Professional Documents
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CABANEIRO) A2011 1
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
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.]
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
Chapter 11: REAL PROPERTY TAXATION. Page 4 of 10
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].
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.
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.
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