TAX2 TSN (REMEDIES)

Taxation Law II
Dean Manuel Quibod III-Manresa (2013)
REMEDIES A: The tax will still be assessed by the BIR to know if you paid the
(Dean decided to have recitations, so Miss Universe and peg nito. correct tax or if you have a deficiency.
Q&A portion)
Q: What will the BIR do after you have filed you return?
Q: If you earned P 1,000,000.00 in a year, and you want to file the
A: Upon the submission of the return, the BIR will examine the
tax on that income, what do file?
return.
A: An income tax return.
Read Section 203.
Q: How often do you file an income tax return?
SEC. 203. Period of Limitation Upon Assessment and
A: Quarterly and Annually. Collection. - Except as provided in Section 222, internal revenue
taxes shall be assessed within three (3) years after the last day
Q: When you are subject to a donor’s tax, prior to the payment of the prescribed by law for the filing of the return, and no proceeding
donor’s tax, what do you usually do for purposes of paying the in court without assessment for the collection of such taxes shall
donor’s tax? be begun after the expiration of such period: Provided, That in a
case where a return is filed beyond the period prescribed by law,
A: You file a Donor’s Tax Return. the three (3)-year period shall be counted from the day the return
was filed.
Q: When do you file the donor’s tax return.
For purposes of this Section, a return filed before the last day
A: You file 30 days after making the donation, prescribed by law for the filing thereof shall be considered as
filed on such last day.
Q: If you are an administrator of the estate, and there is a tax due on
the estate of the decedent, what will you do for purposes of paying Q: So what is the period within which the BIR is mandated to make
the estate tax due? the assessment?
A: You will first inform the BIR of the death of the decedent, then A: Three years after the last day prescribed by law for the filing of
file the Estate Tax Return. the return.
Q: For VAT, if you are also subject to an output VAT, how do you Q: In income tax return, the deadline is April 15. If you file your
pay the tax? return on April 1, how will you count the three year period?
A: There is a separate tax return for VAT. You file the VAT return, A: The period will begin to run on April 16.
and pay the VAT on the basis of the return.
Q: If you file the return on May 1, when will you start counting?
Q: What about percentage tax, like if you are a common carrier, and
you have to pay the percentage tax on that business? A: It will start on May 2, since in counting periods, we do not include
the first day.
A: You file a percentage tax return.
The general prescriptive period within which the government is given
Q: If you are a manufacturer, and you have to pay an excise tax, what time to make assessments is three years. No proceeding in court
do you have to do? without assessment for the collection of said taxes shall be begun
after the expiration of the period.
A: You file an excise tax return.
Q: Can the BIR collect the deficiency tax without an assessment?
Q: When you are subject to the DST, and the amount is very large, When the BIR is given three years to assess, can it collect the
what do you do to pay the DST? deficiency tax collect without an assessment?
A: You file a DST return. A: The BIR cannot collect.
You have noticed that all internal revenue taxes require the filing of Q: Can the BIR collect after the expiration of the three year period?
tax returns, prior to its payment. This brings us to the principle that
taxes in the NIRC are self-assessing taxes. The BIR will not accept A: The BIR can no longer collect. That is precisely the reason of the
payment for taxes without proper filing of the return. Together with law. You cannot go to court to collect the taxes if there is no prior
the filing of the return, you pay the tax due based on the return filed. assessment. In other words, you can only collect the deficiency tax
against the tax payer if there is an assessment.
Q: After the filing of the return, does that mean that you have no
obligation anymore to the Government in so far as your income tax, After the return has been filed and the three year period lapses, the
since you have already complied with the filing of the return and the government can no longer run after the taxpayers. If the taxed year is
payment of the annual tax? 2012, the income tax deadline is April 15, 2013. The BIR is given
from April 16, 2013 to April 15, 2016 to collect any deficiency tax. If
the BIR informs you of a deficiency finding on April 16, 2016, that is
Transcribed by: Althea Mae P. Casador Page 1 of 32

Taxation Law II
already barred because it has already prescribed, So if the BIR would It is not at all times that the government will have the period of 10
like to assess you of the deficiency, it should be made within the years. Only in the cases stated in Section 222.
three year period. Within the three year period, the BIR cannot start
running after you without any assessment. The taxpayer must first be Read Section 222 (b).
notified of the deficiency.
(b) If before the expiration of the time prescribed in Section 203
The word assessment does not contemplate only the period but also for the assessment of the tax, both the Commissioner and the
the finding of the BIR of the deficiency after examining the return. taxpayer have agreed in writing to its assessment after such time,
The examination, audit and inspection, will require the taxpayer to the tax may be assessed within the period agreed upon.
surrender not only the financial statements, but also the books of
accounts and business records. They will also ask the suppliers to The period so agreed upon may be extended by subsequent
cross-match the purchases that the taxpayer made is the same figure written agreement made before the expiration of the period
that you indicated in the return. If there will be variance, a deficiency previously agreed upon.
will result.
So the three year period can be extended so long as the taxpayer and
This is what happens to gasoline dealers. The BIR will ask the the commissioner agreed in writing for such extension. The period
dealers how much gasoline they supply to a certain entity. If the so agreed upon can further be extended by subsequent written
figures will not match, that would be a source of a deficiency. You agreements, so long as such agreement was made before the
will now be assessed of a deficiency income tax. expiration of the period previously agreed upon.
Let’s read Section 222. Q: If the BIR sends an extension notice to the taxpayer and the
taxpayer agrees to and signs the agreement approving the extension,
SEC. 222. Exceptions as to Period of Limitation of Assessment and is that extension valid?
Collection of Taxes. –
A: Yes. The extension notice signed by both the taxpayer and the
(a) In the case of a false or fraudulent return with intent to evade commissioner complies with the requirement of the law for a valid
tax or of failure to file a return, the tax may be assessed, or a extension.
proceeding in court for the collection of such tax may be filed
without assessment, at any time within ten (10) years after the Q: Would the extension be valid even if the extension notice has no
discovery of the falsity, fraud or omission: Provided, That in a signature of the commissioner, as long as the taxpayer agreed to it?
fraud assessment which has become final and executory, the fact
of fraud shall be judicially taken cognizance of in the civil or A: In an extension, you have the statutory provision that both the
criminal action for the collection thereof. commissioner and the taxpayer have agreed in writing. The operative
act is their signatures. If the extension agreement was signed only by
Q: Relate this provision with Section 203. the taxpayer, it is not valid (Johnson case).
A: In case of deficiency, the BIR has 3 years to assess the return. Johnson case
However, in case of false or fraudulent return with intent to evade
tax or of failure to file a return, the BIR may assess, or a proceeding When the BIR noticed that the period is not enough to finish the
in court be filed without an assessment, within 10 years after the assessment, they sent an extension notice to the taxpayer. The
discovery of the fraud. taxpayer agreed by signing the notice. BIR again sent another notice
of extension, to which the taxpayer agreed again. A third extension
Q: What do you understand of the provision that allows the BIR to was again sent. Taxpayer again agreed. After the assessment, BIR
file an action in court without an assessment? sent the taxpayer a deficiency notice. The taxpayers now protested
saying that the assessment is already barred by prescription. The BIR
A: This means that if there is fraud, falsity or an omission to pay tax, contended that there is no need for the commissioner to sign because
the BIR can file a criminal case against the taxpayer even without the notice is already in writing.
prior assessment. So even if you have not received an assessment
notice yet, the BIR can proceed to file a case against you. Supreme Court said no. The provision is not a unilateral agreement. It
is a bilateral agreement. This is a mandatory provision. So the
In this provision, remember that the general prescriptive period agreement to extend must be in writing and signed both by the
within which to make an assessment is three years. But in case of commissioner and the taxpayer.
false or fraudulent return or failure to file a return, the assessment
will be longer. The BIR is given 10 years. However, in case the BIR Therefore, the assessment is already barred by prescription.
omits to make an assessment during the 3 year period, and still
continue on assessing a taxpayer by merely saying that there is fraud Q: How many extensions are allowed?
or falsity in the return filed, that is improper. The BIR cannot just do
that because they have to show that the false and fraudulent return A: As many as you can. But it is not wise to agree to the extension, if
was done with intent to evade paying the tax. Again, the BIR could you are the taxpayer.
not just say that there is fraud in order for them not to be affected of
the prescriptive period. The burden now is with the BIR that there is Another matter is that if you agree for an extension, the period must
falsity and fraud and that there is intent to evade the tax. be definite. In one case, the extension was worded as waiver of the
prescriptive period. That is not allowed. The waiver of the statutory

Taxation Law II
period is not allowed because for the purposes of the extension, the If you avail of a tax amnesty, the government cannot run after you
period must be definite. It must be clear when the extension period anymore.
starts and ends.
Q: Are taxes imprescriptible?
Read letter c.
A: Yes, as an exception. The general rule is that it can be assessed up
(c) Any internal revenue tax which has been assessed within the to three years. Therefore, as a general rule, taxes prescribe.
period of limitation as prescribed in paragraph (a) hereof may be
collected by distraint or levy or by a proceeding in court within Q: What are the instances that taxes are imprescriptible.
five (5) years following the assessment of the tax.
A:
Q: What is the period within which to assess any deficiency tax? SEC. 223. Suspension of Running of Statute of Limitations. - The
running of the Statute of Limitations provided in Sections 203
A: Within 3 years, as a general rule, or within 10 years if there is and 222 on the making of assessment and the beginning of
fraud and falsity. distraint or levy a proceeding in court for collection, in respect of
any deficiency, shall be suspended for the period during which
Q: What is the period to collect? the Commissioner is prohibited from making the assessment or
beginning distraint or levy or a proceeding in court and for sixty
A: 5 years. (60) days thereafter; when the taxpayer requests for a
reinvestigation which is granted by the Commissioner; when the
So you have to remember these periods: 3,10,5. 3 years to make an taxpayer cannot be located in the address given by him in the
assessment, 10 years if there is falsity or fraud, and 5 years to collect return filed upon which a tax is being assessed or
the deficiency tax. collected: Provided, that, if the taxpayer informs the
Commissioner of any change in address, the running of the
Q: Can the government and the taxpayer agree to extend the period of Statute of Limitations will not be suspended; when the warrant
collection? of distraint or levy is duly served upon the taxpayer, his
authorized representative, or a member of his household with
A: Yes, as provided in paragraph (d). sufficient discretion, and no property could be located; and when
the taxpayer is out of the Philippines.
(d) Any internal revenue tax, which has been assessed within the
period agreed upon as provided in paragraph (b) hereinabove, Q: How many instances are there?
may be collected by distraint or levy or by a proceeding in court
within the period agreed upon in writing before the expiration of A: *Dean is really confusing in this part, but according to him, the
the five (5) -year period. following are the instances when the statute of limitations is
suspended:
The period so agreed upon may be extended by subsequent
written agreements made before the expiration of the period 1. Shall be suspended for the period during which the
previously agreed upon. Commissioner is prohibited from making the
assessment or beginning distraint or levy or a
proceeding in court and for sixty (60) days;
Let’s read the last paragraph.
2. When the taxpayer requests for a reinvestigation
which is granted by the commissioner;
(e) Provided, however, That nothing in the immediately preceding 3. When the taxpayer cannot be located in the address
section and paragraph (a) hereof shall be construed to authorize given by him in the return filed. However, if you
the examination and investigation or inquiry into any tax return notify the BIR of your change of address, but despite
filed in accordance with the provisions of any tax amnesty law or the notice, the BIR still sent the assessments to your
decree. previous address, it will not toll the running of the
prescriptive period;
Remember the principle of tax amnesty. It operates as an absolute 4. When the warrant of distraint or levy is duly served
forgiveness on the part of the taxpayer. Tax amnesty are usually upon the taxpayer and property can be located;
legislated. 5. When the taxpayer is out of the Philippines.
Q: If the taxpayer is under investigation, and during the pendency of The suspension covers both assessment and collection. This list is
the three year period, congress came up with a tax amnesty, can the exclusive. Only in these grounds and instances that the assessment
taxpayer avail of the amnesty despite the fact that he is under and collection of deficiency taxes are imprescriptible.
investigation?
NB: Read Revenue Regulation 12-99 and 18-2013.
A: Even if you are under investigation, if the government legislates a
tax amnesty, you are given the opportunity to avail of such amnesty. The assessment contemplates Section 228.
If there is an amnesty, the investigations are suspended, to give way
to taxpayers who likes to relent and avail of the tax amnesty and pay SEC. 228. Protesting of Assessment. - When the Commissioner or
the deficiency taxes. his duly authorized representative finds that proper taxes should
be assessed, he shall first notify the taxpayer of his

Taxation Law II
findings: Provided, however, That a preassessment notice shall not Q: In Revenue Regulation 12-99, what happens when the taxpayer is
be required in the following cases: under investigation, and there’s now an initial finding of deficiency?
(a) When the finding for any deficiency tax is the result of A: There will be a notice of informal conference. This is what is
mathematical error in the computation of the tax as appearing on initially sent.
the face of the return; or(b) When a discrepancy has been
determined between the tax withheld and the amount actually Q: What is the option given to the taxpayers upon receipt of the
remitted by the withholding agent; or(c) When a taxpayer who notice for informal conference?
opted to claim a refund or tax credit of excess creditable
withholding tax for a taxable period was determined to have A: The taxpayer may attend the informal conference or he may not
carried over and automatically applied the same amount claimed attend.
against the estimated tax liabilities for the taxable quarter or
quarters of the succeeding taxable year; or(d) When the excise Q: When he attends the informal conference, what will happen?
tax due on exciseable articles has not been paid; or(e) When the
article locally purchased or imported by an exempt person, such A: They may enter into a compromise agreement. He will admit
as, but not limited to, vehicles, capital equipment, machineries liability in this case, but they will enter into a compromise agreement
and spare parts, has been sold, traded or transferred to non- for the payment of the deficiency. He may also refute the findings of
exempt persons. the examiner.
The taxpayers shall be informed in writing of the law and the Q: If they won’t arrive into an agreement, what will happen?
facts on which the assessment is made; otherwise, the assessment
shall be void. A: *Dean did not allow the student to continue answering* Just read
Revenue Regulation 12-99 for the process.
Within a period to be prescribed by implementing rules and
regulations, the taxpayer shall be required to respond to said We go now to RR 18-2013.
notice.
Q: What do you understand of this revenue regulation?
If the taxpayer fails to respond, the Commissioner or his duly
authorized representative shall issue an assessment based on his A: This is an amendment of the prior revenue regulation.
findings.
Q: How is the process done in this revenue regulation?
Such assessment may be protested administratively by filing a
request for reconsideration or reinvestigation within thirty (30) A: *Not clear if Dean agreed with the student, so let’s read nalang
days from receipt of the assessment in such form and manner as the regulation*
may be prescribed by implementing rules and regulations.
Q: What was eliminated in this amendment?
Within sixty (60) days from filing of the protest, all relevant
supporting documents shall have been submitted; otherwise, the A: The notice of informal conference.
assessment shall become final.
Q: Does this violate due process?
If the protest is denied in whole or in part, or is not acted upon
within one hundred eighty (180) days from submission of A: No. the taxpayer is still given the opportunity to question the
documents, the taxpayer adversely affected by the decision or assessment.
inaction may appeal to the Court of Tax Appeals within thirty
(30) days from receipt of the said decision, or from the lapse of Q: In Section 228, is there a mention of the informal conference?
one hundred eighty (180)-day period; otherwise, the decision
shall become final, executory and demandable. A: None. It only mentions of a pre-assessment notice and a
subsequent notice of assessment.
If the assessment pertains to a notice informing the taxpayer of the
finding of the deficiency and determining that facts and the law to In RR 18-2013, the BIR removed the notice of informal conference,
which the assessment is based, you have Section 228. but they reiterated that there is no violation of due process because in
the revised rules, the taxpayer is still given the opportunity to
Q: In Revenue Regulation 12-99, what is this preliminary assessment question the validity of the assessment. Now, once there is a finding
notice? of a deficiency, the BIR will initially send a pre-assessment notice.
A: Q: What does that assessment notice contain?
Q: Which comes first, the notice of informal conference or the pre- A: It should contain in detail the facts and law, rules and regulations,
assessment notice? to which the assessment is based.
A: The notice of the informal conference Q: When that pre-assessment notice is sent to the taxpayer,
containing the facts and the law, in the hands of the taxpayers, what
will the taxpayers do?

Taxation Law II
A: 1) When the filing for a deficiency tax is the result of a

A: The taxpayer has 15 days within which to respond. He will be mathematical error in the computation of the tax.
considered in default if he does not respond, and therefore a formal
letter of demand shall be issued, calling for the payment of the tax. *Dean asked for examples rather than have the student enumerate
each item. Let’s just read the revenue regulation*
Q: When the taxpayer receives the final letter of demand, what will
he do? The taxpayer will be sent, in these cases, a final assessment notice.
A: The taxpayer can file a protest. Only in these five cases that no pre-assessment will be issued. In all
other cases of a finding of a deficiency, it is required that there is a
Q: In the hands of the Commissioner, what will he do with the pre-assessment notice that will be sent to the taxpayer.
protest?
Q: When a final assessment notice is received by the taxpayer and he
A: The Commissioner would act on the protest. He may either deny contested the assessment, what is the period within which the
or grant the protest. commissioner must decide on the protest?
Q: If the protest is denied, where will the taxpayer go? A: The commissioner is given 180 days to decide on the protest.
A: The taxpayer may either appeal to the CTA within 30 days from Q: If there is no decision within 180 days, what will the taxpayer do?
the day of receipt of the decision, or elevate his protest through
request for reconsideration to the Commissioner within 30 days. A: The taxpayer may appeal to the CTA within 30 days from the
lapse of the 180 days.
So from the denial of the protest, the protest will be brought to the
CTA. In the CTA, the case will be processed on twio levels. It will be Q: Is he given the option to wait for the decision even if the 180 day
heard by CTA by division and when there is an adverse decision, the period has already expired?
case will be appealed to the CTA en banc. From the CTA en banc,
you now go to the Supreme Court. That is where the assessment will A: The taxpayer is given the option to go to the CTA or wait for the
become final. decision.
Q: If the taxpayer fails to respond to the pre-assessment notice, what That is the reason why there is a defect in the law when it states
is the consequence? “otherwise, the decision will become final and executor”, because
since there is an inaction in this case, there is no such decision to
A: When the taxpayer fails to respond, he will be considered in become final to begin with.
default.
In 2004, the CTA came out with the internal rules of procedure in the
Q: Will that make the assessment final? CTA saying that the taxpayers could wait for the decision because
there is no decision that will become final, under Section 228. That is
A: No. a defect in the law.
Q: What will happen since the assessment will not be final on the So the taxpayer is allowed to wait pursuant to the rules of procedure
ground of the taxpayer’s failure to respond? issued by the CTA.
A: A formal letter of demand and final assessment notice will be Once you go to the CTA because of the inaction, you cannot anymore
issued. So when a pre-assessment notice is ignored, it does not make withdraw the petition. Once the taxpayer avail of the remedy of going
the assessment final. What the BIR will do is send a final assessment to the CTA by reason of the inaction, he cannot withdraw that
notice. anymore. The remedies are exclusive.
Q: What will the taxpayer do with that final assessment notice? From the CTA division, you appeal to the CTA en banc, and then to
the Supreme Court. No appeals to the CA anymore because under the
A: The taxpayer may file a protest. new law, RA 9282, the CTA is now equivalent of the CA. So no tax
cases are now appealed to the CA. But in the CTA, the case shall go
Q: If he fails to protest, what will happen? two processed, by division and en banc, before it can proceed to the
Supreme Court.
A: If the taxpayer fails to protest, the assessment shall become final
and demandable. Once the Supreme Court decides on the protest, the assessment will
become final and collection proceeding will follow.
Q: When the assessment becomes final, what will the government
do? For the collection proceedings, you have Section 205.
A: The BIR will now collect the taxes. SEC. 205. Remedies for the Collection of Delinquent Taxes. - The
civil remedies for the collection of internal revenue taxes, fees or
Q: In what cases is the pre-assessment no longer required? charges, and any increment thereto resulting from delinquency
shall be:

Taxation Law II
property will be sold to the highest bidder. The certificate of sale will
(a) By distraint of goods, chattels, or effects, and other personal be issued to the highest bidder and will be annotated with the ROD
property of whatever character, including stocks and other for purposes of counting the one year redemption period. If there will
securities, debts, credits, bank accounts and interest in and rights be no redemption you will issue a final deed to the purchaser. If there
to personal property, and by levy upon real property and interest is redemption, the property will be returned to the taxpayer. The
in rights to real property; and proceeds of the auction will be applied to the delinquency. If there be
an excess, the excess will be given back to the taxpayer. If there will
(b) By civil or criminal action. still be a balance, further levy or distraint will be done.
Either of these remedies or both simultaneously may be pursued The other remedies include forfeiture under Section 224-225; the
in the discretion of the authorities charged with the collection of enforcement of a tax lien in Section 119; entering into compromise
such taxes:Provided, however, That the remedies of distraint and in Section 204 – these are the remedies under the NIRC to collect the
levy shall not be availed of where the amount of tax involve is not taxes. You also have the informer’s reward under Section 282. You
more than One hundred pesos (P100). also have the remedy under Section 5 and 6 of NIRC. The remedies
are not only found in Title VIII, but also in other parts of the tax
The judgment in the criminal case shall not only impose the code.
penalty but shall also order payment of the taxes subject of the
criminal case as finally decided by the Commissioner. NB: You may read the book of de Leon. The aspect of tax
administration is discussed in the book of de Leon. You have a list
The Bureau of Internal Revenue shall advance the amounts there of the administrative remedies.
needed to defray costs of collection by means of civil or criminal
action, including the preservation or transportation of personal The other group of collection remedies is judicial actions, by way of
property distrained and the advertisement and sale thereof, as a civil or criminal action.
well as of real property and improvements thereon.
Q: How do you proceed with a civil action to collect taxes?
So you have these remedies for the collection of delinquent taxes.
The civil remedies for the collection resulting from delinquencies A: File a case of collection of sum of money.
consist of administrative and judicial remedies.
Q: In what court will you file?
Administrative remedies for collection include destraint on personal
property in Section 206 – 212; and levy of real property covered by A: In depends on the value of the tax to be collected. So you have to
Section 207 (b), 213, 214, 202 and 215. Section 202 is misplaced in remember the jurisdictional amount.
your codal. It must follow Section 214 because that is the procedure
on levy. Q: Can you file a collection case in the CTA?
Do not be confused of these proceeding, the distraint and levy, A: No.

because these are the same proceedings that you will encounter in the
rules of execution (Rule 39). When the judgment creditor will now Q: How do you proceed with the filing of a criminal action to collect
collect the award, the sheriff will run after the debtor, either after the the tax?
personal or real properties of the debtor. That is also the process in
collecting taxes when there is deficiency. A: It will start through filing an affidavit-complaint filed by the BIR
in the fiscal’s office, not in the Department of Justice. The fiscal will
In the distraint of personal property, the proceeding may either be now determine if there is probable cause through a Preliminary
constructive or actual distraint. Section 206 tells us about Investigation, to which the taxpayer will be notified. A copy of the
constructive distraint. Constructive distraint is similar to your rules complaint will be given to the taxpayer for the purpose of filing a
on preliminary attachment. In constructive distaint, during the counter-affidavit.
assessment proceedings, to protect the interest of the government, the
taxpayer will be served a warrant of distraint, ordering him to Q: When you file a criminal action to collect the tax, does this require
preserve his properties during the pendency of the assessment. a prior assessment?
In the event that assessment becomes final and collection proceedings A: Yes. The BIR cannot collect the tax if there was no assessment
are now pursued against the taxpayers, actual distraint will follow. In against the taxpayer.
actual distraint, the personal properties are ceased and sold at public
auction. The proceeds will be applied to the deficient taxes plus Read Section 220.
penalties interests and surcharges. Any excess will be returned to the
taxpayer. But if there will still be a balance, further distraint or levy SEC. 220. Form and Mode of Proceeding in Actions Arising under
will be done. this Code. - Civil and criminal actions and proceedings instituted
in behalf of the Government under the authority of this Code or
In levy or real properties, this is similar to extra-judicial foreclosure other law enforced by the Bureau of Internal Revenue shall be
of real estate mortgage. They have the same process. The sheriff will brought in the name of the Government of the Philippines and
annotate the claim before the ROD. The ROD will annotate the shall be conducted by legal officers of the Bureau of Internal
claim. There will be the issuance of notice of sale and publication of Revenue but no civil or criminal action for the recovery of taxes
that notice of sale setting the auction day. During the auction, the or the enforcement of any fine, penalty or forfeiture under this

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Code shall be filed in court without the approval of the that may accrue in addition thereto upon all property and rights
Commissioner. to property belonging to the taxpayer: Provided, That this lien
shall not be valid against any mortgagee purchaser or judgment
Q: In pursuit of the collection remedies on the part of the creditor until notice of such lien shall be filed by the
government, when the BIR proceeds with administrative of collecting Commissioner in the office of the Register of Deeds of the
the tax, is the BIR precluded from proceeding civilly or criminally province or city where the property of the taxpayer is situated or
against the tax payer? located.
A: No. Either of the remedies and both simultaneously can be availed Q: What is a Tax Lien?
of by the government to collect the taxes. This means that the
government has in its discretion to pursue either or both of the A: A claim against the property of the taxpayer.
remedies.
Q: How is the tax lien enforced?
Q: What does this tell us?
A: *Student reads Section 219*
A: This tells us that the BIR can proceed on those actions so that
there will be more efficient collection of taxes, pursuant to the Q: When does the claim arises?
principle that taxes are the lifeblood of the country.
A: When the taxpayer refuses to pay the tax or neglects to pay the
So, all these remedies, administrative, civil or criminal, may be tax, after demand, the government will now enforce the tax lien.
pursued at the same time. The government is not precluded to resort
to only one of these remedies. Q: When the government enforce the tax lien against his properties,
what will the government do?
In the case of a criminal action to collect the tax, there is no need of a
prior assessment. In Section 205, the judgment in the criminal case A: The ROD will annotate the lien.
shall not only impose the penalty but shall also order the payment of
taxes, subject of the criminal case. In filing the criminal action, you Q: The ROD told the BIR that they cannot annotate because this
still follow the ordinary rules of procedure. property is already mortgaged with a bank. What will happen?
The BIR will file a complaint before the fiscal’s office, or they may A: *Student reads last part of the provision*. So if the title is clean,
file it to the Department of Justice. The taxpayer will be notified so the lien can be annotated. But if there Is an existing mortgage or
he may file his counter-affidavit. The preliminary investigation will encumbrance, the lien will be annotated but will not be valid against
be conducted to determine if there is probable cause. If there is a the first mortgage of judgment-debtor. The lien will be secondary to
finding of probable cause, the formal complaint information will be the first mortgagee’s claim. So your claim has the possibility of not
filed. The proceedings that will later on take place, will be the same being enforced.
in your criminal procedure. Even if there is a finding of acquittal, the
court shall still make a determination of the civil liability, since the Later, when we go to local tax, take note of what is the consequence
filing of the criminal action carried with it the civil aspect. of a tax lien in local taxation. In Real Property Taxation, the tax lien
One of the principles applicable in collection remedies is that Taxes is superior to all other liens. So even if there is an existing mortgage
are the lifeblood of the government. The government is allowed to on the title,. But if the lien involves the claim of the LGU for unpaid
resort to all of these remedies to collect the taxes. Aside from that, Real Property Taxes, such lien will be superior. This is not so in
you also have another principle involving Injunction. internal revenue taxes.
SEC. 218. Injunction not Available to Restrain Collection of Tax. Another remedy is the remedy of forfeiture under Section 224 and
- No court shall have the authority to grant an injunction to 225.
restrain the collection of any national internal revenue tax, fee or
charge imposed by this Code. SEC. 224. Remedy for Enforcement of Forfeitures. - The forfeiture
of chattels and removable fixtures of any sort shall be enforced
As a rule, the collection of the taxes cannot be subject to any by the seizure and sale, or destruction, of the specific forfeited
injunction because of the same principle that taxes are the lifeblood property.
of the government.
The forfeiture of real property shall be enforced by a judgment
Another remedy aside from distraint and levy, is the enforcement of a of condemnation and sale in a legal action or proceeding, civil or
tax lien in Section 219. criminal, as the case may require.
SEC. 219. Nature and Extent of Tax Lien. - If any person, SEC. 225. When Property to be Sold or Destroyed. - Sales of
corporation, partnership, joint-account (cuentas en forfeited chattels and removable fixtures shall be effected, so far
participacion), association or insurance company liable to pay an as practicable, in the same manner and under the same
internal revenue tax, neglects or refuses to pay the same after conditions as the public notice and the time and manner of sale as
demand, the amount shall be a lien in favor of the Government of are prescribed for sales of personal property distrained for the
the Philippines from the time when the assessment was made by non-payment of taxes.
the Commissioner until paid, with interests, penalties, and costs

Taxation Law II
Distilled spirits, liquors, cigars, cigarettes, other manufactured Where the basic tax involved exceeds One million pesos
products of tobacco, and all apparatus used I or about the illicit (P1,000.000) or where the settlement offered is less than the
production of such articles may, upon forfeiture, be destroyed by prescribed minimum rates, the compromise shall be subject to
order of the Commissioner, when the sale of the same for the approval of the Evaluation Board which shall be composed of
consumption or use would be injurious to public health or the Commissioner and the four (4) Deputy Commissioners.
prejudicial to the enforcement of the law. (B) Abate or Cancel a Tax Liability, when:
All other articles subject to excise tax, which have been (1) The tax or any portion thereof appears to be unjustly or
manufactured or removed in violation of this Code, as well as excessively assessed; or(2) The administration and collection
dies for the printing or making of internal revenue stamps and costs involved do not justify the collection of the amount due.
labels which are in imitation of or purport to be lawful stamps, or All criminal violations may be compromised except: (a) those
labels may, upon forfeiture, be sold or destroyed in the discretion already filed in court, or (b) those involving fraud.
of the Commissioner. (C) Credit or refund taxes erroneously or illegally received or
Forfeited property shall not be destroyed until at least twenty penalties imposed without authority, refund the value of internal
(20) days after seizure. revenue stamps when they are returned in good condition by the
purchaser, and, in his discretion, redeem or change unused
Q: How is this remedy of forfeiture enforced? stamps that have been rendered unfit for use and refund their
value upon proof of destruction.
A: The remedy of forfeiture shall be enforced by seizure of the No credit or refund of taxes or penalties shall be allowed unless
immovable things that are forfeited and the sale thereof. In case of the taxpayer files in writing with the Commissioner a claim for
real property, there must be a judgment of condemnation and its credit or refund within two (2) years after the payment of the tax
subsequent sale. or penalty: Provided, however, That a return filed showing an
overpayment shall be considered as a written claim for credit or
Q: What is forfeiture? refund.
A Tax Credit Certificate validly issued under the provisions of
A: this Code may be applied against any internal revenue tax,
excluding withholding taxes, for which the taxpayer is directly
Q: So in case of chattels and immovable properties, what will you liable.
do? Any request for conversion into refund of unutilized tax credits
may be allowed, subject to the provisions of Section 230 of this
A: You either seize, sale or destroy the property. Code: Provided, That the original copy of the Tax Credit
Certificate showing a creditable balance is surrendered to the
Q: What will be done first? appropriate revenue officer for verification and
cancellation: Provided, further, That in no case shall a tax refund
A: You first seize the property. The BIR will then classify the be given resulting from availment of incentives granted pursuant
condition of the properties seized. If it is still fit for sale, then the to special laws for which no actual payment was made.
properties will be sold. If it cannot anymore be sold of are already The Commissioner shall submit to the Chairmen of the
unfit for consumption, the properties will be destroyed. Committee on Ways and Means of both the Senate and House of
Representatives, every six (6) months, a report on the exercise of
Q: In case of real properties, what will you do? his powers under this Section, stating therein the following facts
and information, among others: names and addresses of
A: First, you should obtain a judgment of condemnation. taxpayers whose cases have been the subject of abatement or
compromise; amount involved; amount compromised or abated;
Q: What is a judgment of condemnation? and reasons for the exercise of power: Provided, That the said
report shall be presented to the Oversight Committee in
A: Congress that shall be constituted to determine that said powers
are reasonably exercised and that the government is not unduly
Another remedy is compromise under Section 204. deprived of revenues.
SEC. 204. Authority of the Commissioner to Compromise, Abate Q: In what instances can the Commissioner enter into a compromise?
and Refund or Credit Taxes. - The Commissioner may -
(A) Compromise the Payment of any Internal Revenue Tax, A: When there is (1) A reasonable doubt as to the validity of the
when: claim against the taxpayer exists; or (2) The financial position of the
(1) A reasonable doubt as to the validity of the claim against the taxpayer demonstrates a clear inability to pay the assessed tax.
taxpayer exists; or(2) The financial position of the taxpayer
demonstrates a clear inability to pay the assessed tax. There are only two instances where the BIR can inquire into your
The compromise settlement of any tax liability shall be subject to bank accounts:
the following minimum amounts:
For cases of financial incapacity, a minimum compromise rate 1) In the case of estate taxation
equivalent to ten percent (10%) of the basic assessed tax; and 2) When the taxpayer will enter into a compromise on the
For other cases, a minimum compromise rate equivalent to forty ground of financial incapacity.
percent (40%) of the basic assessed tax.
In these cases, the taxpayer must first execute a waiver.

Taxation Law II
CF: Section 6 of NIRC. Let’s now go to informer’s reward.
The compromise is still a negotiation, and not an obligation on the SEC. 282. Informer's Reward to Persons Instrumental in the
part of the government. However, to speed up collection the Discovery of Violations of the National Internal Revenue Code and
government may enter into a compromise. In the event of a in the Discovery and Seizure of Smuggled Goods. -
compromise, there are limitations. For cases of financial incapacity, a (A) For Violations of the National Internal Revenue Code. - Any
minimum compromise rate equivalent to ten percent (10%) of the person, except an internal revenue official or employee, or other
basic assessed tax. For other cases, a minimum compromise rate public official or employee, or his relative within the sixth degree
equivalent to forty percent (40%) of the basic assessed tax. Where the of consanguinity, who voluntarily gives definite and sworn
basic tax involved exceeds One million pesos (P1,000.000) or where information, not yet in the possession of the Bureau of Internal
the settlement offered is less than the prescribed minimum rates, the Revenue, leading to the discovery of frauds upon the internal
compromise shall be subject to the approval of the Evaluation Board revenue laws or violations of any of the provisions thereof,
which shall be composed of the Commissioner and the four (4) thereby resulting in the recovery of revenues, surcharges and fees
Deputy Commissioners. and/or the conviction of the guilty party and/or the imposition of
any of the fine or penalty, shall be rewarded in a sum equivalent
Q: When do you abate and cancel tax liability? to ten percent (10%) of the revenues, surcharges or fees
recovered and/or fine or penalty imposed and collected or One
A: When the tax or any portion thereof appears to be unjustly or Million Pesos (P1,000,000) per case, whichever is lower.
excessively assessed or when the administration and collection costs The same amount of reward shall also be given to an informer
involved do not justify the collection of the amount due. where the offender has offered to compromise the violation of law
committed by him and his offer has been accepted by the
Take note that even criminal violations may be compromised except Commissioner and collected from the offender: Provided, That
those already filed in court and those involving fraud. should no revenue, surcharges or fees be actually recovered or
collected, such person shall not be entitled to a reward:Provided,
The other remedies are found in Section 5 and 6. You also have further, That the information mentioned herein shall not refer to
Section 15. a case already pending or previously investigated or examined by
the Commissioner or any of his deputies, agents or examiners, or
In the case of the criminal action, there is no need of a prior the Secretary of Finance or any of his deputies or
assessment for purposes of pursuing the remedy of filing the criminal agents: Provided, finally, That the reward provided herein shall
action. But if you proceed with the remedy of the civil action, it be paid under rules and regulations issued by the Secretary of
requires prior assessment. To collect taxes by way of civil action in Finance, upon recommendation of the Commissioner.
court, this would require a prior assessment. (B) For Discovery and Seizure of Smuggled Goods. - To encourage
the public to extend full cooperation in eradicating smuggling, a
Let’s go to Section 281. cash reward equivalent to ten percent (10%) of the fair market
value of the smuggled and confiscated goods or One Million
SEC. 281. Prescription for Violations of any Provision of this Code. Pesos (P1,000,000) per case, whichever is lower, shall be given to
- All violations of any provision of this Code shall prescribe after persons instrumental in the discovery and seizure of such
Five (5) years. smuggled goods.
The cash rewards of informers shall be subject to income tax,
Prescription shall begin to run from the day of the commission of collected as a final withholding tax, at a rate of ten percent
the violation of the law, and if the same be not known at the time, (10%).
from the discovery thereof and the institution of judicial The provisions of the foregoing Subsections notwithstanding, all
proceedings for its investigation and punishment. public officials, whether incumbent or retired, who acquired the
information in the course of the performance of their duties
The prescription shall be interrupted when proceedings are during their incumbency, are prohibited from claiming
instituted against the guilty persons and shall begin to run again informer's reward.
if the proceedings are dismissed for reasons not constituting
jeopardy. The informer’s reward is of two kinds; one for violation of the NIRC
and one for discovery of smuggled goods. The discovery adnd
The term of prescription shall not run when the offender is seizure of smuggled goods is not involved liability for internal
absent from the Philippines. revenue taxes like VAT or other excise taxes on account of
importation.
This provides for the period within which the criminal action should
be pursued. An informer who gives a sworn information not yet known to the
BIR will be given a reward. He shall be rewarded to a sum equivalent
In Section 222, the assessment is 3 years, and 10 years as an to 10% of the revenue recovered or 1,000,000 whichever is lower. So
exception. To collect the tax, you have 5 years, whether you proceed the information must lead to collection of the tax in order for the
with administrative remedies or judicial remedies. Do not be informer to be rewarded. The reward will still be given even if the
confused of the periods. offender will offer to compromise. The reward in this case will be
based in the compromised amount.
The running of the prescriptive period is tolled when the offender is
out of the country. For discovery and seizure of smuggled goods, there is no more
exclusion as to who can be an informer. You will receive 10% of the

Taxation Law II
fair value of the goods, or 1,000,000, whichever is lower. The cash

reward will be subjected to a withholding tax. Before 1998, this If you will be asked in what language shall the books are to be kept,
reward is tax free. But not it is already subject to tax. Section 234 will give you an answer. They can be in English, Spanish
or in the native language.
Title IX talks about compliance requirements.
If it will be in a language other than this three, you must keep a
SEC. 232. Keeping of Books of Accounts. - separate book that will provide translations.
(A) Corporations, Companies, Partnerships or Persons Required to
Keep Books of Accounts. - All corporations, companies, SEC. 235. Preservation of Books and Accounts and Other
partnerships or persons required by law to pay internal revenue Accounting Records. - All the books of accounts, including the
taxes shall keep a journal and a ledger or their subsidiary books and other accounting records of corporations,
equivalents: Provided, however, That those whose quarterly sales, partnerships, or persons, shall be preserved by them for a period
earnings, receipts, or output do not exceed Fifty thousand pesos beginning from the last entry in each book until the last day
(P50,000) shall keep and use simplified set of bookkeeping prescribed by Section 203 within which the Commissioner is
records duly authorized by the Secretary of Finance where in all authorized to make an assessment.
transactions and results of operations are shown and from which The said books and records shall be subject to examination and
all taxes due the Government may readily and accurately be inspection by internal revenue officers: Provided, That for income
ascertained and determined any time of the year:Provided, tax purposes, such examination and inspection shall be made
further, That corporations, companies, partnerships or persons only once in a taxable year, except in the following cases:
whose gross quarterly sales, earnings, receipts or output exceed (a) Fraud, irregularity or mistakes, as determined by the
One hundred fifty thousand pesos (P150,000) shall have their Commissioner;(b) The taxpayer requests reinvestigation;(c)
books of accounts audited and examined yearly by independent Verification of compliance with withholding tax laws and
Certified Public Accountants and their income tax returns regulations;(d) Verification of capital gains tax liabilities; and(e)
accompanied with a duly accomplished Account Information In the exercise of the Commissioner's power under Section 5(B)
Form (AIF) which shall contain, among others, information lifted to obtain information from other persons in which case, another
from certified balance sheets, profit and loss statements, or separate examination and inspection may be made.
schedules listing income-producing properties and the Examination and inspection of books of accounts and other
corresponding income therefrom and other relevant statements. accounting records shall be done in the taxpayer's office or place
(B) Independent Certified Public Accountant Defined. - The of business or in the office of the Bureau of Internal Revenue.
term"Independent Certified Public Accountant", as used in the All corporations, partnerships or persons that retire from
preceding paragraph, means an accountant who possesses the business shall, within ten (10) days from the date of retirement or
independence as defined in the rules and regulations of the Board within such period of time as may be allowed by the
of Accountancy promulgated pursuant to Presidential Decree No. Commissioner in special cases, submit their books of accounts,
692, otherwise known as the Revised Accountancy Law. including the subsidiary books and other accounting records to
the Commissioner or any of his deputies for examination, after
This talks about the keeping of books of accounts. The books which they shall be returned.
required are the journals and ledgers or their equivalent. Corporations and partnerships contemplating dissolution must
notify the Commissioner and shall not be dissolved until cleared
SEC. 233. Subsidiary Books. - All corporations, companies, of any tax liability.
partnerships or persons keeping the books of accounts mentioned Any provision of existing general or special law to the contrary
in the preceding Section may, at their option, keep subsidiary notwithstanding, the books of accounts and other pertinent
books as the needs of their business may require: Provided, That records of tax-exempt organizations or grantees of tax incentives
were such subsidiaries are kept, they shall form part of the shall be subject to examination by the Bureau of Internal
accounting system of the taxpayer and shall be subject to the Revenue for purposes of ascertaining compliance with the
same rules and regulations as to their keeping, translation, conditions under which they have been granted tax exemptions
production and inspection as are applicable to the journal and or tax incentives, and their tax liability, if any.
the ledger.
The keeping of the books must be in the same period within which
SEC. 234. Language in which Books are to be Kept; the action for assessment can be pursued. So after three years, you are
Translation. - All suchcorporations, companies, partnerships or free to throw away the books.
persons shall keep the books or records mentioned in Section 232
hereof in native language, English or Spanish: Provided, Ordinarily, you can only be investigated and be subjected to
however, That if in addition to said books or records the taxpayer assessment only once in a taxable year. When you are under
keeps other books or records in a language other than a native assessment, what generates that notice informing you that you are
language, English or Spanish, he shall make a true and complete under assessment is the letter of authority (LOA). The LOA is the
translation of all the entries in suck other books or records into a document of the examiner served to the taxpayer informing him of
native language; English or Spanish, and the said translation the assessment. The LOA will define the tax period involved. You
must be made by the bookkeeper, or such taxpayer, or in his cannot be examined for an indefinite tax period. The period must be
absence, by his manager and must be certified under oath as to definite and must be stated in the LOA.
its correctness by the said bookkeeper or manager, and shall
form an integral part of the aforesaid books of accounts. You can be made to keep the books for more than three years in the
The keeping of such books or records in any language other than cases enumerated in Section 235. These are the exception to the
a native language, English or Spanish, is hereby prohibited. general rule.

Taxation Law II
Code for exemption from the value-added tax shall register in

SEC. 236. Registration Requirements. - accordance with Subsection (A) hereof, and shall pay the annual
(A) Requirements. - Every person subject to any internal revenue registration fee prescribed within ten (10) days after the end of
tax shall register once with the appropriate Revenue District the last month of that period, and shall be liable to the value-
Officer: added tax commencing from the first day of the month following
(1) Within ten (10) days from date of employment, or his registration.
(2) On or before the commencement of business,or (I) Optional Registration of Exempt Person. - Any person whose
(3) Before payment of any tax due, or transactions are exempt from value-added tax under Section
(4) Upon filing of a return, statement or declaration as required 109(z) of this Code; or any person whose transactions are exempt
in this Code. from the value-added tax under Section 109(a), (b), (c), and (d) of
The registration shall contain the taxpayer's name, style, place of this Code, who opts to register as a VAT taxpayer with respect to
residence, business and such other information as may be his export sales only, may update his registration information in
required by the Commissioner in the form prescribed therefor. accordance with Subsection (E) hereof, not later than ten (10)
A person maintaining a head office, branch or facility shall days before the beginning of the taxable quarter and shall pay
register with the Revenue District Officer having jurisdiction the annual registration fee prescribed in Subsection (B) hereof.
over the head office, brand or facility. In any case, the Commissioner may, for administrative reasons,
For purposes of this Section, the term "facility" may include but deny any application for registration including updates
not be limited to sales outlets, places of production, warehouses prescribed under Subsection (E) hereof.
or storage places. For purposes of Title IV of this Code, any person who has
(B) Annual Registration Fee. - An annual registration fee in the registered value-added tax as a tax type in accordance with the
amount of Five hundred pesos (P500) for every separate or provisions of Subsection (C) hereof shall be referred to as VAT-
distinct establishment or place of business, including facility registered person who shall be assigned only one Taxpayer
types where sales transactions occur, shall be paid upon Identification Number.
registration and every year thereafter on or before the last day of (J) Supplying of Taxpayer Identification Number (TIN). - Any
January: Provided, however, That cooperatives, individuals person required under the authority of this Code to make, render
earning purely compensation income, whether locally or abroad, or file a return, statement or other document shall be supplied
and overseas workers are not liable to the registration fee herein with or assigned a Taxpayer Identification Number (TIN) which
imposed. he shall indicate in such return, statement or document filed with
The registration fee shall be paid to an authorized agent bank the Bureau of Internal Revenue for his proper identification for
located within the revenue district, or to the Revenue Collection tax purposes, and which he shall indicate in certain documents,
Officer, or duly authorized Treasurer of the city of municipality such as, but not limited to the following:
where each place of business or branch is registered. (1) Sugar quedans, refined sugar release order or similar
(C) Registration of Each Type of Internal Revenue Tax. - Every instruments;(2) Domestic bills of lading;(3) Documents to be
person who is required to register with the Bureau of Internal registered with the Register of Deeds of Assessor's Office;(4)
Revenue under Subsection (A) hereof, shall register each type of Registration certificate of transportation equipment by land, sea
internal revenue tax for which he is obligated, shall file a return or air;(5) Documents to be registered with the Securities and
and shall pay such taxes, and shall updates such registration of Exchange Commission;(6) Building construction permits;(7)
any changes in accordance with Subsection (E) hereof. Application for loan with banks, financial institutions, or other
(D) Transfer of Registration. - In case a registered person decides financial intermediaries;(8) Application for mayor's permit;(9)
to transfer his place of business or his head office or branches, it Application for business license with the Department of Trade &
shall be his duty to update his registration status by filing an Industry; and(10) Such other documents which may hereafter be
application for registration information update in the form required under rules and regulations to be promulgated by the
prescribed therefor. Secretary of Finance, upon recommendation of the
(E) Other Updates. - Any person registered in accordance with Commissioner.
this Section shall, whenever applicable, update his registration In cases where a registered taxpayer dies, the administrator or
information with the Revenue District Office where he is executor shall register the estate of the decedent in accordance
registered, specifying therein any change in type and other with Subsection (A) hereof and a new Taxpayer Identification
taxpayer details. Number (TIN) shall be supplied in accordance with the
(F) Cancellation of Registration. - The registration of any person provisions of this Section.
who ceases to be liable to a tax type shall be cancelled upon filing In the case of a nonresident decedent, the executor or
with the Revenue District Office where he is registered an administrator of the estate shall register the estate with the
application for registration information update in a form Revenue District Office where he is registered: Provided,
prescribed therefor. however, That in case such executor or administrator is not
(G) Persons Commencing Business. - Any person, who expects to registered, registration of the estate shall be made with the
realize gross sales or receipts subject to value-added tax in excess Taxpayer Identification Number (TIN) supplied by the Revenue
of the amount prescribed under Section 109(z) of this Code for District Office having jurisdiction over his legal residence.
the next 12-month period from the commencement of the Only one Taxpayer identification Number (TIN) shall be
business, shall register with the Revenue District Office which assigned to a taxpayer.
has jurisdiction over the head office or branch and shall pay the Any person who shall secure more than one Taxpayer
annual registration fee prescribed in Subsection (B) hereof. Identification Number shall be criminally liable under the
(H) Persons Becoming Liable to the Value-added Tax. - Any provision of Section 275 on 'Violation of Other Provisions of this
person, whose gross sales or receipts in any 12-month period Code or Regulations in General'.
exceeds the amount prescribed under Subsection 109(z) of this

Taxation Law II
All taxpayers are required to register and pay the annual registration
fee of P500.00. You also have to get a Tax Identification Number Let’s now go to Section 245.
(TIN).
SEC. 245. Specific Provisions to be Contained in Rules and
SEC. 237. Issuance of Receipts or Sales or Commercial Invoices. - Regulations. -The rules and regulations of the Bureau of Internal
All persons subject to an internal revenue tax shall, for each sale Revenue shall, among other thins, contain provisions specifying,
or transfer of merchandise or for services rendered valued at prescribing or defining:
Twenty-five pesos (P25.00) or more, issue duly registered receipts (a) The time and manner in which Revenue Regional Director
or sales or commercial invoices, prepared at least in duplicate, shall canvass their respective Revenue Regions for the purpose of
showing the date of transaction, quantity, unit cost and discovering persons and property liable to national internal
description of merchandise or nature of service: Provided, revenue taxes, and the manner in which their lists and records of
however, That in the case of sales, receipts or transfers in the taxable persons and taxable objects shall be made and kept;(b)
amount of One hundred pesos (P100.00) or more, or regardless of The forms of labels, brands or marks to be required on goods
the amount, where the sale or transfer is made by a person liable subject to an excise tax, and the manner in which the labelling,
to value-added tax to another person also liable to value-added branding or marking shall be effected;(c) The conditions under
tax; or where the receipt is issued to cover payment made as which and the manner in which goods intended for export, which
rentals, commissions, compensations or fees, receipts or invoices if not exported would be subject to an excise tax, shall be
shall be issued which shall show the name, business style, if any, labelled, branded or marked;(d) The conditions to be observed
and address of the purchaser, customer or client: Provided, by revenue officers respecting the institutions and conduct of
further, That where the purchaser is a VAT-registered person, in legal actions and proceedings;(e) The conditions under which
addition to the information herein required, the invoice or receipt goods intended for storage in bonded warehouses shall be
shall further show the Taxpayer Identification Number (TIN) of conveyed thither, their manner of storage and the method of
the purchaser. keeping the entries and records in connection therewith, also the
The original of each receipt or invoice shall be issued to the books to be kept by Revenue Inspectors and the reports to be
purchaser, customer or client at the time the transaction is made by them in connection with their supervision of such
effected, who, if engaged in business or in the exercise of houses;(f) The conditions under which denatured alcohol may be
profession, shall keep and preserve the same in his place of removed and dealt in, the character and quantity of the
business for a period of three (3) years from the close of the denaturing material to be used, the manner in which the process
taxable year in which such invoice or receipt was issued, while of denaturing shall be effected, so as to render the alcohol
the duplicate shall be kept and preserved by the issuer, also in his suitably denatured and unfit for oral intake, the bonds to be
place of business, for a like period. given, the books and records to be kept, the entries to be made
The Commissioner may, in meritorious cases, exempt any person therein, the reports to be made to the Commissioner, and the
subject to internal revenue tax from compliance with the signs to be displayed in the business or by the person for whom
provisions of this Section. such denaturing is done or by whom, such alcohol is dealt in;(g)
The manner in which revenue shall be collected and paid, the
This will guide you in determining the minimum value to which you instrument, document or object to which revenue stamps shall be
have to issue a receipt. affixed, the mode of cancellation of the same, the manner in
which the proper books, records, invoices and other papers shall
SEC. 238. Printing of Receipts or Sales or Commercial be kept and entries therein made by the person subject to the tax,
Invoices. - All persons who are engaged in business shall secure as well as the manner in which licenses and stamps shall be
from the Bureau of Internal Revenue an authority to print gathered up and returned after serving their purposes;(h) The
receipts or sales or commercial invoices before a printer can conditions to be observed by revenue officers respecting the
print the same. enforcement of Title III imposing a tax on estate of a decedent,
No authority to print receipts or sales or commercial invoices and other transfers mortis causa, as well as on gifts and such
shall be granted unless the receipts or invoices to be printed are other rules and regulations which the Commissioner may
serially numbered and shall show, among other things, the name, consider suitable for the enforcement of the said Title III;(i) The
business style, Taxpayer Identification Number (TIN) and manner in which tax returns, information and reports shall be
business address of the person or entity to use the same, and such prepared and reported and the tax collected and paid, as well as
other information that may be required by rules and regulations the conditions under which evidence of payment shall be
to be promulgated by the Secretary of Finance, upon furnished the taxpayer, and the preparation and publication of
recommendation of the Commissioner. tax statistics;(j) The manner in which internal revenue taxes,
All persons who print receipt or sales or commercial invoices such as income tax, including withholding tax, estate and donor's
shall maintain a logbook/register of taxpayers who availed of taxes, value-added tax, other percentage taxes, excise taxes and
their printing services. documentary stamp taxes shall be paid through the collection
The logbook/register shall contain the following information: officers of the Bureau of Internal Revenue or through duly
(1) Names, Taxpayer Identification Numbers of the persons or authorized agent banks which are hereby deputized to receive
entities for whom the receipts or sales or commercial invoices payments of such taxes and the returns, papers and statements
were printed; and that may be filed by the taxpayers in connection with the
(2) Number of booklets, number of sets per booklet, number of payment of the tax: Provided, however, That notwithstanding the
copies per set and the serial numbers of the receipts or invoices in other provisions of this Code prescribing the place of filing of
each booklet. returns and payment of taxes, the Commissioner may, by rules
and regulations, require that the tax returns, papers and
statements that may be filed by the taxpayers in connection with
This tells you about the requirement on printing receipts.

Taxation Law II
the payment of the tax. Provided, however, That notwithstanding different from the facts on which the ruling is based; or(c) Where
the other provisions of this Code prescribing the place of filing of the taxpayer acted in bad faith.
returns and payment of taxes, the Commissioner may, by rules
and regulations require that the tax returns, papers and Tax laws and other regulations are prospective in application.
statements and taxes of large taxpayers be filed and paid, Retroactive application only happens in the instances enumerated in
respectively, through collection officers or through duly Section 246.
authorized agent banks: Provided, further, That the
Commissioner can exercise this power within six (6) years from
the approval of Republic Act No. 7646 or the completion of its LOCAL GOVERNMENT TAXATION
comprehensive computerization program, whichever comes
earlier: Provided, finally, That separate venues for the Luzon,
Visayas and Mindanao areas may be designated for the filing of Q: What is the basis of the local government’s power of taxation.
tax returns and payment of taxes by said large taxpayers.
For the purpose of this Section, "large taxpayer" means a A: Section 129
taxpayer who satisfies any of the following criteria;
(1) Value-Added Tax (VAT). - Business establishment with VAT Section 129. Power to Create Sources of Revenue. - Each local
paid or payable of at least One hundred thousand pesos government unit shall exercise its power to create its own sources
(P100,000) for any quarter of the preceding taxable year; of revenue and to levy taxes, fees, and charges subject to the
(2) Excise Tax. - Business establishment with excise tax paid or provisions herein, consistent with the basic policy of local
payable of at least One million pesos (P1,000,000) for the autonomy. Such taxes, fees, and charges shall accrue exclusively
preceding taxable year; to the local government units.
(3) Corporate Income Tax. - Business establishment with annual
income tax paid or payable of at least One million pesos
(P1,000,000) for the preceding taxable year; and Q: Is the power of taxation of LGUs inherent?
(4) Withholding Tax. - Business establishment with withholding
tax payment or remittance of at least One million pesos A: No.
(P1,000,000) for the preceding taxable year.
Provided, however, That the Secretary of Finance, upon Q: How is the power granted?
recommendation of the Commissioner, may modify or add to the
above criteria for determining a large taxpayer after considering A:
such factors as inflation, volume of business, wage and
employment levels, and similar economic factors. Q: What is the role of the LGC in LGUs power of taxation?
The penalties prescribed under Section 248 of this Code shall be
imposed on any violation of the rules and regulations issued by A: The LGC provides the scope of the power. But the power is
the Secretary of Finance, upon recommendation of the granted by the constitution. The LGC
Commissioner, prescribing the place of filing of returns and
payments of taxes by large taxpayers. Q: What are these Local Government Units?
A: Section 128.
What you have to remember here is the definition of a large taxpayer.
SEC. 244. Authority of Secretary of Finance to Promulgate Rules Section 128. Scope. - The provisions herein shall govern the
and Regulations. - The Secretary of Finance, upon exercise by provinces, cities, municipalities, and barangays of
recommendation of the Commissioner, shall promulgate all their taxing and other revenue-raising powers.
needful rules and regulations for the effective enforcement of the
provisions of this Code. Read Section 130.
The authority to make rules and regulations is upon the Secretary of

Finance, not on the Commissioner. The commissioner only Section 130. Fundamental Principles. - The following
recommends. fundamental principles shall govern the exercise of the taxing
and other revenue-raising powers of local government units:
SEC. 246. Non-Retroactivity of Rulings. - Any revocation,
modification or reversal of any of the rules and regulations (a) Taxation shall be uniform in each local government unit;
promulgated in accordance with the preceding Sections or any of
the rulings or circulars promulgated by the Commissioner shall (b) Taxes, fees, charges and other impositions shall:
not be given retroactive application if the revocation,
modification or reversal will be prejudicial to the taxpayers,
(1) be equitable and based as far as practicable on the
except in the following cases:
taxpayer's ability to pay;
(a) Where the taxpayer deliberately misstates or omits material
facts from his return or any document required of him by the
Bureau of Internal Revenue;(b) Where the facts subsequently (2) be levied and collected only for public purposes;
gathered by the Bureau of Internal Revenue are materially
(3) not be unjust, excessive, oppressive, or confiscatory;

Taxation Law II
(4) not be contrary to law, public policy, national

economic policy, or in the restraint of trade; Q: What does Section 133 tell us?
A:
(c) The collection of local taxes, fees, charges and other
impositions shall in no case be let to any private person;
Section 133. Common Limitations on the Taxing Powers of Local
(d) The revenue collected pursuant to the provisions of this Code Government Units. - Unless otherwise provided herein, the
shall inure solely to the benefit of, and be subject to the exercise of the taxing powers of provinces, cities, municipalities,
disposition by, the local government unit levying the tax, fee, and barangays shall not extend to the levy of the following:
charge or other imposition unless otherwise specifically provided
herein; and, (a) Income tax, except when levied on banks and other financial
institutions;
(e) Each local government unit shall, as far as practicable, evolve
a progressive system of taxation. (b) Documentary stamp tax;
Q: Are these principles of taxation on the LGUs the same principles (c) Taxes on estates, inheritance, gifts, legacies and other
in the state’s inherent power of taxation? acquisitions mortis causa, except as otherwise provided herein;
A: Yes because in our constitution the policy of the state is that (d) Customs duties, registration fees of vessel and wharfage on
which is mirrored in the provisions herein provided. wharves, tonnage dues, and all other kinds of customs fees,
charges and dues except wharfage on wharves constructed and
Q: What provisions? maintained by the local government unit concerned;
A: The principle that the state will promote progressive system of

(e) Taxes, fees, and charges and other impositions upon goods
taxation is also provided in the Constitution.
carried into or out of, or passing through, the territorial
jurisdictions of local government units in the guise of charges for
Q: How about the principle of due process?
wharfage, tolls for bridges or otherwise, or other taxes, fees, or
charges in any form whatsoever upon such goods or
A: The levying of taxes must only be for public purposes and must
merchandise;
not be excessive and confiscatory.
Q: What about equal protection? (f) Taxes, fees or charges on agricultural and aquatic products
when sold by marginal farmers or fishermen;
A: Taxation shall be uniform in each local government unit and that it
shall be equitable and based on the taxpayer’s ability to pay. (g) Taxes on business enterprises certified to by the Board of
Investments as pioneer or non-pioneer for a period of six (6) and
The principles that you have learned in the state’s inherent power of four (4) years, respectively from the date of registration;
taxation is the same principles as provided in Section 130. They also
apply in local taxation. These principles are the same but are more
defined. (h) Excise taxes on articles enumerated under the national
Internal Revenue Code, as amended, and taxes, fees or charges
Q: Who is given the authority to exercise local taxation so far as on petroleum products;
taxes are concerned?
(i) Percentage or value-added tax (VAT) on sales, barters or
A: Section 132. exchanges or similar transactions on goods or services except as
otherwise provided herein;
Section 132. Local Taxing Authority. - The power to impose a tax,
fee, or charge or to generate revenue under this Code shall be (j) Taxes on the gross receipts of transportation contractors and
exercised by the sanggunian of the local government unit persons engaged in the transportation of passengers or freight by
concerned through an appropriate ordinance. hire and common carriers by air, land or water, except as
provided in this Code;
Q: What do you mean by Sanggunian?
(k) Taxes on premiums paid by way or reinsurance or
A: Sangguniang panlalawigan, Sangguniang panlungsod and retrocession;
Sangguniang bayan.
(l) Taxes, fees or charges for the registration of motor vehicles
Q: What do they enact? and for the issuance of all kinds of licenses or permits for the
driving thereof, except tricycles;
A: They pass an ordinance for the imposition of the tax, fee or
charge.

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(m) Taxes, fees, or other charges on Philippine products actually

exported, except as otherwise provided herein; A: Section 151.
(n) Taxes, fees, or charges, on Countryside and Barangay Section 151. Scope of Taxing Powers. - Except as otherwise
Business Enterprises and cooperatives duly registered under R.A. provided in this Code, the city, may levy the taxes, fees, and
No. 6810 and Republic Act Numbered Sixty-nine hundred thirty- charges which the province or municipality may impose:
eight (R.A. No. 6938) otherwise known as the "Cooperative Code Provided, however, That the taxes, fees and charges levied and
of the Philippines" respectively; and collected by highly urbanized and independent component cities
shall accrue to them and distributed in accordance with the
(o) Taxes, fees or charges of any kind on the National provisions of this Code.
Government, its agencies and instrumentalities, and local
government units. The rates of taxes that the city may levy may exceed the
maximum rates allowed for the province or municipality by not
more than fifty percent (50%) except the rates of professional
Q: Why are these limitations provided?
and amusement taxes.
A: So that the LGU may not exercise the power arbitrarily.
Q: What does this provision mean?
Q: What does this provision tell us?
A: The taxing powers of provinces and municipalities combined
A: This enumeration includes all taxes that cannot be imposed by constitute the taxing power of cities.
LGUs.
Q: Is there a limit to such exercise of taxing powers?
Q: Why are LGUs prohibited from imposing these taxes?
A: Section 151, second paragraph.
A: Because these are national taxes and thus are already collected by
the national government. They cannot impose taxes already provided Q: provinces are authorized to imposed professional tax. How much
or given to the national government. These taxes are already provided is the rate?
for in the NIRC.
A:
Read Section 133 (e).
Section 139. Professional Tax. –
(e) Taxes, fees, and charges and other impositions upon goods
carried into or out of, or passing through, the territorial (a) The province may levy an annual professional tax on each
jurisdictions of local government units in the guise of charges for person engaged in the exercise or practice of his profession
wharfage, tolls for bridges or otherwise, or other taxes, fees, or requiring government examination at such amount and
charges in any form whatsoever upon such goods or reasonable classification as the sangguniang panlalawigan may
merchandise; determine but shall in no case exceed Three hundred pesos
(P300.00).
Q: What is the reason behind this provision?
(b) Every person legally authorized to practice his profession
A: Because if the imposition will be allowed, that will constitute shall pay the professional tax to the province where he practices
restraint of trade which is expressly prohibited in Section 130 (b)(4). his profession or where he maintains his principal office in case
he practices his profession in several places: Provided, however,
Just imagine if LGUs will have this ordinance, no business or trade That such person who has paid the corresponding professional
will flourish because the cost of trade is so high that there will be no tax shall be entitled to practice his profession in any part of the
expected profit anymore. Philippines without being subjected to any other national or local
tax, license, or fee for the practice of such profession.
So in Section 133, most of these taxes are already imposed by the
national government, either under the NIRC or the Tariffs and
(c) Any individual or corporation employing a person subject to
Customs Code.
professional tax shall require payment by that person of the tax
on his profession before employment and annually thereafter.
Q: In the case of provinces, what are the taxes allowed to be
imposed?
(d) The professional tax shall be payable annually, on or before
A: Sections 135-141. the thirty-first (31st) day of January. Any person first beginning
to practice a profession after the month of January must,
Q: What are the taxes allowed to be imposed by Municipalities? however, pay the full tax before engaging therein. A line of
profession does not become exempt even if conducted with some
A: Sections 143, 147, 148 and 149. other profession for which the tax has been paid. Professionals
exclusively employed in the government shall be exempt from the
Q: What are taxes fees and charges allowed to be imposed by Cities? payment of this tax.

Taxation Law II
(e) Any person subject to the professional tax shall write in deeds,
receipts, prescriptions, reports, books of account, plans and A: Section 135.
designs, surveys and maps, as the case may be, the number of the
official receipt issued to him. Section 135. Tax on Transfer of Real Property Ownership.
Q: So in view of Section 139, how much professional tax can the city (a) The province may impose a tax on the sale , donation, barter,
impose? or on any other mode of transferring ownership or title of real
property at the rate of not more than fifty percent (50%) of the
A: The City shall impose the same rate as in the province, which is one percent (1%) of the total consideration involved in the
P300.00. acquisition of the property or of the fair market value in case the
monetary consideration involved in the transfer is not
Q: How about amusement tax? substantial, whichever is higher. The sale, transfer or other
disposition of real property pursuant to R.A. No. 6657 shall be
A: exempt from this tax.
Section 140. Amusement Tax. – (b) For this purpose, the Register of Deeds of the province
concerned shall, before registering any deed, require the
(a) The province may levy an amusement tax to be collected from presentation of the evidence of payment of this tax. The
the proprietors, lessees, or operators of theaters, cinemas, concert provincial assessor shall likewise make the same requirement
halls, circuses, boxing stadia, and other places of amusement at a before cancelling an old tax declaration and issuing a new one in
rate of not more than thirty percent (30%) of the gross receipts place thereof, Notaries public shall furnish the provincial
from admission fees. treasurer with a copy of any deed transferring ownership or title
to any real property within thirty (30) days from the date of
notarization.
(b) In the case of theaters or cinemas, the tax shall first be
deducted and withheld by their proprietors, lessees, or operators
and paid to the provincial treasurer before the gross receipts are It shall be the duty of the seller, donor, transferor, executor or
divided between said proprietors, lessees, or operators and the administrator to pay the tax herein imposed within sixty (60)
distributors of the cinematographic films. days from the date of the execution of the deed or from the date
of the decedent's death.
(c) The holding of operas, concerts, dramas, recitals, painting and
art exhibitions, flower shows, musical programs, literary and Q: If you are the provincial councilor, and you are going to impose an
oratorical presentations, except pop, rock, or similar concerts ordinance under Section 135, what rate will you impose?
shall be exempt from the payment of the tax hereon imposed.
A: .5% of the total amount of the consideration of the sale.
(d) The sangguniang panlalawigan may prescribe the time,
Q: Can the province impose a rate lesser than that rate?
manner, terms and conditions for the payment of tax. In case of
fraud or failure to pay the tax, the sangguniang panlalawigan
A: Yes, since the only limitation is that it must not exceed the rate
may impose such surcharges, interest and penalties as it may
provided in the LGC.
deem appropriate.
Q: What about taxes on the business of printing and publication?
(e) The proceeds from the amusement tax shall be shared equally
by the province and the municipality where such amusement A: Section 136.
places are located.
Section 136. Tax on Business of Printing and Publication. - The
Q: So how much can the Cities impose as amusement tax? province may impose a tax on the business of persons engaged in
the printing and/or publication of books, cards, posters, leaflets,
A: The cities must impose the same rate for amusement tax as well. handbills, certificates, receipts, pamphlets, and others of similar
So they can only impose 30% of the gross receipts as amusement tax. nature, at a rate not exceeding fifty percent (50%) of one percent
(1%) of the gross annual receipts for the preceding calendar
Q: How about in the other taxes? year.
A: For other taxes, Cities can impose higher than those imposed by
In the case of a newly started business, the tax shall not exceed
provinces, but such increase shall be limited to 50% of the amount
one-twentieth (1/20) of one percent (1%) of the capital
imposed by provinces.
investment. In the succeeding calendar year, regardless of when
the business started to operate, the tax shall be based on the gross
So except in professional and amusement taxes, cities can impose
receipts for the preceding calendar year, or any fraction thereof,
higher taxes.
as provided herein.
Q: in the case of provinces, what is the rate for the transfer of real
property ownership?

Taxation Law II
The receipts from the printing and/or publishing of books or

other reading materials prescribed by the Department of In the case of Metro Manila, the way they enact tax ordinance,
Education, Culture and Sports as school texts or references shall including RPT, since it is composed of different cities, the different
be exempt from the tax herein imposed. cities are clustered into several groupings. There are about four
clusters. One LGU in a cluster cannot impose or amend or introduce
new taxes unless with the approval of the other LGUs in the cluster.
Q: How about franchise tax? So when an LGU gets an approval from the other LGUs within the
cluster, they can now go to the Sanggunian to propose the ordinance.
A: Section 137. Without that conformity, whatever ordinance they enact will be null
and void.
Section 137. Franchise Tax. - Notwithstanding any exemption
granted by any law or other special law, the province may impose The RPT are what we call non-self assessing taxes, unlike internal
a tax on businesses enjoying a franchise, at the rate not exceeding revenue taxes and some local taxes. The tariff and customs duties are
fifty percent (50%) of one percent (1%) of the gross annual also non-self assessing. The collector of customs is the one who will
receipts for the preceding calendar year based on the incoming compute the dutiable value and the corresponding duties.
receipt, or realized, within its territorial jurisdiction.
RPT are non-self assessing because the property owner himself
cannot determine the fair market value of his property. The real
In the case of a newly started business, the tax shall not exceed
property is still subject to appraisal and assessment to determine the
one-twentieth (1/20) of one percent (1%) of the capital
fair market value. It is the local assessor, whose function is to make
investment. In the succeeding calendar year, regardless of when
the appraisal and assessment of real properties. The end product is
the business started to operate, the tax shall be based on the gross
what we call as the Tax Declaration. This is the document that will
receipts for the preceding calendar year, or any fraction thereon,
contain the the fair market value of the property, and the assessed
as provided herein.
value of the property. These are the two figures that will be found in
your Tax declaration. What is collected by the LGU through the
Q: Does the province have the authority to immediately enforce the Local Treasurer, is the RPT, which is based on the assessed value
provisions of the LGC? multiplied by the rate.
A: They first have to enact an ordinance. These powers given by the RPT = Assessed Value x rate
LGC are just limitations to the taxing power of the LGUs. Therefore,
the Sanggunian, through an ordinance will fix the rate. Not all LGUs The property owner may know the fair market value but he would not
have inhabitants who can afford the rates in the LGC. So some LGUs know the assessed value, because there is a formula for that.
impose lesser taxes. The rates that they will impose will depend in
the capability of their taxpayers.
Assessed Value = Fair Market Value x Assessment Level
January 29 (parehong sira ang recordings namin ni ate jen sa day na
ito, so to follow nalang to ha? Maghahanap pa ako ng recording na The law in your RPT provides the percentages, which is called the
maayos) assessment level for each kind of real property. Your tax is based on
the assessed value, not the fair market value.
REAL PROPERTY TAXATION In sum, your RPT simply involves assessment in determining the
assessed value, and the collection of the tax, except those properties
Section 197. Scope. - This Title shall govern the administration, which are exempted. In the principles, you have tax exemptions on
appraisal, assessment, levy and collection of real property tax. RPT on the basis of actual use (religious, charitable, educational).
In the case of Real Property Taxation (RPT), the subjects of the tax Section 198. Fundamental Principles. - The appraisal, assessment,
are real properties. When you talk about real properties, these are the levy and collection of real property tax shall be guided by the
real properties as defined under you Civil Code. They are movables, following fundamental principles:
which include lands, buildings, and all other improvement, including
those attached to the land. (a) Real property shall be appraised at its current and fair
market value;
For RPT you have appraisal and assessment, levy and collection.
What is appraised and assessed are the real properties. What is levied (b) Real property shall be classified for assessment purposes on
and collected is the tax. the basis of its actual use;
Similar to local taxation, wherein you have the LGUs having its own (c) Real property shall be assessed on the basis of a uniform
taxing powers, wherein the LGC provides the extent of the power to classification within each local government unit;
the kind of taxes they are allowed to impose, and the imposition of
these charges cannot be done without the passage of a tax ordinance. (d) The appraisal, assessment, levy and collection of real property
In RPT, LGUs also have to enact an ordinance to impose the taxes tax shall not be let to any private person; and
authorized to them, principally the provinces and the cities, under the
LGC.

Taxation Law II
(e) The appraisal and assessment of real property shall be

equitable. The most common approach is the Sales approach.
The principles here are the same as the state’s and local government’s (b) Real property shall be classified for assessment purposes on
power of taxation. The subjects here however are real properties. the basis of its actual use;
Let’s go over them one by one.
In the NIRC the taxpayer himself determines the tax liability. The
a) Real property shall be appraised at its current and fair market Commissioner may also come up with an assessment of a tax
value; deficiency. In local taxation, assessment is made by the local
treasurer. In RPT, you have Section 199 (f).
The word appraisal is defined in Section 199(e).
(f) "Assessment" is the act or process of determining
the value of a property, or proportion thereof subject to
(e) "Appraisal" is the act or process of determining the tax, including the discovery, listing, classification, and
value of property as of a specified date for a specific appraisal of properties;
purpose;
Basically, this is the determination of the value of the property

There is an appraisal for purposes of coming up with a fair market subject to tax, or what we call the ‘assessed value’
value of the property. The property owner may himself provide the
fair market value. The LGUs may come up with its own fair market
value on the basis of its zoning. The LGU will be zonified whether Assessed Value = Fair Market Value x Assessment Level
they are within commercial, residential and industrial zones, through
an ordinance. The real properties found in a specific zone will have The Assessment level is the percentage applied to the fair market
their corresponding fair market values. value to determine the taxable value of the property. That taxable
value is the assessed value.
Q: What is fair market value?
Under Section 199 (h), assessed value is defined as:
(l) "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; (h) "Assessed Value" is the fair market value of the real
property multiplied by the assessment level. It is
synonymous to taxable value;
The fair market value may be arrived through three types of
valuation:
The taxable value of the property is not the fair market value but the
1) Sales approach (Section 199 (l)) – this is the common assessed value of the property. The person doing the assessment and
valuation. This is usually determined depending on the appraisal is the local assessor. The person who determines the tax to
location. be paid is the local treasurer, who makes the levy and the collection.
2) Income Approach (Reyes vs. Omanson (?)) – the property
of JBL Reyes was appraised by the City of Manila, which Now let us define actual use.
consist of apartment dwellings. When it was assessed for
RPT purposes, the assessors made a valuation on the basis
(b) "Actual Use" refers to the purpose for which the
of the sales approach. Reyes questioned that appraisal
property is principally or predominantly utilized by the
claiming that sales approach is not applicable because the
person in possession thereof;
value of the property is being restricted by the rent control
law. It can only earn so much because of the restrictions
imposed by the law. So you have this income approach. Whether the real property is exempted from taxation purposes, the
Under this approach, your property may be valued on the exemption will always be guided by its actual use. If it is commercial
basis of the income that could be generated or earned by and residential, it will be taxable. But if it is used for religious,
such property. charitable and educational purposes, it will be exempted. It is not the
3) Replacement/Reproduction Cost (Section 199 (t)) ownership that will determine exemption but its actual use.
(t) "Replacement or Reproduction Cost" is the cost that (c) Real property shall be assessed on the basis of a uniform
would be incurred on the basis of current prices, in classification within each local government unit;
acquiring an equally desirable substitute property, or
the cost of reproducing a new replica of the property on
the basis of current prices with the same or closely In assessing the tax, the LGU shall provide a uniform classification.
similar material They have to enact an ordinance for purposes of not violating the
equal protection clause.
The property, under this approach, will be valued on the basis of
replacement/reproduction cost. Even if it is zoned as residential, it does not mean that you cannot put
there a commercial building, or have in a commercial area the

Taxation Law II
residence of the owners. In these cases, be guided by the actual use of Section 203. Duty of Person Acquiring Real Property or Making
the property. So you apportion your assessment vis-à-vis the portion Improvement Thereon. - It shall also be the duty of any person, or
of the property used as residential and that which is used as his authorized representative, acquiring at any time real
commercial. property in any municipality or city or making any improvement
on real property, to prepare, or cause to be prepared, and file
(d) The appraisal, assessment, levy and collection of real property with the provincial, city or municipal assessor, a sworn statement
tax shall not be let to any private person; and declaring the true value of subject property, within sixty (60)
days after the acquisition of such property or upon completion or
occupancy of the improvement, whichever comes earlier.
Assessment and appraisal must be done by the local assessor, and the
levy and collection must be done by the local treasurer.
A real property was sold. When the ROD will issue a new title, the
(e) The appraisal and assessment of real property shall be buyer must declare said title to the Assessor so that the name of the
equitable. seller in the tax declaration will be cancelled, and the new owner will
be substituted therein. If the new owner is not aware of the taxes
payable for the property, he will not know that the property has
Remember here the principle of ability to pay. already been subject of an auction as a result of the unpaid taxes.
Section 200. Administration of the Real Property Tax. - The This also covers making an improvement to the property. Before
provinces and cities, including the municipalities within the constructing the house, you need to get a building permit. After the
Metropolitan Manila Area, shall be primarily responsible for the construction, you have to get an occupancy permit. This permit you
proper, efficient and effective administration of the real property will present to the local assessor to declare the newly constructed
tax. building. So if you have a house and lot, you have to make a separate
declaration for the lot and the house.
Municipalities outside Metro Manila do not enact ordinance for RPT.
It will be the provinces or the cities. In agricultural lots, if it is vacant, then you have to declare that it is
vacant. But if you start planting corn on the lot, you have to declare
such an improvement as well.
Section 201. Appraisal of Real Property. - All real property,
whether taxable or exempt, shall be appraised at the current and
fair market value prevailing in the locality where the property is Section 204. Declaration of Real Property by the Assessor. - When
situated. The Department of Finance shall promulgate the any person, natural or juridical, by whom real property is
necessary rules and regulations for the classification, appraisal, required to be declared under Section 202 hereof, refuses or fails
and assessment of real property pursuant to the provisions of this for any reason to make such declaration within the time
Code. prescribed, the provincial, city or municipal assessor shall
himself declare the property in the name of the defaulting owner,
if known, or against an unknown owner, as the case may be, and
This is the basic rule in the appraisal and assessment of property.
shall assess the property for taxation in accordance with the
This means that all real properties, whether taxable or exempt, shall
provision of this Title. No oath shall be required of a declaration
be declared for RPT purposes. All properties must have a real
thus made by the provincial, city or municipal assessor.
property tax declaration.
If the owner fails to make the declaration, the assessor will do the
Section 202. Declaration of real Property by the Owner or
declaration for the owner.
Administrator. - It shall be the duty of all persons, natural or
juridical, owning or administering real property, including the
improvements therein, within a city or municipality, or their duly Section 205. Listing of Real Property in the Assessment Rolls. –
authorized representative, to prepare, or cause to be prepared,
and file with the provincial, city or municipal assessor, a sworn (a) In every province and city, including the municipalities within
statement declaring the true value of their property, whether the Metropolitan Manila Area, there shall be prepared and
previously declared or undeclared, taxable or exempt, which maintained by the provincial, city or municipal assessor an
shall be the current and fair market value of the property, as assessment roll wherein shall be listed all real property, whether
determined by the declarant. Such declaration shall contain a taxable or exempt, located within the territorial jurisdiction of
description of the property sufficient in detail to enable the the local government unit concerned. Real property shall be
assessor or his deputy to identify the same for assessment listed, valued and assessed in the name of the owner or
purposes. The sworn declaration of real property herein referred administrator, or anyone having legal interest in the property.
to shall be filed with the assessor concerned once every three (3)
years during the period from January first (1st) to June thirtieth
(30th) commencing with the calendar year 1992. (b) The undivided real property of a deceased person may be
listed, valued and assessed in the name of the estate or of the
heirs and devisees without designating them individually; and
It is the owner who will make the declaration. He will go to the undivided real property other than that owned by a deceased
assessor to declare the value of the property, whether previously may be listed, valued and assessed in the name of one or more co-
declared or undeclared, whether taxable or exempt. The declaration owners: Provided, however, That such heir, devisee, or co-owner
must have a description of the property. shall be liable severally and proportionately for all obligations

Taxation Law II
imposed by this Title and the payment of the real property tax (c) All machineries and equipment that are actually, directly and
with respect to the undivided property. exclusively used by local water districts and government owned
or controlled corporations engaged in the supply and distribution
(c) The real property of a corporation, partnership, or of water and/or generation and transmission of electric power;
association shall be listed, valued and assessed in the same
manner as that of an individual. (d) All real property owned by duly registered cooperatives as
provided for under R.A. No. 6938; and
(d) Real property owned by the Republic of the Philippines, its
instrumentalities and political subdivisions, the beneficial use of (e) Machinery and equipment used for pollution control and
which has been granted, for consideration or otherwise, to a environmental protection.
taxable person, shall be listed, valued and assessed in the name of
the possessor, grantee or of the public entity if such property has Except as provided herein, any exemption from payment of real
been acquired or held for resale or lease. property tax previously granted to, or presently enjoyed by, all
persons, whether natural or juridical, including all government-
The assessment roll is the list of the real properties in the territory of owned or controlled corporations are hereby withdrawn upon the
the assessor, and their classifications and their assessed values. effectivity of this Code.
Whether it is owned by a corporation or by the republic, all these
must be declared. The government is also required to make a tax CASE: Philippine Association of Rural Electric Cooperatives is a
declaration. cooperative registered with the National Electric Administration
(NEA). They questioned the constitutionality of Section 234 (d), as a
Section 206. Proof of Exemption of Real Property from Taxation. - violation of the equal protection clause as the exemption only covers
Every person by or for whom real property is declared, who shall cooperatives registered with Cooperative Development Authority
claim tax exemption for such property under this Title shall file (CDA). The Supreme Court ruled that there is no violation of equal
with the provincial, city or municipal assessor within thirty (30) protection because there is a distinction between those cooperative
days from the date of the declaration of real property sufficient registered with the NEA and those registered with the CDA. What
documentary evidence in support of such claim including they could have done is to lobby in the Congress to include them in
corporate charters, title of ownership, articles of incorporation, the exemption.
by-laws, contracts, affidavits, certifications and mortgage deeds,
and similar documents. This provision operated to the effect that all RPT exemption granted
prior to the LGC was withdrawn. However, Congress later on passed
If the required evidence is not submitted within the period herein a law reinstating the exemptions. This involved SSS and GSIS.
prescribed, the property shall be listed as taxable in the
assessment roll. However, if the property shall be proven to be Section 207. Real Property Identification System. - All declarations
tax exempt, the same shall be dropped from the assessment roll. of real property made under the provisions of this Title shall be
kept and filed under a uniform classification system to be
In the case of property tax exemption for religious, charitable and established by the provincial, city or municipal assessor.
educational use, the grant is in the constitution, but it is not
automatic. You have to present proof that you are covered by that Section 208. Notification of Transfer of Real Property Ownership. -
exemption. Any person who shall transfer real property ownership to
another shall notify the provincial, city or municipal assessor
Read with Section 234. concerned within sixty (60) days from the date of such transfer.
The notification shall include the mode of transfer, the
description of the property alienated, the name and address of
Section 234. Exemptions from Real Property Tax. - The following the transferee.
are exempted from payment of the real property tax:
Section 209. Duty of Registrar of Deeds to Appraise Assessor of
(a) Real property owned by the Republic of the Philippines or Real Property Listed in Registry. –
any of its political subdivisions except when the beneficial use
thereof has been granted, for consideration or otherwise, to a
taxable person; (a) To ascertain whether or not any real property entered in the
Registry of Property has escaped discovery and listing for the
purpose of taxation, the Registrar of Deeds shall prepare and
(b) Charitable institutions, churches, parsonages or convents submit to the provincial, city or municipal assessor, within six (6)
appurtenant thereto, mosques, non-profit or religious cemeteries months from the date of effectivity of this Code and every year
and all lands, buildings, and improvements actually, directly, and thereafter, an abstract of his registry, which shall include brief
exclusively used for religious, charitable or educational purposes; but sufficient description of the real properties entered therein,
their present owners, and the dates of their most recent transfer
or alienation accompanied by copies of corresponding deeds of
sale, donation, or partition or other forms of alienation.

Taxation Law II
(b) It shall also be the duty of the Registrar of Deeds to require Section 212. Preparation of Schedule of Fair Market Values. -
every person who shall present for registration a document of Before any general revision of property assessment is made
transfer, alienation, or encumbrance of real property to pursuant to the provisions of this Title, there shall be prepared a
accompany the same with a certificate to the effect that the real schedule of fair market values by the provincial, city and
property subject of the transfer, alienation, or encumbrance, as municipal assessor of the municipalities within the Metropolitan
the case may be, has been fully paid of all real property taxes due Manila Area for the different classes of real property situated in
thereon. Failure to provide such certificate shall be a valid cause their respective local government units for enactment by
for the Registrar of Deeds to refuse the registration of the ordinance of the sanggunian concerned. The schedule of fair
document. market values shall be published in a newspaper of general
circulation in the province, city or municipality concerned or in
the absence thereof, shall be posted in the provincial capitol, city
This is for the purpose of updating both the records of the ROD and
or municipal hall and in two other conspicuous public places
the local assessor. In reality, the records of the ROD are more
therein.
updated than the records of the local assessor.
Paragraph b talks about the Real Property Tax clearance. The ROD This is the role also of the assessor, to prepare a schedule of fair
will not issue a new title to the new owner without this clearance, market values. If the owner fails to make a declaration, it will be the
which would show that you have paid all taxes on the property. assessor who will make a declaration in behalf of the owner, and
make the determination of the fair market value. There are times
where the fair market value of the assessor and that of the owner
Section 210. Duty of Official Issuing Building Permit or Certificate vary. The owner will always declare a lower amount.
of Registration of Machinery to Transmit Copy to Assessor. - Any
public official or employee who may now or hereafter be
The schedule so made by the assessor must be approved by the
required by law or regulation to issue to any person a permit for
Sanggunian through the enactment of an ordinance, after holding
the construction, addition, repair, or renovation of a building, or
public hearings on such subject.
permanent improvement on land, or a certificate of registration
for any machinery, including machines, mechanical contrivances,
and apparatus attached or affixed on land or to another real Section 213. Authority of Assessor to Take Evidence. - For the
property, shall transmit a copy of such permit or certificate purpose of obtaining information on which to base the market
within thirty (30) days of its issuance, to the assessor of the value of any real property, the assessor of the province, city or
province, city or municipality where the property is situated. municipality or his deputy may summon the owners of the
properties to be affected or persons having legal interest therein
and witnesses, administer oaths, and take deposition concerning
The building officer must send copies of the buildings permits it
the property, its ownership, amount, nature, and value.
issued to the assessor in order for the latter to determine whether the
construction was completed or not.
This is on account of disputes on the valuation of real properties.
Section 211. Duty of Geodetic Engineers to Furnish Copy of Plans
to Assessor. - It shall be the duty of all geodetic engineers, public Section 214. Amendment of Schedule of Fair Market Values. - The
or private, to furnish free of charge to the assessor of the provincial, city or municipal assessor may recommend to the
province, city or municipality where the land is located with a sanggunian concerned amendments to correct errors in valuation
white or blue print copy of each of all approved original or in the schedule of fair market values. The sanggunian concerned
subdivision plans or maps of surveys executed by them within shall, by ordinance, act upon the recommendation within ninety
thirty (30) days from receipt of such plans from the Lands (90) days from receipt thereof.
Management Bureau, the Land Registration Authority, or the
Housing and Land Use Regulatory Board, as the case may be. Section 215. Classes of Real Property for Assessment Purposes. -
For purposes of assessment, real property shall be classified as
So the geodetic engineers shall always furnish the assessor with residential, agricultural, commercial, industrial, mineral,
blueprints of all surveys they did. timberland or special.
The city or municipality within the Metropolitan Manila Area,

through their respective sanggunian, shall have the power to
classify lands as residential, agricultural, commercial, industrial,
mineral, timberland, or special in accordance with their zoning
ordinances.
The definition of the classes of lands enumerated in the provision is

found in Section 199.
(d) "Agricultural Land" is land devoted principally to

the planting of trees, raising of crops, livestock and
poultry, dairying, salt making, inland fishing and

Taxation Law II
similar aquacultural activities, and other agricultural Timberland 20%

activities, and is not classified as mineral, timber,
residential, commercial or industrial land;
(b) On Buildings and Other Structures:
(i) "Commercial Land" is land devoted principally for
the object of profit and is not classified as agricultural,
industrial, mineral, timber, or residential land; <td
</td
(n) "Industrial Land" is land devoted principally to (1) Residential
industrial activity as capital investment and is not Fair market Value
classified as agricultural, commercial, timber, mineral
or residential land; Over Not Over Assessment Levels
P175,000.00 0%
(p) "Mineral Lands" are lands in which minerals,
metallic or non-metallic, exist in sufficient quantity or P175,000.00 300,000.00 10%
grade to justify the necessary expenditures to extract
300,000.00 500,000.00 20%
and utilize such materials;
500,000.00 750,000.00 25%
(u) "Residential Land" is land principally devoted to
habitation. 750,000.00 1,000,000.00 30%
1,000,000.00 2,000,000.00 35%
Special land is defined in the next Section.
2,000,000.00 5,000,000.00 40%
Section 216. Special Classes of Real Property. - All lands, 5,000,000.00 10,000,000.00 50%
buildings, and other improvements thereon actually, directly and
10,000,000.00 60%
exclusively used for hospitals, cultural, or scientific purposes, and
those owned and used by local water districts, and government- (2) Agricultural
owned or controlled corporations rendering essential public Fair Market Value
services in the supply and distribution of water and/or generation
and transmission of electric power shall be classified as special. Over Not Over Assessment Levels
P300,000.00 25%
In classifying lands among these spcial classes, an ordinance must be
enacted. This ordinance is called as the Zoning Ordinance. P300,000.00 500,000.00 30%
500,000.00 750,000.00 35%
Section 217. Actual Use of Real Property as Basis for Assessment. -
Real property shall be classified, valued and assessed on the basis 750,000.00 1,000,000.00 40%
of its actual use regardless of where located, whoever owns it, and
1,000,000.00 2,000,000.00 45%
whoever uses it.
2,000,000.00 50%
Section 218. Assessment Levels. - The assessment levels to be
applied to the fair market value of real property to determine its (3) Commercial / Industrial
assessed value shall be fixed by ordinances of the sangguniang Fair Market Value
panlalawigan, sangguniang panlungsod or sangguniang bayan of Over Not Over Assessment Levels
a municipality within the Metropolitan Manila Area, at the rates
not exceeding the following: P300,000.00 30%
P300,000.00 500,000.00 35%
(a) On Lands:
500,000.00 750,000.00 40%
CLASS ASSESSMENT LEVELS 750,000.00 1,000,000.00 50%
Residential 20% 1,000,000.00 2,000,000.00 60%
Agricultural 40% 2,000,000.00 5,000,000.00 70%
Commercial 50% 5,000,000.00 10,000,000.00 75%
Industrial 50% 10,000,000.00 80%
Mineral 50% (4) Timberland

Taxation Law II
Fair Market Value

Example:
Over Not Over Assessment Levels
Year 1
P300,000.00 45% Assessment level = 20%
FMV=1,000,000
P300,000.00 500,000.00 50%
Rate=2%
500,000.00 750,000.00 55%
Assessed value = 1,000,000 x 30%
750,000.00 1,000,000.00 60% Assessed value = 200,000
5,000,000.00 2,000,000.00 65% RPT = 200,000 x 2%
RPT = 4,000
2,000,000.00 70%
Year 5
(c) On Machineries FMV=1,500,000
Assessed value = 1,500,000 x 30%

Class Assessment Levels Assessed value = 450,000
Agricultural 40% RPT = 450,000 x 2%
Residential 50% RPT = 9,000
Commercial 80%
Section 219. General Revision of Assessment and Property
Industrial 80% Classification. - The provincial, city or municipal assessor shall
undertake a general revision of real property assessments within
two (2) years after the effectivity of this Code and every three (3)
(d) On Special Classes: The assessment levels for all years thereafter.
lands buildings, machineries and other improvements;
Section 220. Valuation of Real Property. - In cases where (a) real
Actual Use Assessment Level property is declared and listed for taxation purposes for the first
time; (b) there is an ongoing general revision of property
Cultural 15% classification and assessment; or (c) a request is made by the
person in whose name the property is declared, the provincial,
Scientific 15% city or municipal assessor or his duly authorized deputy shall, in
accordance with the provisions of this Chapter, make a
Hospital 15%
classification, appraisal and assessment or taxpayer's valuation
Local water districts 10% thereon: Provided, however, That the assessment of real property
shall not be increased oftener than once every three (3) years
Government-owned or controlled 10% except in case of new improvements substantially increasing the
corporations engaged in the supply value of said property or of any change in its actual use.
and distribution of water and/or
generation and transmission of Section 221. Date of Effectivity of Assessment or Reassessment. -
electric power All assessments or reassessments made after the first (1st) day of
January of any year shall take effect on the first (1st) day of
You must also have these assessment levels adopted through an January of the succeeding year: Provided, however, That the
ordinance. The application of this provision is not therefore reassessment of real property due to its partial or total
automatic. destruction, or to a major change in its actual use, or to any great
and sudden inflation or deflation of real property values, or to
the gross illegality of the assessment when made or to any other
*Dean proceeded to read the values* abnormal cause, shall be made within ninety (90) days from the
date any such cause or causes occurred, and shall take effect at
Remember the formula for assessed value and RPT the beginning of the quarter next following the reassessment.
Assessed Value = Fair Market Value x Assessment Level New assessments/valuations/appraisals takes effect on the beginning
of the next year.
RPT = Assessed Value x rate
If the ordinance on RPT adjusting the rates, the effectivity will
The rate is fixed by law, which shall also be embodied in an always be on January 1 of the following year, even if it was approved
ordinance. What is constant here are the rate and the assessment in the middle of the year.
level. The variable is the Assessed value and the fair market value.

Taxation Law II
In local taxation, the ordinance will take effect on the first day of the Section 226. Local Board of Assessment Appeals. - Any owner or
quarter following the effectivity of such ordinance. person having legal interest in the property who is not satisfied
with the action of the provincial, city or municipal assessor in the
Section 222. Assessment of Property Subject to Back Taxes. - Real assessment of his property may, within sixty (60) days from the
property declared for the first time shall be assessed for taxes for date of receipt of the written notice of assessment, appeal to the
the period during which it would have been liable but in no case Board of Assessment Appeals of the provincial or city by filing a
of more than ten (10) years prior to the date of initial assessment: petition under oath in the form prescribed for the purpose,
Provided, however, That such taxes shall be computed on the together with copies of the tax declarations and such affidavits or
basis of the applicable schedule of values in force during the documents submitted in support of the appeal.
corresponding period.
This is what will happen if there will be no agreement.
If such taxes are paid on or before the end of the quarter
following the date the notice of assessment was received by the The assessor will issue an assessment notice. This is different from
owner or his representative, no interest for delinquency shall be the assessment in the NIRC. In NIRC, the assessment pertains to
imposed thereon; otherwise, such taxes shall be subject to an deficient taxes. Here, the assessment contains the decision of the
interest at the rate of two percent (2%) per month or a fraction assessor regarding the valuation of the property. From that notice of
thereof from the date of the receipt of the assessment until such assessment, the taxpayer is given 60 days to appeal file before the
taxes are fully paid. Local board of Assessment Appeals.
Section 223. Notification of New or Revised Assessment. - When Section 227. Organization, Powers, Duties, and Functions of the
real property is assessed for the first time or when an existing Local Board of Assessment Appeals. –
assessment is increased or decreased, the provincial, city or
municipal assessor shall within thirty (30) days give written
notice of such new or revised assessment to the person in whose (a) The Board of Assessment Appeals of the province or city shall
name the property is declared. The notice may be delivered be composed of the Registrar of Deeds, as Chairman, the
personally or by registered mail or through the assistance of the provincial or city prosecutor and the provincial, or city engineer
punong barangay to the last known address of the person to be as members, who shall serve as such in an ex officio capacity
served. without additional compensation.
Section 224. Appraisal and Assessment of Machinery. – (b) The chairman of the Board shall have the power to designate
any employee of the province or city to serve as secretary to the
Board also without additional compensation.
(a) The fair market value of a brand-new machinery shall be the
acquisition cost. In all other cases, the fair market value shall be
determined by dividing the remaining economic life of the (c) The chairman and members of the Board of Assessment
machinery by its estimated economic life and multiplied by the Appeals of the province or city shall assume their respective
replacement or reproduction cost. positions without need of further appointment or special
designations immediately upon effectivity of this Code. They shall
take oath or affirmation of office in the prescribed form.
(b) If the machinery is imported, the acquisition cost includes
freight, insurance, bank and other charges, brokerage, arrastre
and handling, duties and taxes, plus charges at the present site. (d) In provinces and cities without a provincial or city engineer,
The cost in foreign currency of imported machinery shall be the district engineer shall serve as member of the Board. In the
converted to peso cost on the basis of foreign currency exchange absence of the Registrar of Deeds, or the provincial or city
rates as fixed by the Central Bank. prosecutor, or the provincial or city engineer, or the district
engineer, the persons performing their duties, whether in an
acting capacity or as a duly designated officer-in-charge, shall
Section 225. Depreciation Allowance for Machinery. - For automatically become the chairman or member, respectively, of
purposes of assessment, a depreciation allowance shall be made the said Board, as the case may be.
for machinery at a rate not exceeding five percent (5%) of its
original cost or its replacement or reproduction cost, as the case
may be, for each year of use: Provided, however, That the This composes the Local Board of Assessment Appeals.
remaining value for all kinds of machinery shall be fixed at not
less than twenty percent (20%) of such original, replacement, or Section 228. Meetings and Expenses of the Local Board of
reproduction cost for so long as the machinery is useful and in Assessment Appeals. –
operation.
(a) The Board of Assessment Appeals of the province or city shall
ASSESSMENT APPEALS meet once a month and as often as may be necessary for the
prompt disposition of appealed cases. No member of the Board
The usual controversy before the assessor’s office involves the shall be entitled to per diems or traveling expenses for his
valuation of the fair market value of the property. The owner and the attendance in Board meetings, except when conducting an ocular
assessor will oftentimes disagree on the value. inspection in connection with a case under appeal.

Taxation Law II
(b) All expenses of the Board shall be charged against the general and other emoluments. The Board shall have appellate
fund of the province or city, as the case may be. The sanggunian jurisdiction over all assessment cases decided by the Local Board
concerned shall appropriate the necessary funds to enable the of Assessment Appeals.
Board in their respective localities to operate effectively.
There shall be Hearing Officers to be appointed by the Central
Section 229. Action by the Local Board of Assessment Appeals. – Board of Assessment Appeals pursuant to civil service laws, rules
and regulations, one each for Luzon, Visayas and Mindanao, who
(a) The Board shall decide the appeal within one hundred twenty shall hold office in Manila, Cebu City and Cagayan de Oro City,
(120) days from the date of receipt of such appeal. The Board, respectively, and who shall serve for a term of six (6) years,
after hearing, shall render its decision based on substantial without reappointment until their successors have been
evidence or such relevant evidence on record as a reasonable appointed and qualified. The Hearing Officers shall have the
mind might accept as adequate to support the conclusion. same qualifications as that of the Judges of the Municipal Trial
Courts.
(b) In the exercise of its appellate jurisdiction, the Board shall
have the power to summon witnesses, administer oaths, conduct The Central Board Assessment Appeals, in the performance of its
ocular inspection, take depositions, and issue subpoena and powers and duties, may establish and organize staffs, offices,
subpoena duces tecum. The proceedings of the Board shall be units, prescribe the titles, functions and duties of their members
conducted solely for the purpose of ascertaining the facts without and adopt its own rules and regulations.
necessarily adhering to technical rules applicable in judicial
proceedings. Unless otherwise provided by law, the annual appropriations for
the Central Board of Assessment Appeals shall be included in the
(c) The secretary of the Board shall furnish the owner of the budget of the Department of Finance in the corresponding
property or the person having legal interest therein and the General Appropriations Act.
provincial or city assessor with a copy of the decision of the
Board. In case the provincial or city assessor concurs in the Under RA 9504, the decision of the Central Board is brought to the
revision or the assessment, it shall be his duty to notify the owner Court of Tax Appeals. This is where the action is converted to a
of the property or the person having legal interest therein of such judicial action. From the CTA, you go to the Supreme Court.
fact using the form prescribed for the purpose. The owner of the
property or the person having legal interest therein or the
assessor who is not satisfied with the decision of the Board, may, Section 231. Effect of Appeal on the Payment of Real Property
within thirty (30) days after receipt of the decision of said Board, Tax. - Appeal on assessments of real property made under the
appeal to the Central Board of Assessment Appeals, as herein provisions of this Code shall, in no case, suspend the collection of
provided. The decision of the Central Board shall be final and the corresponding realty taxes on the property involved as
executory. assessed by the provincial or city assessor, without prejudice to
subsequent adjustment depending upon the final outcome of the
appeal.
The decision of the board will either grant or deny the appeal made
by the taxpayers.
Pending appeal before the local board or the central board, the
collection of the real property tax is not suspended. But if at the end
In case of a denial, the property owner, or the assessor will go to the of all the proceedings the court will decide in favor of the taxpayer,
Central Board of Assessment Appeals. any excess in the payments made by him during the pendency of the
action will be considered as tax credits, to be applied to future tax
Section 230. Central Board of Assessment Appeals. - The Central liabilities.
Board of Assessment Appeals shall be composed of a chairman,
and two (2) members to be appointed by the President, who shall LEVY AND COLLECTION
serve for a term of seven (7) years, without reappointment. Of
those first appointed, the chairman shall hold office for seven (7)
years, one member for five (5) years, and the other member for Section 232. Power to Levy Real Property Tax. - A province or city
three (3) years. Appointment to any vacancy shall be only for the or a municipality within the Metropolitan Manila Area my levy
unexpired portion of the term of the predecessor. In no case shall an annual ad valorem tax on real property such as land, building,
any member be appointed or designated in a temporary or acting machinery, and other improvement not hereinafter specifically
capacity. The chairman and the members of the Board shall be exempted.
Filipino citizens, at least forty (40) years old at the time of their
appointment, and members of the Bar or Certified Public Section 233. Rates of Levy. - A province or city or a municipality
Accountants for at least ten (10) years immediately preceding within the Metropolitan Manila Area shall fix a uniform rate of
their appointment. The chairman of the Board of Assessment basic real property tax applicable to their respective localities as
Appeals shall have the salary grade equivalent to the rank of follows:
Director III under the Salary Standardization Law exclusive of
allowances and other emoluments. The members of the Board (a) In the case of a province, at the rate not exceeding one percent
shall have the salary grade equivalent to the rank of Director II (1%) of the assessed value of real property; and
under the Salary Standardization Law exclusive of allowances

Taxation Law II
(b) In the case of a city or a municipality within the Metropolitan Manila Area, may levy an annual tax on idle lands at the rate not
Manila Area, at the rate not exceeding two percent (2%) of the exceeding five percent (5%) of the assessed value of the property
assessed value of real property. which shall be in addition to the basic real property tax.
There is no flexibility provision here. Once you have reached the Section 237. Idle Lands, Coverage. - For purposes of real property
maximum value, you cannot go any further. taxation, idle lands shall include the following:
Section 234. Exemptions from Real Property Tax. - The following (a) Agricultural lands, more than one (1) hectare in area, suitable
are exempted from payment of the real property tax: for cultivation, dairying, inland fishery, and other agricultural
uses, one-half (1/2) of which remain uncultivated or unimproved
by the owner of the property or person having legal interest
(a) Real property owned by the Republic of the Philippines or therein. Agricultural lands planted to permanent or perennial
any of its political subdivisions except when the beneficial use crops with at least fifty (50) trees to a hectare shall not be
thereof has been granted, for consideration or otherwise, to a considered idle lands. Lands actually used for grazing purposes
taxable person; shall likewise not be considered idle lands.
(b) Charitable institutions, churches, parsonages or convents (b) Lands, other than agricultural, located in a city or
appurtenant thereto, mosques, non-profit or religious cemeteries municipality, more than one thousand (1,000) square meters in
and all lands, buildings, and improvements actually, directly, and area one-half (1/2) of which remain unutilized or unimproved by
exclusively used for religious, charitable or educational purposes; the owner of the property or person having legal interest therein.
(c) All machineries and equipment that are actually, directly and Regardless of land area, this Section shall likewise apply to
exclusively used by local water districts and government owned residential lots in subdivisions duly approved by proper
or controlled corporations engaged in the supply and distribution authorities, the ownership of which has been transferred to
of water and/or generation and transmission of electric power; individual owners, who shall be liable for the additional tax:
Provided, however, That individual lots of such subdivisions, the
(d) All real property owned by duly registered cooperatives as ownership of which has not been transferred to the buyer shall be
provided for under R.A. No. 6938; and considered as part of the subdivision, and shall be subject to the
additional tax payable by subdivision owner or operator.
(e) Machinery and equipment used for pollution control and
environmental protection. Section 238. Idle Lands Exempt from Tax. - A province or city or
a municipality within the Metropolitan Manila Area may exempt
Except as provided herein, any exemption from payment of real idle lands from the additional levy by reason of force majeure,
property tax previously granted to, or presently enjoyed by, all civil disturbance, natural calamity or any cause or circumstance
persons, whether natural or juridical, including all government- which physically or legally prevents the owner of the property or
owned or controlled corporations are hereby withdrawn upon the person having legal interest therein from improving, utilizing or
effectivity of this Code. cultivating the same.
In RPT, what is collected is the basic RPT and the special levies. So even if your land is idle, you can be exempted from tax for valid
Special levies are provided in Section 235, 236 and 240. reasons enumerated in the provision above.
What is regularly collected is the basic RPT and the 1% SEF. The Section 239. Listing of Idle Lands by the Assessor. - The
special levy on idle lands is applied only if the land is found to be provincial, city or municipal assessor shall make and keep an
idle. updated record of all idle lands located within his area of
jurisdiction. For purposes of collection, the provincial, city or
municipal assessor shall furnish a copy thereof to the provincial
Section 235. Additional Levy on Real Property for the Special or city treasurer who shall notify, on the basis of such record, the
Education Fund. - A province or city, or a municipality within the owner of the property or person having legal interest therein of
Metropolitan Manila Area, may levy and collect an annual tax of the imposition of the additional tax.
one percent (1%) on the assessed value of real property which
shall be in addition to the basic real property tax. The proceeds
thereof shall exclusively accrue to the Special Education Fund Section 240. Special Levy by Local Government Units. - A
(SEF). province, city or municipality may impose a special levy on the
lands comprised within its territorial jurisdiction specially
benefited by public works projects or improvements funded by
This is for the benefit of the Local School Board, for the upkeep of the local government unit concerned: Provided, however, That
the public schools. the special levy shall not exceed sixty percent (60%) of the actual
cost of such projects and improvements, including the costs of
Section 236. Additional Ad Valorem Tax on Idle Lands. - A acquiring land and such other real property in connection
province or city, or a municipality within the Metropolitan therewith: Provided, further, That the special levy shall not apply
to lands exempt from basic real property tax and the remainder

Taxation Law II
of the land portions of which have been donated to the local Section 245. Accrual of Special Levy. - The special levy shall
government unit concerned for the construction of such projects accrue on the first day of the quarter next following the
or improvements. effectivity of the ordinance imposing such levy.
Special levies operate as a form of reimbursement to the LGU for So you just follow the procedure in Chapter 3 of Title two for your
introducing development. Because they invested, they have the right remedies as a taxpayer against special levies.
to recover through this special assessment. So this special levy is not
a tax. In the case of local taxes, any amendment or revisions on local tax
ordinances, the accrual of the tax under the new ordinance takes
If the development was made in front of your property, you will be effect on the first day of the quarter following the effectivity of the
assessed more than those whose property are father away from the ordinance. In RPT, if an ordinance is enacted, the accrual of the tax
development. will begin on the first day of January of the following year. But in the
case of a special levy, it shall accrue on the first day of the quarter
following the date of the enactment of the ordinance.
Section 241. Ordinance Imposing a Special Levy. - A tax ordinance
imposing a special levy shall describe with reasonable accuracy
the nature, extent, and location of the public works projects or Section 246. Date of Accrual of Tax. - The real property tax for
improvements to be undertaken, state the estimated cost thereof, any year shall accrue on the first day of January and from that
specify the metes and bounds by monuments and lines and the date it shall constitute a lien on the property which shall be
number of annual installments for the payment of the special levy superior to any other lien, mortgage, or encumbrance of any kind
which in no case shall be less than five (5) nor more than ten (10) whatsoever, and shall be extinguished only upon the payment of
years. The sanggunian concerned shall not be obliged, in the the delinquent tax.
apportionment and computation of the special levy, to establish a
uniform percentage of all lands subject to the payment of the tax Section 247. Collection of Tax. - The collection of the real
for the entire district, but it may fix different rates for different property tax with interest thereon and related expenses, and the
parts or sections thereof, depending on whether such land is enforcement of the remedies provided for in this Title or any
more or less benefited by proposed work. applicable laws, shall be the responsibility of the city or
municipal treasurer concerned.
So again, you have to enact an ordinance for this special levy.
The city or municipal treasurer may deputize the barangay
treasurer to collect all taxes on real property located in the
Section 242. Publication of Proposed Ordinance Imposing a barangay: Provided, That the barangay treasurer is properly
Special Levy. - Before the enactment of an ordinance imposing a bonded for the purpose: Provided, further, That the premium on
special levy, the sanggunian concerned shall conduct a public the bond shall be paid by the city or municipal government
hearing thereon; notify in writing the owners of the real property concerned.
to be affected or the persons having legal interest therein as to the
date and place thereof and afford the latter the opportunity to
express their positions or objections relative to the proposed RPT will be collected by the local treasurer. As a rule, the RPT
ordinance. collected by the LGU is the basic RPT and the SEF. These are the
two RPT that will be collected. The other special levies, involving
idle lands, is a special imposition to lands which has been declared as
Section 243. Fixing the Amount of Special Levy. - The special levy
idle; and the other is for reimbursement for development introduced
authorized herein shall be apportioned, computed, and assessed
by LGUs.
according to the assessed valuation of the lands affected as shown
by the books of the assessor concerned, or its current assessed
value as fixed by said assessor if the property does not appear of Payment of these taxes could be done annually or quarterly
record in his books. Upon the effectivity of the ordinance installments, pursuant to Section 250.
imposing special levy, the assessor concerned shall forthwith
proceed to determine the annual amount of special levy assessed The LGC only provides the limits of the power. The LGUs have to
against each parcel of land comprised within the area especially enact an ordinance so that the provisions allowed to them under the
benefited and shall send to each landowner a written notice LGC may be imposed.
thereof by mail, personal service or publication in appropriate
cases.
So the payment of installments and the granting of discounts shall be
embodied in an ordinance.
Section 244. Taxpayer's Remedies Against Special Levy. - Any
owner of real property affected by a special levy or any person
having a legal interest therein may, upon receipt of the written Section 248. Assessor to Furnish Local Treasurer with Assessment
notice of assessment of the special levy, avail of the remedies Roll. - The provincial, city or municipal assessor shall prepare
provided for in Chapter 3, Title Two, Book II of this Code. and submit to the treasurer of the local government unit, on or
before the thirty-first (31st) day of December each year, an
assessment roll containing a list of all persons whose real
properties have been newly assessed or reassessed and the values
of such properties.

Taxation Law II
Section 249. Notice of Time for Collection of Tax. - The city or may avail of the remedies as provided for in Chapter 3, Title II,
municipal treasurer shall, on or before the thirty-first (31st) day Book II of this Code.
of January each year, in the case of the basic real property tax
and the additional tax for the Special Education Fund (SEF) or
When the property owner is engaged in a controversy with the local
any other date to be prescribed by the sanggunian concerned in
treasurer involving RPT assessment in connection with the amount,
the case of any other tax levied under this title, post the notice of
Section 252 has to be complied with. You are first made to pay the
the dates when the tax may be paid without interest at a
tax and pay it under protest. No protest will be entertained unless the
conspicuous and publicly accessible place at the city or municipal
taxpayer pays the tax.
hall. Said notice shall likewise be published in a newspaper of
general circulation in the locality once a week for two (2)
consecutive weeks. In the RPT involving appeals, you have encountered protests against
the assessment of the local assessor. Your remedy is to file a petition
with the local board of assessment appeals. From there, you appeal to
Section 250. Payment of Real Property Taxes in Installments. - The
the central board of assessment appeals. And then you bring it to the
owner of the real property or the person having legal interest
CTA and to the Supreme Court.
therein may pay the basic real property tax and the additional
tax for Special Education Fund (SEF) due thereon without
interest in four (4) equal installments; the first installment to be This procedure is the same as those involving special levies.
due and payable on or before March Thirty-first (31st); the
second installment, on or before June Thirty (30); the third In matters involving the payment of the RPT, the venue is the Office
installment, on or before September Thirty (30); and the last is the Local Treasurer. What is required is you have to pay under
installment on or before December Thirty-first (31st), except the protest and indicate in the receipts that you are paying under protest.
special levy the payment of which shall be governed by ordinance And then you file the protest with the local treasurer. The local
of the sanggunian concerned. treasurer may either grant or deny your appeal. In the event the
protest is decided in favor of the taxpayer, the tax paid must be
The date for the payment of any other tax imposed under this refunded or applied as tax credit. In the event the protest is denied or
Title without interest shall be prescribed by the sanggunian lapse of the 60 day period prescribed, you now proceed to the local
concerned. board of assessment appeals. You would notice that all matters
involving RPT will all pass through the local board, whether the
controversy originated in the assessor or the treasurer.
Payments of real property taxes shall first be applied to prior
years delinquencies, interests, and penalties, if any, and only after
said delinquencies are settled may tax payments be credited for Section 253. Repayment of Excessive Collections. - When an
the current period. assessment of basic real property tax, or any other tax levied
under this Title, is found to be illegal or erroneous and the tax is
Section 251. Tax Discount for Advanced Prompt Payment. - If the accordingly reduced or adjusted, the taxpayer may file a written
basic real property tax and the additional tax accruing to the claim for refund or credit for taxes and interests with the
Special Education Fund (SEF) are paid in advance in accordance provincial or city treasurer within two (2) years from the date the
with the prescribed schedule of payment as provided under taxpayer is entitled to such reduction or adjustment.
Section 250, the sanggunian concerned may grant a discount not
exceeding twenty percent (20%) of the annual tax due. The provincial or city treasurer shall decide the claim for tax
refund or credit within sixty (60) days from receipt thereof. In
Section 252. Payment Under Protest. – case the claim for tax refund or credit is denied, the taxpayer
may avail of the remedies as provided in Chapter 3, Title II, Book
II of this Code.
(a) No protest shall be entertained unless the taxpayer first pays
the tax. There shall be annotated on the tax receipts the words
"paid under protest". The protest in writing must be filed within This involves erroneously collected RPT. In the case of a refund, file
thirty (30) days from payment of the tax to the provincial, city the claim with the local treasurer. The treasurer may either grant the
treasurer or municipal treasurer, in the case of a municipality refund or deny it. In case of a denial, you appeal to the local board of
within Metropolitan Manila Area, who shall decide the protest assessment appeals. The taxpayers may claim a refund within two
within sixty (60) days from receipt. years from the date the taxpayer becomes entitled to such adjustment.
(b) The tax or a portion thereof paid under protest, shall be held It is also required that the local treasurer decide within that period.
in trust by the treasurer concerned. After which, the taxpayer will bring the action to the local board of
assessment appeals.
(c) In the event that the protest is finally decided in favor of the
taxpayer, the amount or portion of the tax protested shall be There are therefore four types of cases that you bring to the local
refunded to the protestant, or applied as tax credit against his board.
existing or future tax liability.
Section 254. Notice of Delinquency in the Payment of the Real
(d) In the event that the protest is denied or upon the lapse of the Property Tax. –
sixty day period prescribed in subparagraph (a), the taxpayer

Taxation Law II
(a) When the real property tax or any other tax imposed under Section 257. Local Governments Lien. - The basic real property
this Title becomes delinquent, the provincial, city or municipal tax and any other tax levied under this Title constitutes a lien on
treasurer shall immediately cause a notice of the delinquency to the property subject to tax, superior to all liens, charges or
be posted at the main hall and in a publicly accessible and encumbrances in favor of any person, irrespective of the owner
conspicuous place in each barangay of the local government unit or possessor thereof, enforceable by administrative or judicial
concerned. The notice of delinquency shall also be published once action, and may only be extinguished upon payment of the tax
a week for two (2) consecutive weeks, in a newspaper of general and the related interests and expenses.
circulation in the province, city, or municipality.
Section 258. Levy on Real Property. - After the expiration of the
(b) Such notice shall specify the date upon which the tax became time required to pay the basic real property tax or any other tax
delinquent and shall state that personal property may be levied under this Title, real property subject to such tax may be
distrained to effect payment. It shall likewise state that any time levied upon through the issuance of a warrant on or before, or
before the distraint of personal property, payment of the tax with simultaneously with, the institution of the civil action for the
surcharges, interests and penalties may be made in accordance collection of the delinquent tax. The provincial or city treasurer,
with the next following Section, and unless the tax, surcharges or a treasurer of a municipality within the Metropolitan Manila
and penalties are paid before the expiration of the year for which Area, as the case may be, when issuing a warrant of levy shall
the tax is due except when the notice of assessment or special levy prepare a duly authenticated certificate showing the name of the
is contested administratively or judicially pursuant to the delinquent owner of the property or person having legal interest
provisions of Chapter 3, Title II, Book II of this Code, the therein, the description of the property, the amount of the tax
delinquent real property will be sold at public auction, and the due and the interest thereon. The warrant shall operate with the
title to the property will be vested in the purchaser, subject, force of a legal execution throughout the province, city or a
however, to the right of the delinquent owner of the property or municipality, within the Metropolitan Manila Area. The warrant
any person having legal interest therein to redeem the property shall be mailed to or served upon the delinquent owner of the
within one (1) year from the date of sale. real property or person having legal interest therein, or in case he
is out of the country or cannot be located, the administrator or
occupant of the property. At the same time, written notice of the
This involves delinquency in paying RPT. In the event the taxpayer
levy with the attached warrant shall be mailed to or served upon
fails to pay the RPT, he will be notified. The LGU will publish in a
the assessor and the Registrar of Deeds of the province, city or
newspaper the list of delinquent taxpayers.
municipality within the Metropolitan Manila Area where the
property is located, who shall annotate the levy on the tax
It is in this aspect that the RPT will become a lien. That lien of the declaration and certificate of title of the property, respectively.
LGU is superior to any other liens on that property. Even if there is
an existing encumbrance, in the event of a delinquency in RPT, the
The levying officer shall submit a report on the levy to the
claim of the government will be superior.
sanggunian concerned within ten (10) days after receipt of the
warrant by the owner of the property or person having legal
It is also in this manner where if you are a new owner of a real interest therein.
property, you must have that real property declared so that you will
have a new tax declaration. If you fail to make a new declaration in
the records of the assessor, it will still be the former owner that will If the property is not enough, you can further levy other properties.
be written there. The notices will still be sent to the previous owner.
The new owner will not be aware therefore that his property has Section 259. Penalty for Failure to Issue and Execute Warrant. -
already been sold at public auction. And without such knowledge, the Without prejudice to criminal prosecution under the Revised
new owner will also not be able to redeem the property in case the Penal Code and other applicable laws, any local treasurer or his
property has already been sold. deputy who fails to issue or execute the warrant of levy within
one (1) year from the time the tax becomes delinquent or within
Section 255. Interests on Unpaid Real Property Tax. - In case of thirty (30) days from the date of the issuance thereof, or who is
failure to pay the basic real property tax or any other tax levied found guilty of abusing the exercise thereof in an administrative
under this Title upon the expiration of the periods as provided in or judicial proceeding shall be dismissed from the service.
Section 250, or when due, as the case may be, shall subject the
taxpayer to the payment of interest at the rate of two percent Section 260. Advertisement and Sale. - Within thirty (30) days
(2%) per month on the unpaid amount or a fraction thereof, until after service of the warrant of levy, the local treasurer shall
the delinquent tax shall have been fully paid: Provided, however, proceed to publicly advertise for sale or auction the property or a
That in no case shall the total interest on the unpaid tax or usable portion thereof as may be necessary to satisfy the tax
portion thereof exceed thirty-six (36) months. delinquency and expenses of sale. The advertisement shall be
effected by posting a notice at the main entrance of the
Section 256. Remedies For The Collection Of Real Property Tax. - provincial, city or municipal building, and in a publicly accessible
For the collection of the basic real property tax and any other tax and conspicuous place in the barangay where the real property is
levied under this Title, the local government unit concerned may located, and by publication once a week for two (2) weeks in a
avail of the remedies by administrative action thru levy on real newspaper of general circulation in the province, city or
property or by judicial action. municipality where the property is located. The advertisement
shall specify the amount of the delinquent tax, the interest due
thereon and expenses of sale, the date and place of sale, the name

Taxation Law II
of the owner of the real property or person having legal interest Section 263. Purchase of Property By the Local Government Units
therein, and a description of the property to be sold. At any time for Want of Bidder. - In case there is no bidder for the real
before the date fixed for the sale, the owner of the real property property advertised for sale as provided herein, the real property
or person having legal interest therein may stay the proceedings tax and the related interest and costs of sale the local treasurer
by paying the delinquent tax, the interest due thereon and the conducting the sale shall purchase the property in behalf of the
expenses of sale. The sale shall be held either at the main local government unit concerned to satisfy the claim and within
entrance of the provincial, city or municipal building, or on the two (2) days thereafter shall make a report of his proceedings
property to be sold, or at any other place as specified in the notice which shall be reflected upon the records of his office. It shall be
of the sale. the duty of the Registrar of Deeds concerned upon registration
with his office of any such declaration of forfeiture to transfer the
Within thirty (30) days after the sale, the local treasurer or his title of the forfeited property to the local government unit
deputy shall make a report of the sale to the sanggunian concerned without the necessity of an order from a competent
concerned, and which shall form part of his records. The local court.
treasurer shall likewise prepare and deliver to the purchaser a
certificate of sale which shall contain the name of the purchaser, Within one (1) year from the date of such forfeiture, the taxpayer
a description of the property sold, the amount of the delinquent or any of his representative, may redeem the property by paying
tax, the interest due thereon, the expenses of sale and a brief to the local treasurer the full amount of the real property tax and
description of the proceedings: Provided, however, That proceeds the related interest and the costs of sale. If the property is not
of the sale in excess of the delinquent tax, the interest due redeemed as provided herein, the ownership thereof shall be
thereon, and the expenses of sale shall be remitted to the owner of vested on the local government unit concerned.
the real property or person having legal interest therein.
Section 264. Resale of Real Estate Taken for Taxes, Fees, or
The local treasurer may, by ordinance duly approved, advance Charges. - The sanggunian concerned may, by ordinance duly
an amount sufficient to defray the costs of collection thru the approved, and upon notice of not less than twenty (20) days, sell
remedies provided for in this Title, including the expenses of and dispose of the real property acquired under the preceding
advertisement and sale. section at public auction. The proceeds of the sale shall accrue to
the general fund of the local government unit concerned.
Section 261. Redemption of Property Sold. - Within one (1) year
from the date of sale, the owner of the delinquent real property Section 265. Further Distraint or Levy. - Levy may be repeated if
or person having legal interest therein, or his representative, necessary until the full amount due, including all expenses, is
shall have the right to redeem the property upon payment to the collected.
local treasurer of the amount of the delinquent tax, including the
interest due thereon, and the expenses of sale from the date of Section 266. Collection of Real Property Tax Through the Courts. -
delinquency to the date of sale, plus interest of not more than two The local government unit concerned may enforce the collection
percent (2%) per month on the purchase price from the date of of the basic real property tax or any other tax levied under this
sale to the date of redemption. Such payment shall invalidate the Title by civil action in any court of competent jurisdiction. The
certificate of sale issued to the purchaser and the owner of the civil action shall be filed by the local treasurer within the period
delinquent real property or person having legal interest therein prescribed in Section 270 of this Code.
shall be entitled to a certificate of redemption which shall be
issued by the local treasurer or his deputy.
Section 267. Action Assailing Validity of Tax Sale. - No court shall
entertain any action assailing the validity or any sale at public
From the date of sale until the expiration of the period of auction of real property or rights therein under this Title until
redemption, the delinquent real property shall remain in the taxpayer shall have deposited with the court the amount for
possession of the owner or person having legal interest therein which the real property was sold, together with interest of two
who shall be entitled to the income and other fruits thereof. percent (2%) per month from the date of sale to the time of the
institution of the action. The amount so deposited shall be paid to
The local treasurer or his deputy, upon receipt from the the purchaser at the auction sale if the deed is declared invalid
purchaser of the certificate of sale, shall forthwith return to the but it shall be returned to the depositor if the action fails.
latter the entire amount paid by him plus interest of not more
than two percent (2%) per month. Thereafter, the property shall Neither shall any court declare a sale at public auction invalid by
be free from lien of such delinquent tax, interest due thereon and reason or irregularities or informalities in the proceedings unless
expenses of sale. the substantive rights of the delinquent owner of the real
property or the person having legal interest therein have been
Section 262. Final Deed to Purchaser. - In case the owner or impaired.
person having legal interest fails to redeem the delinquent
property as provided herein, the local treasurer shall execute a
This contemplates a property already sold at public auction. You can
deed conveying to the purchaser said property, free from lien of
question the validity of that sale, subject to some conditions. One of
the delinquent tax, interest due thereon and expenses of sale. The
these conditions is for you to make a deposit. Such amount will be
deed shall briefly state the proceedings upon which the validity of
given to the purchaser is the deed is declared invalid.
the sale rests.

Taxation Law II
Failure to make the deposit will result to the dismissal of the action. (a) In the case of provinces:
That is a mandatory provision. If the entity is exempted from the
RPT, and it is questioning the validity of the sale, the requisite of
(1) Province - Thirty-five percent (35%) shall accrue to the
making a deposit is not applicable.
general fund;
Section 268. Payment of Delinquent Taxes on Property Subject of (2) Municipality - Forty percent (40%) to the general fund of the
Controversy. - In any action involving the ownership or municipality where the property is located; and
possession of, or succession to, real property, the court may, motu
propio or upon representation of the provincial, city, or
municipal treasurer or his deputy, award such ownership, (3) Barangay - Twenty-five percent (25%) shall accrue to the
possession, or succession to any party to the action upon payment barangay where the property is located.
to the court of the taxes with interest due on the property and all
other costs that may have accrued, subject to the final outcome of (b) In the case of cities:
the action.
(1) City - Seventy percent (70%) shall accrue to the general fund
Section 269. Treasurer to Certify Delinquencies Remaining of the city; and
Uncollected. - The provincial, city or municipal treasurer or their
deputies shall prepare a certified list of all real property tax (2) Thirty percent (30%) shall be distributed among the
delinquencies which remained uncollected or unpaid for at least component barangays of the cities where the property is located
one (1) year in his jurisdiction, and a statement of the reason or in the following manner:
reasons for such non-collection or non-payment, and shall submit
the same to the sanggunian concerned on or before December
thirty-first (31st) of the year immediately succeeding the year in (i) Fifty percent (50%) shall accrue to the barangay where the
which the delinquencies were incurred, with a request for property is located;
assistance in the enforcement of the remedies for collection
provided herein. (ii) Fifty percent (50%) shall accrue equally to all component
barangays of the city; and
Section 270. Periods Within Which To Collect Real Property
Taxes. - The basic real property tax and any other tax levied (c) In the case of a municipality within the Metropolitan Manila
under this Title shall be collected within five (5) years from the Area:
date they become due. No action for the collection of the tax,
whether administrative or judicial, shall be instituted after the
(1) Metropolitan Manila Authority - Thirty-five percent (35%)
expiration of such period. In case of fraud or intent to evade
shall accrue to the general fund of the authority;
payment of the tax, such action may be instituted for the
collection of the same within ten (10) years from the discovery of
such fraud or intent to evade payment. (2) Municipality - Thirty-five percent (35% shall accrue to the
general fund of the municipality where the property is located;
The period of prescription within which to collect shall be
suspended for the time during which: (3) Barangays - Thirty percent (30%) shall be distributed among
the component barangays of the municipality where the property
is located in the following manner:
(1) The local treasurer is legally prevented from collecting the
tax;
(i) Fifty percent (50%) shall accrue to the barangay where the
property is located;
(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 (ii) Fifty percent (50%) shall accrue equally to all component
collect; and barangays of the municipality.
(3) The owner of the property or the person having legal interest (d) The share of each barangay shall be released, without need of
therein is out of the country or otherwise cannot be located. any further action, directly to the barangay treasurer on a
quarterly basis within five (5) days after the end of each quarter
and shall not be subject to any lien or holdback for whatever
Take note that in the NIRC the period to collect is also 5 years. In purpose.
local taxation you also have 5 years. Here, the period is also 5 years.
Section 272. Application of Proceeds of the Additional One Percent
Section 271. Distribution of Proceeds. - The proceeds of the basic SEF Tax. - The proceeds from the additional one percent (1%)
real property tax, including interest thereon, and proceeds from tax on real property accruing to the Special Education Fund
the use, lease or disposition, sale or redemption of property (SEF) shall be automatically released to the local school boards:
acquired at a public auction in accordance with the provisions of Provided, That, in case of provinces, the proceeds shall be
this Title by the province or city or a municipality within the divided equally between the provincial and municipal school
Metropolitan Manila Area shall be distributed as follows:

Taxation Law II
boards: Provided, however, That the proceeds shall be allocated provincial, city or municipal assessor with copies of all contracts
for the operation and maintenance of public schools, construction selling, transferring, or otherwise conveying, leasing, or
and repair of school buildings, facilities and equipment, mortgaging real property received by, or acknowledged before
educational research, purchase of books and periodicals, and them.
sports development as determined and approved by the Local
School Board. Section 279. Insurance Companies to Furnish Information. -
Insurance companies are hereby required to furnish the
Prior to the LGC, SEF is used to address salary adjustments of public provincial, city or municipal assessor copies of any contract or
school teachers. policy insurance on buildings, structures, and improvements
insured by them or such other documents which may be
necessary for the proper assessment thereof.
Section 273. Proceeds of the Tax on Idle Lands. - The proceeds of
the additional real property tax on idle lands shall accrue to the
respective general fund of the province or city where the land is Section 280. Fees in Court Actions. - All court actions, criminal or
located. In the case of a municipality within the Metropolitan civil, instituted at the instance of the provincial, city or municipal
Manila Area, the proceeds shall accrue equally to the treasurer or assessor under the provisions of this Code, shall be
Metropolitan Manila Authority and the municipality where the exempt from the payment of court and sheriff's fees.
land is located.
Section 281. Fees in Registration of Papers or Documents on Sale
Section 274. Proceeds of the Special Levy. - The proceeds of the of Delinquent Real Property to Province, City or Municipality. - All
special levy on lands benefited by public works, projects and certificates, documents, and papers covering the sale of
other improvements shall accrue to the general fund of the local delinquent property to the province, city or municipality, if
government unit which financed such public works, projects or registered in the Registry of Property, shall be exempt from the
other improvements. documentary stamp tax and registration fees.
Section 275. General Assessment Revision; Expenses Incident Section 282. Real Property Assessment Notices or Owner's Copies
Thereto. - The sanggunian of provinces, cities and municipalities of Tax Declarations to be Exempt from Postal Charges or Fees. -
within the Metropolitan Manila Area shall provide the necessary All real property assessment notices or owner's copies of tax
appropriations to defray the expenses incident to the general declaration sent through the mails by the assessor shall be
revision of real property assessment. exempt from the payment of postal charges or fees.
All expenses incident to a general revision of real property Section 283. Sale and Forfeiture Before Effectivity of Code. - Tax
assessment shall, by ordinance of the sangguniang panlalawigan, delinquencies incurred, and sales and forfeitures of delinquent
be apportioned between the province and the municipality on the real property effected, before the effectivity of this Code shall be
basis of the taxable area of the municipality concerned. governed by the provisions of applicable laws then in force.
Section 276. Condonation or Reduction of Real Property Tax and

Interest. - In case of a general failure of crops or substantial
decrease in the price of agricultural or agribased products, or
calamity in any province, city or municipality, the sanggunian
concerned, by ordinance passed prior to the first (1st) day of
January of any year and upon recommendation of the Local
Disaster Coordinating Council, may condone or reduce, wholly
or partially, the taxes and interest thereon for the succeeding
year or years in the city or municipality affected by the calamity.
Section 277. Condonation or Reduction of Tax by the President of

the Philippines. - The President of the Philippines may, when
public interest so requires, condone or reduce the real property
tax and interest for any year in any province or city or a
municipality within the Metropolitan Manila Area.
This power is shared by the LGU with the President. In case if a

calamity, the Sanggunian can condone RPT through an ordinance.
This can also be done by the President. The President has broader
scope than that of the Sanggunian.
Section 278. Duty of Registrar of Deeds and Notaries Public to

Assist the Provincial, City or Municipal Assessor. - It shall be the
duty of the Registrar of Deeds and notaries public to furnish the

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Taxation Law II

Dean Manuel Quibod III-Manresa (2013)

A: You file a DST return. A: The BIR cannot collect.

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A: Q: What does that assessment notice contain?

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A: 1) When the filing for a deficiency tax is the result of a

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Do not be confused of these proceeding, the distraint and levy, A: No.

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CF: Section 6 of NIRC. Let’s now go to informer’s reward.

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fair value of the goods, or 1,000,000, whichever is lower. The cash

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Code for exemption from the value-added tax shall register in

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The authority to make rules and regulations is upon the Secretary of

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(4) not be contrary to law, public policy, national

A: The principle that the state will promote progressive system of

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(m) Taxes, fees, or other charges on Philippine products actually

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The receipts from the printing and/or publishing of books or

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(e) The appraisal and assessment of real property shall be

Basically, this is the determination of the value of the property

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The city or municipality within the Metropolitan Manila Area,

The definition of the classes of lands enumerated in the provision is

(d) "Agricultural Land" is land devoted principally to

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similar aquacultural activities, and other agricultural Timberland 20%

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Fair Market Value

Assessed value = 1,500,000 x 30%

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Section 276. Condonation or Reduction of Real Property Tax and

Section 277. Condonation or Reduction of Tax by the President of

This power is shared by the LGU with the President. In case if a

Section 278. Duty of Registrar of Deeds and Notaries Public to

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