Bar Review - Local Tax 2012 Final

8/13/2019 Bar Review - Local Tax 2012 Final

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BAR REVIEW

LECTURE

LOCAL TAXATION

Prof. Carmencita C. Dabu



• Local Taxation –

primary law- Local Government Code

of 1991 –RA

Part I – Local Government Taxation

Book II, Title One- Secs.128 to 196

Part II – Real Property TaxationBook II, Title Two – Sec.197 to 283



• Part I – Local government taxation:

Nature and source of taxing power

of LGU’s -

a) Sec. 5, Art. X, 1987 Constitution

b) Sec. 128 to 196, LGC



. Nature of taxing power of LGU’s

- not inherent, not mere delegation by

legislature – but direct

constitutional grant

- not absolute – subject to limitations

(Sec.133, LGC)

- legislative – exercised by Sanggunian

through ordinance (Sec. 132, LGC)

- territorial



Fundamental Principles – Sec. 130

[CUP –E-CLIP]

U - Uniform

E - EquitableP - Public purpose

C - not unjust, excessive, oppressive

or ConfiscatoryC - not Contrary to law, public policy

L - collection not Let to privateperson

I - Inure solely to the LGU

P - Progressive system



Power to prescribe penalties-(Sec. 516, LGC)

Power to adjust tax rates –Sec. 191not oftener that once every 5 years



Power to grant tax exemption- Sec. 192,

LGC

- does no apply to regulatory fees

- thru ordinance

- conferred thru tax exemption certificate

- tax exemption cert. not transferrable



Guidelines: tax exemptions

- calamities, civil disturbance, etc.

- through ordinance- all businesses similarly situated

- duration – 12 months

- in case of shared revenues- only

to LGU granting exemption



Guidelines – tax incentives

- new investments

- ordinance prescribe terms andconditions

- definite period –one year

- ordinance passed prior to Jan. 1



Tax exemption prior to LGC –

Gen. Rule – withdrawn by Sec. 193

Exceptions: (Sec. 234)

a) local water districtsb) cooperatives registered under RA 6938.

non-profit hospitals

c) educational institution



Question – Does the power to grant tax

exemptions include the power to condone

taxes that have already accrued before the

passage of the ordinance?



Residual taxing power of LGU’s

-(Sec. 186)- LGU’s can impose othertaxes.

Limitations:

a) constitutionalb) limitations under Sec. 133

c) fundamental principles under Sec. 130

d) requirement under Sec. 186e) principle of pre-emption



Principle of Pre-emption or ExclusionaryRule – (Victorias Milling Co., Inc. v.

Municipality of Victorias, Neg. Occ..

L-21183. Sept. 27, 1968 )-national government elects to tax a

particular area, it impliedly withholds from

the LGU the power to tax the same area.



Cases: Province of Bulacan vs. CA

GR 126232, Nov. 27. 1998

Mun. of San Fernando, La Union

vs. Sta. Romana, March 31, 1987



Tax Ordinance –

a. Procedure for approval

- Sec. 53 –quorum

- Sec. 54 – approval and veto

b. Effectivity – 1) other ordinances – after 10 days

copy was posted

2) tax ordinances -



Scope of Taxing Power:

Common Limitations (Sec. 133)a. income tax

except – banks and FI;

b. documentary stamp tax

c. taxes on estate, gift, legacies and

mortis cause acquisitions;

except – LGC



d. customs duties (TFC – TCCP)

e. TFC - importations and exportations

f. TFC – agricultural/aquatic products

sold by marginal farmers

g. business taxes- registered with BOI

as pioneer (6 years) and non-pioneer

(4 years)

h. excise taxes imposed by NIRC; TFCon petroleum products



i. percentage tax or VAT

j. taxes on gross receipts oftransportation contractors, etc.

k. taxes on reinsurance premiums

l. TFC for registration of motor vehicleslicense and permits

m. TFC- Phil. products exported

n. TFC – RA 6810 and RA 6938n. TFC on the government and LGUs



Specific Taxing powers of LGUs

A. Province and City

1. transfer of real property-

2. printer’s and publisher’s tax –

exempt - books/reading materialsrequired by DECS and text books



3. franchise tax- 50% of 1% of GAR;

(Sec. 137, LGC)

a) Sec. 119, NIRC -2% FT on electric

gas and water utilities;

b) Telephone, telegraph, radio and

TV broadcasting – 12%VAT

(Sec. 108 [A], NIRC)



4. sand, gravel, quarry resources

(public lands, sea beds, streams)-10%

of FMV per cubic meter (Sec. 138, LGC)

NIRC imposes tax on sand gravel

quarry resources regardless of source.



5.professional tax –

- passed government examinations

6.amusement tax – proprietors, lessees,

operators

exempt – operas, concerts, drama,

recitals, painting/art exhibitions,

musical, literary, oratoricalexcept: pop, rock or similar concets.



B. Municipality- not levied by the province

(Sec. 142)

1. Business tax-

a) manufacturers, assemblers, repackers,processors, brewers, distillers, rectifiers and

compounders of liquors, distilled spirits and

wines (Sec. 143) – graduated annual fixed tax

-37.5% of 1% - gross sale of P6.5M or more



b. wholesalers, distributors, or dealers

of any article of commerce- graduated

annual fixed tax;gross sale-P2M – percentage tax

at 50% of 1%



c. exporters and manufacturers, millers,producers, wholesalers, distributors

or retailers of essential commodities



d. Retailers – annual percentage tax on

gross sale (preceding CY)

-not more than P400k - 2%

- more than P400k - 1%

barangays –exclusive power if gross

sales not exceed P50,000 (city)and P30,000 (municipality)



e. Contractors and independent

contractors – graduated annual fixed tax

* gross receipt – P2M – percentagetax -50% of 1%



f. Banks and financial institutions-

50% of 1%

g. Peddlers – merchandise/article of

commerce – not exceed P50.00 per

peddler annually;



h. any business subject to excise,

VAT or percentage tax –

rate not exceed 2% of gross receipts

Municipalities within Metro Manila –

- rate not exceed by 50% of

maximum under LGC



C. Barangays –

1) retailer – rate 1%2) service fees/charges

3) barangay clearance

4) other fees-



Situs of local taxes (Sec. 150)

1. place of business

2. principal and branch office –sale at

branch



3. with factory, plantation, project office

-100% recorded-principal office;

tax shall accrue and taxable-

a. 30% principal

70% factory/plantation/p.o.



b. plantation and factory- located

in different city/municipalities -100% recorded at principal office-

tax accrues and payable at:

1) 30% principal office;70% allocated: 60% -factory

40%-plantation

or p.o



2) 2 or more factories located at

different municipalities –

70% pro rated



Common revenue raising powers of

LGUs

1. fees and charges

2. operation of public utilities owned

by LGU



3. Toll fees –

* except: enlisted men of AFP and PNP on

mission, post office personnel delivering,

physically handicapped/disabled

citizens 65 years of age.

* suspend collection –public safety

and welfare requires



4. Community tax –

Kinds : a) basic (CTC A) – P5 -

b) additional (CTC B)c) CTC C – juridical persons

Who are liable – basic tax

a) individuals 18 years oldemployed for 30 consecutive workingdays or engaged in business or owns

real property or required by law to file

ITR



Who are exempt –

1) diplomatic and consular rep.

2) transient visitors –stay not exceed

3 monthsPlace of payment –

individuals -residence

juridical persons- principal place ofbusiness



Time of payment -

accrues -1st day of January

payable – last day of Feb

Penalty for late payment – 24%

per annum



a) Tax period - Calendar Year

manner of payment – quarterly

installment

b) Accrual of tax – 1st day of

January of each Year**new taxes -1st of quarter following the

effectivity of ordinance

Collection of business tax



c) Time of payment – within 1st 20 days of

January of each year; or next quarter

** extended – 6 months only

d) Penalties – interest – 2% per month

maximum -36 monthssurcharge – 25%

e) Treasurer – collect and inspect books



a) Period of assessment –

5 years tax become due

Fraud/intent to evade taxes – 10 years from discovery

Period of collection – 5 years fromdate of assessment

Taxpayer’s remedies



Suspension prescriptive period:

1. Treasurer -legally prohibited to

collect

2. TP –request for reinvestigation or

waives period3. TP out of the country



b) Protest of assessment –

1) written protest – 60 days

2) Treasurer – 60 days to decide

3) if denied – 30 days to appeal

to regular courts

inaction – 30 days from lapse of 60days = appeal to regular courts

4) Regular courts –denied protest-

appeal to CTA – 30 days



c) Claim for refund or tax credit –

** erroneously/illegally collected TFC

** written claim filed with Treasurer** 2 years from payment

Ci il di f ll ti f



Civil remedies for collection of

revenues

a) Local government’s lien

b) Civil remedies

(i) Administrative action – a) distraint of

personal property

b) levy on real property



personal property exempt from distraint or levy(Sec. 185)

Penalty - local treasurer for failure to issue andexecute warrant of distraint or levy - dismissal

(2) Judicial action



REAL PROPERTY TAXATION



1. Fundamental principles

2. Nature of real property tax

3. Imposition of real property tax

a) Power to levy real property taxb) Exemption from real property tax

4 A i l d t f



4. Appraisal and assessment of

real property tax

a) Rule on appraisal of real property at fair

market value

b) Declaration of real property

c) Listing of real property in assessment rolls

A i l d f l



Appraisal and assessment of real property tax

d) Preparation of schedules of fair market

value

(i) Authority of assessor to take evidence

(ii) Amendment of schedule of fair market

value

e) Classes of real property

f) Actual use of property as basis of

assessment

A i l d t f l t t



g) Assessment of real property

(i) Assessment levels

(ii) General revisions of assessments and

property classification

(iii) Date of effectivity of assessment orreassessment

(iv) Assessment of property subject to back

taxes

(v) Notification of new or revised assessment

h) Appraisal and assessment of machinery

Appraisal and assessment of real property tax



5. Collection of real property tax

a) Date of accrual of real property tax

b) Collection of tax

(i) Collecting authority

(ii) Duty of assessor to furnish local

treasurer with assessment rolls(iii) Notice of time for collection of tax

C ll ti f l t t



Collection of real property tax

c) Periods within which to collect real

property tax

d) Special rules on payment

(i) Payment of real property tax in

installments

(ii) Interests on unpaid real property tax

(iii) Condonation of real property tax

C ll ti f l t t



Collection of real property tax

e) Remedies of LGUs for collection of real property

tax

(i) Issuance of notice of delinquency for real

property tax payment(ii) Local government’s lien

(iii) Remedies in general

(iv) Resale of real estate taken for taxes, feesor charges

(v) Further levy until full payment of amount

due

6 Refund or credit of



6. Refund or credit of

real property tax

a) Payment under protest

b) Repayment of excessive collections

7 Taxpayer’s remedies



7. Taxpayer s remedies

a) Contesting an assessment of value of real

property

(i) Appeal to the Local Board of

Assessment Appeals

(ii) Appeal to the Central Board of

Assessment Appeals

(iii) Effect of payment of tax



Taxpayer’s remedies

b. Payment of real property under protest

(i) File protest with local treasurer

(ii) Appeal to the Local Board of

Assessment Appeals

(iii) Appeal to the Central Board of

Assessment Appeals

(iv) Appeal to the CTA

(v) Appeal to the Supreme Court

Documents

Bar Review - Local Tax 2012 Final