under R.A. 6938; and
ordinance levying taxes on the business of producing mineral water. It also (5) Machinery and equipment used for POLLUTION CONTROL and
enacted an ordinance levying taxes on the production of plastic bottles. K ENVIRONMENTAL PROTECTION.
asked your learned advice whether or not she should pay the said taxes. Property Tax; Reqts; Auction Sales of Property for Tax Delinquency (2006)
Discuss your advice. Quezon City published on January 30, 2006 a list of delinquent real property
I would advise K to pay the tax on her business of producing taxpayers in 2 newspapers of general circulation and posted this in the main lobby
mineral water, but not on her production of plastic bottles. This is because her of the City Hall. The notice requires all owners of real properties in the list to pay
main line of business is the production of mineral water, for which she is liable for the real property tax due within 30 days from the date of publication, otherwise the
the local business tax. On the other hand, her production of plastic bottles is properties listed shall be sold at public auction.
done exclusively for her mineral water business; hence, the same should not be Joachin is one of those named in the list. He purchased a real property in 1996 but
treated as a separate business. It is well-settled that where a taxpayer is failed to register the document of sale with the register of Deeds and secure a new
engaged in a distinct business and, as a feature thereof, in an activity merely real property tax declaration in his name. He alleged that the auction sale of his
incidental which serves no other person or business, the incidental activity property is void for lack of due process considering that the City Treasurer did not
should not be separately or additionally taxed. send him personal notice. For his part, the City Treasurer maintains that the
Real Property Taxation: Fundamental Principles (1997) publication and posting of notice are sufficient compliance with the requirements of
State the fundamental principles underlying real property taxation in the the law.
Philippines. 1. If you were the judge, how will you resolve this issue?
SUGGESTED ANSWER: SUGGESTED ANSWER:
The following are the fundamental principles governing I will resolve the issue in favor of Joachin. In auction sales
real property taxation: of property for tax delinquency, notice to delinquent landowners and to the public in
1) Real property shall be appraised at its current and general is an essential and indispensable requirement of law, the non-fulfillment of
fair market value; which vitiates the same (Tiongco v. Phil. Veterans ). The failure to give notice to the
2) Real property shall be classified for assessment purposes on the basis of its right person i.e., the real owner, will render an auction sale void (Tan v. Bantegui,
actual use: City Treasurer of Q.C. v. CA).
3) Real property shall be assessed on the basis of a uniform classification within 2. Assuming Joachin is a registered owner, will your answer be the same?
each local government unit; SUGGESTED ANSWER:
4) The appraisal, assessment, levy, and collection of real property tax shall not be Yes. The law requires that a notice of the auction sale must
let to any private person; and be properly sent to Joachin and not merely through publication (Tan v.
5) The appraisal and assessment of real property shall be equitable. Bantegui,,October24, 2005; Estate of Mercedes Jacob v. CA, Dec. 22, 1997).
Real Property Taxation; Exempted Properties (2006)
What properties are exempt from the real property tax?
Chapter 11: REAL PROPERTY TAXATION. Page 10 of 10

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