Draft

Guide on How to
Review the Local
Revenue Code
(LRC) by Higher
LGUs
 TABLE OF CONTENTS

1.0 INTRODUCTION ........................................................................................................... 4

1.1 Rationale .......................................................................................................................... 4
1.2 Objective of the Guideline ............................................................................................... 4
1.3 Users of the Guideline ...................................................................................................... 4
1.4 Organization of the Guideline .......................................................................................... 5
2.0 EXTENT OF THE POWERS OF LOCAL GOVERNMENT UNITS TO CREATE SOURCES OF
REVENUES ............................................................................................................................. 5
3.0 AUTHORITY TO REVIEW LOCAL REVENUE MEASURES ................................................... 6
3.1 Legal Bases on the Authority to Review........................................................................... 6
a. Sangguniang Panlalawigan ........................................................................................... 6
b. Sangguniang Panglungsod................................................................................................ 6
c. Sangguniang Bayan .......................................................................................................... 6
3.2 Codal Requirements in the Review of Local Revenue Measures ..................................... 6
a. Review by the Sangguniang Panlalawigan. ...................................................................... 7
b. Review by the Sangguniang Panlungsod or Sangguniang Bayan. .................................... 7
4.0 CONSIDERATIONS IN THE REVIEW FUNCTIONS ............................................................ 8
4.1 General Considerations .................................................................................................... 8
a. Approval of Revenue Measure/Ordinance by Local Sanggunian .................................. 8
b. Tax Rates for Cities. ......................................................................................................... 8
c. Rates of Tax of Municipalities Within the Metropolitan Manila Area ............................. 8
d. Taxes on Newly Started Business ..................................................................................... 8
e. Upward and Downward Adjustment of Tax Rates of Tax Ordinances ............................. 9
f. Adjustments of tax rate shall not be oftener than once every five (5) years. For this
purpose, the date of the effectivity of the revenue measures is the start date of the five (5)
year period. ............................................................................................................................. 9
g. Rates of Fees and Charges ............................................................................................... 9
h. Upward and Downward Adjustment of Rates of Fees and Charges ................................ 9
i. Extent of the Taxing Powers of Provinces. ....................................................................... 9
j. Fines and Penalties ......................................................................................................... 10
k. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges ....................................... 10
l. Interests on Unpaid Real Property Tax .......................................................................... 10
m. Limitations on the Taxing Powers of LGUs. ................................................................ 11
4.2 Detailed Review of the Local Revenue Measures .......................................................... 13
 a. Local Business Taxes....................................................................................................... 13
1. Tax on Transfer of Real Property Ownership (Sec. 135) ........................................... 13
2. Tax on Business of Printing and Publication (Sec. 136) .............................................. 14
3. Franchise Tax (Sec. 137) ............................................................................................. 14
4. Tax on Sand, Gravel and Other Quarry Resources (Sec 138), (Art 239) ..................... 14
5. Professional Tax (Sec 139), (Sec 151) ......................................................................... 14
6. Amusement Tax (Sec 140), (Sec 151), (RA 9640) ....................................................... 15
7. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or Producers,
Wholesalers of, Dealers, or Retailers in, Certain Products (Sec 141) ............................... 15
8. Tax on Business (Sec 143) ........................................................................................... 15
b. Land-Based Taxes ........................................................................................................... 17
1. Real Property Tax (Sec 232), (Sec 233), (Sec 271) ...................................................... 17
2. Additional Levy on Real Property for the Special Educational Fund (SEF) (Sec 235),
(Sec 271)............................................................................................................................. 17
3. Additional Ad Valorem Tax on Idle Lands (Sec 236), (Sec 273) .................................. 18
4. Special Levy by Local Government Units (Sec 240, 241, 242, 243, 244, 245) ............ 18
5. Socialized Housing Tax (Sec 43, RA 7279), (LFC 1-97) ................................................ 18
c. Permit and Regulatory Fees ........................................................................................... 19
1. Mayors Permit Fee on Business ................................................................................ 21
2. Fees for Sealing and Licensing of Weights and Measures .......................................... 21
3. Building Permit Fee..................................................................................................... 21
4. Permit Fee for Zoning/Locational Clearance .............................................................. 21
5. Subdivision Plan Processing Fee ................................................................................. 21
6. Permit Fees for Tricycle Operation ............................................................................. 22
7. Permit Fee for Pedaled Tricycle (Sec ) ........................................................................ 22
8. Permit Fee for Cockpits Owners/Operators/Licensees/Promoters and Cockpit
Personnel (Sec ).................................................................................................................. 22
9. Special Permit Fee for Cockfighting (Sec ) .................................................................. 22
10. Permit Fee on Occupation or Calling Not Requiring Government Examination (Sec
) 22
11. Registration and Transfer Fees on Large Cattle (Sec ) ............................................ 23
12. Fees on Impounding of Stray Animals (Sec ).......................................................... 23
13. Cart or Sledge Registration Fee (Sec ) ..................................................................... 23
14. Permit Fee on Caretela or Calesa (Sec ) .................................................................. 23
15. Permit Fee for Agricultural Machinery and Other Heavy Equipment (Sec ) .......... 23
16. Permit and Inspection Fee on Machineries and Engines (Sec ) .............................. 23
17. Permit Fee for the Storage of Flammable and Combustible Materials .................. 23
18. Permit Fee for Temporary Use of Roads, Streets, Sidewalks, Alleys, Patios, Plazas
and Playgrounds................................................................................................................. 24
19. Permit Fee for Excavation ....................................................................................... 24
20. Permit Fee on Circus and Other Parades ................................................................ 24
21. Permit Fee for the Conduct of Group Activities (Sec ) ............................................ 24
22. Permit Fee on Film-Making (Sec ) ........................................................................... 24

Guidelines in Reviewing the Local Revenue Measures Page 2

 d. Service Fee ..................................................................................................................... 24
e. Charges ........................................................................................................................... 25
1. Fishery Rentals, Fees and Charges ............................................................................. 25
2. Rentals of Personal and Real Properties Owned by the LGU (Sec ) ........................... 26
3. Charges for Parking (Sec ) ........................................................................................... 26
4. Hospital Service Fee (Sec ) .......................................................................................... 26
5. Charges for Use of Waterworks System (Sec ) ........................................................... 26
6. Cemetery Charges (Sec ) ............................................................................................. 26
7. Market Fees and Charges (Sec ) ................................................................................. 26
8. Slaughterhouse Fees (Sec ) ......................................................................................... 27
9. Toll Fees or Charges (Sec ) .......................................................................................... 27

Guidelines in Reviewing the Local Revenue Measures Page 3

 1.0 INTRODUCTION

1.1 Rationale

In the midst of the recurring global crisis resulting in the financial strain on
government, local government units (LGUs) are face with the challenge to fully marshal
local taxing, regulatory as well as proprietary powers to generate the needed revenues and
resources to finance the delivery of basic services.

The Local Government Code of 1991 defines the legal framework by which
LGUs can generate revenues and mobilize resources. It has given LGUs some degree of
autonomy in making revenue raising decisions, such that LGUs have the option to impose
the various tax subjects enumerated in the Code and they may set the tax rates within a
certain limit through an approved local revenue ordinance. They are also allowed to
make tax rate adjustments once every five years. These statutory mandates have
provided some degree of dynamism as well as certainty in the revenue-raising powers of
LGUs.

However, such revenue generating and regulatory powers of LGUs are not open-
ended, they must be exercised based on some guiding principles and must be within the
parameters and limits provided by law.

A growing number of complaints from the business sector and ordinary taxpayers
seem to indicate a possible and unwitting abuse or misuse of such powers on the part of
the LGUs, thus negatively affecting compliance. It is also noted that some LGUs have
adopted revenue and regulatory measures beyond their taxing and regulatory powers.

It becomes imperative then to strengthen the existing oversight and review

mechanisms related to enactment of LRCs/revenue ordinances to ensure equity and
fairness, prudence and better compliance.

1.2 Objective of the Guideline

This Guideline is prepared in order to provide the reviewing authorities the

necessary tools in ensuring the legality, rationality and uniformity of local revenue
measures enacted by their component local government units.

1.3 Users of the Guideline

This guideline is a useful tool to the following:

a. Members of the Sangguniang Panlalawigan in reviewing the local revenue

measures of its component municipalities and component cities;

b. Members of the Sangguninang Bayan and Sangguniang Panglungsod in

reviewing the local revenue measures of their respective barangays;

Guidelines in Reviewing the Local Revenue Measures Page 4

 c. Provincial Attorney, Provincial Prosecutor, City Attorney and City Prosecutor
who may be required by the appropriate sanggunian to provide inputs and
comments on the submitted local revenue measures.

d. Local Treasurers who may be required by the appropriate sanggunian to act as

resource person during the review of the submtitted local revenue measures.

e. Department of Interior and Local Government (DILG) and Bureau of Local

Government Finance, Department of Finance (BLGF-DOF) who may be
requested by local government units (LGUs) to provide comments on their
local revenue measures.

1.4 Organization of the Guideline

The guideline provides an overview of the legal bases and responsibilities of

higher local government units in reviewing the local revenue measures of their
component LGUs. It is designed to be an easy reference in reviewing local revenue
measures enacted by component local government units.

The guideline first discusses the rationale and objective of its issuance. It further
amplifies the importance of the review function of higher level LGUs and describes their
roles and responsibilities in reviewing the local revenue measures of their component
LGUs.

Lastly it identifies the areas to be reviewed in the local revenue measures

supported with citation on specific provisions in the Local Government Code of 1991
(LGC) and other relevant laws, rules and regulations.

2.0 EXTENT OF THE POWERS OF LOCAL GOVERNMENT UNITS TO

CREATE SOURCES OF REVENUES

Section 129 of the LGC provides that Each local government unit shall exercise its
power to create its own sources of revenue and to levy taxes, fees, and charges subject to the
provisions herein, consistent with the basic policy of local autonomy. Such taxes, fees, and
charges shall accrue exclusively to the local government units.

However, such power is not absolute because Congress provided limitations in the LGC
pursuant to Section 5, Article X of the Philippine Constitution which is quoted hereunder:

Each local government unit shall have the power to create its own sources of
revenues and to levy taxes, fees and charges subject to such guidelines and
limitations as the Congress may provide, consistent with the basic policy of local
autonomy. Such taxes, fees and charges shall accrue exclusively to the local
governments.

Such limitations are provided in Section 133 of the LGC. Further, Section 5b of the LGC
also provides that In case of doubt, any tax ordinance or revenue measure shall be construed
Guidelines in Reviewing the Local Revenue Measures Page 5
strictly against the local government unit enacting it, and liberally in favor of the taxpayer. Any
tax exemption, incentive or relief granted by any local government unit pursuant to the
provisions of this Code shall be construed strictly against the person claiming it.

3.0 MANDATE TO REVIEW LOCAL REVENUE MEASURES

3.1 Legal Bases of the Review Functions

a. Sangguniang Panlalawigan
Shall review all ordinances approved by the sanggunians of component cities
and municipalities and executive orders issued by the mayors of said
component units to determine whether these are within the scope of the
prescribed powers of the sanggunian and of the mayor. [Sec. 468(1)(i)],
(Sec. 56).

b. Sangguniang Panglungsod
Shall review all ordinances approved by the sanggunian barangay and
executive orders issued by the punong barangay to determine whether these
are within the scope of the prescribed powers of the sanggunian and of the
punong barangay. [Sec. 458(1)(i)], (Sec 57).

c. Sangguniang Bayan
Shall review all ordinances approved by the sanggunian barangay and
executive orders issued by the punong barangay to determine whether these
are within the scope of the prescribed powers of the sanggunian and of the
punong barangay. [Sec. 447(1)(i)], (Sec 57).

3.2 Codal Requirements in the Review of Local Revenue Measures

The review function of higher level LGUs over the LRCs/revenue ordinances of
their component LGUs is of paramount importance in promoting equity, fairness and
legality of such LRCs/revenue ordinances.

The review would ensure that LRCs/revenue ordinances of component LGUs are
properly formulated and crafted based on fundamental principles and statutory
requirements of local taxation, and aptly anchored on a coherent philosophical
framework.

To facilitate a meaningful and comprehensive review of component LGUs

Revenue Codes/Ordinances, it is imperative for the reviewing authority to provide the
component LGUs a checklist of the documents to be submitted to the reviewing
authority. The checklist would include the following: (a) copies of the Revenue
Code/Ordinance to be reviewed; and (b) copies of the immediately preceding Revenue
Code/Ordinance being updated or amended by the proposed Revenue Code/Ordinance.
This would provide the reviewing authority the necessary information as to the propriety
of the rates and the effectivity of the proposed measures. Additional documents such as

Guidelines in Reviewing the Local Revenue Measures Page 6

 AIP, CLUP and Zoning Ordinance of the component LGUs are also desirable, to provide
the reviewing authority a holistic governance profile of the component LGU, wherein the
proposed Revenue Code/Ordinance is a vital integral component. This would underscore
the truism that revenue generation is an inherent challenge to local governance and
development.

a. Review by the Sangguniang Panlalawigan

Step 1. Within three (3) days after the approval of revenue measures, the
secretary of the sanguniang panlungsod or sangguniang bayan shall
forward to the sangguniang panlalawigan for review, copies of approved
ordinances. [Sec 56 (a)]

Step 2. Within thirty (30) days after receipt of copies of such ordinances and
resolutions the sangguniang panlalawigan shall examine the documents
or transmit them to the provincial attorney, or if there is none, to the
provincial prosecutor for prompt examination. [Sec 56 (b)]

The provincial attorney or provincial prosecutor shall, within a

period of ten (10) days from receipt of the documents inform the
sangguniang panlalawigan in writing of his comments or
recommendations, which may be considered by the sangguniang
panlalawigan in making its decision. [Sec 56 (b)]

Step 3. If the Sangguniang Panlalawigan finds that such an ordinance or

resolution is beyond the power conferred upon the Sangguniang
Panlungsod or Sangguniang bayan concerned, it shall declare such
ordinance or resolution invalid in whole or in part. The Sangguniang
Panlalawigan shall enter its action in the minutes and shall advise the
corresponding city or municipal authorities of the action it has taken.
[Sec 56 (c)]

Step 4. If no action has been taken by the Sangguniang Panlalawigan within

thirty (30) days after submission of such an ordinance or resolution, the
same shall be presumed consistent with law and therefore valid.
[Sec 56(d)]

b. Review by the Sangguniang Panlungsod or Sangguniang Bayan.

Step 1. Within ten (10) days after its enactment, the Sangguniang Barangay
shall furnish copies of all Barangay revenue ordinances to the
Sangguniang Panlungsod or Sangguniang bayan concerned for review as
to whether the ordinance is consistent with law and city or municipal
ordinances. [Sec 57 (a) of LGC]

Step 2. If the Sangguniang Panlungsod or Sangguniang bayan, as the case may

be, finds the Barangay ordinances inconsistent with law or city or
municipal ordinances, the Sanggunian concerned shall, within thirty (30)
Guidelines in Reviewing the Local Revenue Measures Page 7
 days from receipt thereof, return the same with its comments and
recommendations to the Sangguniang Barangay concerned for
adjustment, amendment, or modification; in which case, the effectivity
of the Barangay ordinance is suspended until such time as the revision
called for is effected. [Sec 57 (c) of LGC]

Step 3. If the Sangguniang Panlungsod or Sangguniang bayan, as the case may

be, fails to take action on Barangay ordinances within thirty (30) days
from receipt thereof, the same shall be deemed approved.
[Sec 57(b) of LGC]

4.0 CONSIDERATIONS IN THE REVIEW OF LOCAL REVENUE

MEASURES

4.1 General Considerations

a. Approval of Revenue Measure/Ordinance by Local Sanggunian

An ordinance levying taxes, fees and charges, prescribing the rates thereof
for general and specific purposes, and granting tax exemptions, incentives or
reliefs shall be approved by majority vote of all members of the sanggunian. [Sec
458(2)(ii), Sec 447(2)(ii)]

b. Tax Rates for Cities.

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 and amusement taxes (Sec 151). As such, the
rates of the professional and amusement taxes for provinces and cities shall be
P300.00 for professional tax, and 10% for amusement tax (as amended by R.A.
9640).

c. Rates of Tax of Municipalities Within the Metropolitan Manila Area

The municipalities within the Metropolitan Manila Area (MMA) may levy
the taxes on business enumerated in Article 232 of the IRR of LGC at rates which
shall not exceed by fifty percent (50%) the maximum rates prescribed for said
business (Art. 236).

d. Taxes on Newly Started Business

No taxes on newly started business shall be collected by all levels of

LGUs except on business of printing and publication (Sec 136) and business
enjoying a franchise (Sec. 137) which can only be imposed and collected by

Guidelines in Reviewing the Local Revenue Measures Page 8

 provinces, cities the municipality of Pateros in MMA. The tax shall be based on
the capital investment of the said newly started business. However, such
businesses are required to secure and pay the necessary permit fees, licenses and
charges that the LGU may impose.

e. Upward and Downward Adjustment of Tax Rates of Tax Ordinances

Pursuant to Sec 191 of the LGC, Adjustment of tax rates of tax ordinances
is governed by the following conditions:

f. Adjustments of tax rate shall not be oftener than once every five (5)
years. For this purpose, the date of the effectivity of the revenue
measures is the start date of the five (5) year period.
1. Tax rate adjustment shall not exceed ten percent (10%) percent of the
rates prescribed in the LGC.

g. Rates of Fees and Charges

The municipality may impose and collect such reasonable fees and
charges on business and occupation and, except as reserved to the province in
Section 139 of the LGC, on the practice of any profession or calling,
commensurate with the cost of regulation, inspection and licensing before any
person may engage in such business or occupation, or practice such profession or
calling. (Sec. 147)

No such fee or charge shall be based on capital investment or gross sales

or receipts of a person or business (Art. 233). It is therefore prohibited for the
LGU to impose a fee or clearance and charges based on the amount of taxes paid
on the previous years.

h. Upward and Downward Adjustment of Rates of Fees and Charges

Rates adjustment on fees and charges is not covered by the provision of
Sec 191 of the LGC. Because of the nature of its imposition, the rates of fees and
charges may be adjusted annually.

i. Extent of the Taxing Powers of Provinces.

The sangguniang panlalawigan has no authority to impose taxes on
businesses and professionals within the territorial jurisdiction of the city. This is
in view of the provision of Sec 151 of the LGC. This is further supported by the
provision of Art. 5 of the IRR of LGC which states that Any fair and reasonable
doubt on the powers of LGUs shall be liberally interpreted and resolved in their
favor, and in cases involving lower and higher level LGUs, in favor of the lower
level LGU.

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 j. Fines and Penalties
Local sanggunian of different levels of LGUs can only impose the
following fines and penalties:

1) Sangguniang Panlalawigan.

Approve ordinances imposing a fine not exceeding Five thousand

pesos (Php5,000) or imprisonment not exceeding one (1) year, or both in
the discretion of the court, for the violation of a provincial ordinance
[Sec. 468(iii)].

2) Sangguniang Panglunsod.

Approve ordinances imposing a fine not exceeding Five thousand

pesos (Php5,000) or imprisonment not exceeding one (1) year, or both in
the discretion of the court, for the violation of a city ordinance
[Sec.458(iii)].

3) Sangguniang Bayan.

Approve ordinances imposing a fine not exceeding Two thousand

five hundred pesos (Php2,500) or imprisonment not exceeding six (6)
months, or both in the discretion of the court, for the violation of a
municipal ordinance [Sec. 447(iii)].

4) Sangguniang Barangay.

Prescribe fines in amounts not exceeding One thousand pesos

(Php1,000) for violation of barangay ordinance [Sec. 391(14)]. Unlike
other local legislative bodies, the sangguniang barangay cannot impose
imprisonment as a penalty for violating a barangay ordinance.

k. Surcharges and Penalties on Unpaid Taxes, Fees, or Charges

The Sanggunian may impose a surcharge not exceeding twenty-five
percent (25%) of the amount of taxes, fees or charges not paid on time and an
interest at the rate not exceeding two percent (2%) per month of the unpaid taxes,
fees or charges including surcharges, until such amount is fully paid but in no
case shall the total interest on the unpaid amount or portion thereof exceed thirty-
six (36) months. (Sec. 168)

l. Interests on Unpaid Real Property Tax

In case of failure to pay the basic real property tax or any other tax levied
under this Title upon the expiration of the periods as provided in 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 (2%) per month on the unpaid amount or a fraction
thereof, until the delinquent tax shall have been fully paid: Provided, however,

Guidelines in Reviewing the Local Revenue Measures Page 10

 That in no case shall the total interest on the unpaid tax or portion thereof exceed
thirty-six (36) months. (Sec. 255)

m. Limitations on the Taxing Powers of LGUs.

In no case that local revenue measures of LGUs should extend to levy of
the following as enumerated in Sec 133 of the LGC:

1) Income tax, except when levied on banks and other financial

institutions;
Local government units may levy local taxes on banks and other
financial institutions based on gross receipts. The DOF has provided
guidelines on these impositions per Local Finance Circular No. 1-93.
(LFC No. 2-07 dated Feb 26, 2007 amending Sections 2 and 5 of LFC
1-93)

2) Documentary stamp tax;

Only the National Government may impose the excise tax upon the
privilege, opportunity or facility offered at exchanges for the
transaction of the business.

3) Taxes on estates, inheritance, gifts, legacies and other acquisitions

mortis causa, except as otherwise provided herein;
An exception is provided in Sec. 135 of the LGC, where provinces and
cities may impose tax on the sale, donation, barter, or on any other
transferring ownership or title of real property. Transfer of real
properties owned by religious and charitable institutions which are
sold or transferred to private parties are subject to transfer tax

4) Customs duties, registration fees vessels and wharfage on wharves,

tonnage dues, and all other kinds of customs fees, charges and dues
except wharfage on wharves constructed and maintained by the local
government unit concerned;
Sec. 149 (3) of the LGC authorizes LGUs to impose license fees for
the operation of fishing vessels of 3 tons or less.

5) Taxes, fee and charges and other impositions upon goods carried into
or out of, or passing through, the territorial jurisdictions of local
government units in the guise of charges for wharfage, tolls for bridges
or otherwise, or other taxes, fees or charges in any form whatsoever
upon such goods or merchandise;
Import or export taxes or fees on goods and commodities carried
through into or out of their respective territories would deter the free
flow of commerce in the country and cause considerable increase in
the prices of commodities, to the prejudice on the consuming public.

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 6) Taxes, fees, or charges on agricultural and aquatic products when sold
by marginal farmers or fishermen;
Sec. 131 provides a listing of covered agricultural products and the
definition of a marginal farmer or fisherman. So that agricultural
products and aquatic products become taxable when:

- It is sold by persons other than the farmer or fisherman, even

without undergoing any process.
- Sold on a commercial scale
- The products have been transformed into manufactured
products such as sugar, charcoal, balut, sardines, etc.

7) Taxes on business enterprises certified to by the Board of Investments

as pioneer or non-pioneer for a period of six (6) and (4) four years,
respectively from the date of registration;
DOF issued LFC No. 5-93 provides guidelines on this.

8) Excise taxes on articles enumerated under the National Internal

Revenue Code, as amended, and taxes, fees or charges on petroleum
products;
Excise taxes can be in the form of specific or ad valorem taxes.
Specific taxes are based on the unit or number, weight or volume
capacity or any other physical unit of measurement of the objects to
tax. While Ad valorem taxes are based on the selling price or other
specific value of the goods

9) Percentage or value added tax (VAT) on sales, barters or exchanges or

similar transactions on goods or services except as otherwise provided
herein;

10) Taxes on the gross receipts of transaction contractors and persons

engaged in the transportation of passengers or freight by hire and
common carriers by air, land or water, except as provided in the LGC;
Since transportation contractors are still subject to the business tax
imposed on contractors by LGUs as stated in DOF Opinion,
November 8, 1995, it may be implied that LGUs may impose a
business tax on bases other than gross receipts, i.e., type of vehicle,
number of vehicles, capacity, etc. (for transport companies with
terminals or booking office)

11) Taxes on premium paid by way or reinsurance or retrocession;

Reinsurance is a contract by which an insurer procures a third person
to ensure him against loss or liability by reason of original insurance.
Retrocession is the rejection of the risk being insured.

Guidelines in Reviewing the Local Revenue Measures Page 12

 12) Taxes, fees or charges for the registration of motor vehicle and for the
issuance of all kinds of licenses or permits for the driving thereof,
except tricycles;
LGUs may impose taxes, fees, or charges for the registration of
tricycles.

13) Taxes, fees or charges on Philippine products actually exported, except

as otherwise provided herein;
The prohibition does not apply to the business of exporting said
products which is still covered by the business tax on exporters. (DOF
Opinion, March 10, 1994), Sec. 143(c) of the LGC of 1991.

14) Taxes, fees, or charges, on Countryside and Barangay Business

Enterprises and cooperatives duly registered under R.A. No. 6810 and
Republic Act Numbered Sixty-nine hundred thirty-eight (R.A. No.
6938) otherwise known as the "Cooperatives Code of the Philippines"
respectively; and
However, per DOF Opinion dated November 14, 1994, the exception
enjoyed by duly registered cooperatives does not include payment of
service charges or rentals for the use of property and equipment or
public utilities owned by a local government such as charges for
actual consumption of water, electric power, toil fees, use of public
roads and bridges, and the like.

15) Taxes, fees or charges, of any kind on the National Government, its
agencies and instrumentalities, and local government units.
This should be read in connection with Section 193 of the Code which
withdraws exceptions or incentives granted to all persons, natural or
juridical, including government owned- or controlled corporations
except local water districts, non-stock and non-profit hospitals and
educational institutions.

4.2 Specific Considerations in the Review of the Local Revenue Measures

a. Local Business Taxes

Local business taxes are impositions of province, city, municipality and

barangays enumerated in Title One Book II of the LGC. (Section 128-196)

1. Tax on Transfer of Real Property Ownership (Sec. 135)

Taxing Authority : Province City

Maximum Tax Rate : 50% of 1% 75% of 1%
Tax Base: : Total consideration involved in the acquisition of the
property or the fair market value as reflected in the
Assessors approved schedule of Market Value, whichever

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 is higher.
Remarks : The LGU can only use the acquisition cost or the fair market
value as provided in the Schedule of Fair Market Value
(SFMV) of the LGU. The LGU cannot use the zonal value
for this purpose.

2. Tax on Business of Printing and Publication (Sec. 136)

Taxing Authority : Province City

Maximum Tax Rate : 50% of 1% 75% of 1%
: 1/20 of 1% 3/40 of 1% For newly started business
Tax Base: : Gross receipts of the preceding year
Capital investment for newly started business
Remarks : Tax can be imposed on newly started business

3. Franchise Tax (Sec. 137)

Taxing Authority : Province City

Maximum Tax Rate : 50% of 1% 75% of 1%
: 1/20 of 1% 3/40 of 1% For newly started business
Tax Base: : Gross receipts of the preceding year
Capital investment for newly started business
Remarks : Tax can be imposed on newly started business

4. Tax on Sand, Gravel and Other Quarry Resources (Sec 138), (Art 239)

Taxing Authority : Province Highly Urbanized City

Maximum Tax Rate : 10% 15%
Sharing : Province - City - 60%
30% Barangay - 40%
Component city or mun. -
30%
Barangay -
40%
Tax Base: : Fair market value in the locality per cubic meter
extracted from public lands and public waters
Remarks : The permit to extract sand, gravel and other quarry
resources shall be issued exclusively by the provincial
governor or city mayor, in case of highly urbanized
city, pursuant to their respective ordinances.

5. Professional Tax (Sec 139), (Sec 151)

Taxing Authority : Province City

Maximum Tax Rate : Php300.00 Php300.00
Tax Base: : Fixed amount
Remarks : The rate of professional tax for provinces and cities shall be
uniform

Guidelines in Reviewing the Local Revenue Measures Page 14

 6. Amusement Tax (Sec 140), (Sec 151), (RA 9640)

Taxing Authority : Province City

Maximum Tax Rate : 10% 10%
Sharing : Province : 50%
Municipality : 50%
Tax Base: : Gross receipts from admission
Remarks : The rate of amusement tax for provinces and cities shall be
uniform. Sec 140 of the LGC was amended by R.A. 9640
lowering the maximum amusement tax rate from 30% to
10%.

7. Annual Fixed Tax For Every Delivery Truck or Van of Manufacturers or

Producers, Wholesalers of, Dealers, or Retailers in, Certain Products
(Sec 141)

Taxing Authority : Province City

Maximum Tax Rate : Php500.00 Php750.00
Tax Base: : Fixed amount
Remarks : Exempt from municipal or city peddlers tax

8. Tax on Business (Sec 143)

8.1 On manufacturers, assemblers, repackers, processors, brewers,

distillers, rectifiers, and compounders of liquors, distilled spirits, and
wines or manufacturers of any article of commerce of whatever kind of
nature [Sec 143(a)]

Taxing Authority : Municipality City

Maximum Tax Rate : 37 % of 1% 56 % of 1%
Tax Base: : Gross sales/receipts of the preceding calendar
year
Remarks : No tax for newly started business

8.2 On wholesalers, distributors, or dealers in any article of commerce of

whatever kind or nature [Sec 143(b)]

Taxing Authority : Municipality City

Maximum Tax Rate : 50% of 1% 75% of 1%
Tax Base: : Gross sales/receipts of the preceding calendar
year
Remarks : No tax for newly started business

8.3 On exporters, and on manufacturers, millers, producers, wholesalers,

distributors, dealers or retailers of essential commodities [Sec 143(c)]

Taxing Authority : Municipality City

Guidelines in Reviewing the Local Revenue Measures Page 15

 Maximum Tax Rate : of the maximum tax rate of Sec. 143 (a(, (b),
and (d)
Tax Base: : Gross sales/receipts of the preceding calendar
year
Remarks : No tax for newly started business

8.4 On retailers [Sec 143(d)], (Sec 152)

Taxing Authority : Municipality City Barangay

Maximum Tax Rate : 400,000 or less 2% 400,000 or less 3%
More than 400,000 1% More than 400,000 1%
Maximum Tax Rate for : Depending on the location of the barangay, the
barangay maximum tax rate shall be that of the municipality
or city where the barangay is located.
Tax Base: : The barangays shall have the exclusive power to
levy taxes, under Sec 152 on gross sales or
receipts of the preceding year of Php50,000.00 or
less, in the case of cities, and Php30,000.00 or
less, in the case of municipalities
Remarks : No tax for newly started business. Only the
municipality or city shall issue permit to operate
this kind of business. The barangay, as in all kind
of business, shall only issue barangay clearance.

8.5 On contractors and other independent contractors [Sec 143(e)]

Taxing Authority : Municipality City

Maximum Tax Rate : 50% of 1% 75% of 1%
Tax Base: : Gross sales/receipts of the preceding calendar
year
Remarks : No tax for newly started business

8.6 On banks and other financial Institutions [Sec 143(f)]

Taxing Authority : Municipality City

Maximum Tax Rate : 50% of 1% 75% of 1%
Tax Base: : Gross receipts derived from interest, commissions
and discounts from lending activities, income
from financial leasing, dividends, rentals, on
property and profit from exchange or sale of
property, insurance premium of the preceding
calendar year
Remarks : No tax for newly started business

8.7 On peddlers [Sec 143(g)]

Taxing Authority : Municipality City

Maximum Tax Rate : Php50.00 Php75.00
Tax Base: : Fixed amount
Guidelines in Reviewing the Local Revenue Measures Page 16
 Remarks : None

8.8 On any other business not previously enumerated[Sec 143(h)]

Taxing Authority : Municipality City

Maximum Tax Rate : 2.0% 3.0%
Tax Base: : Gross sales/receipts of the preceding calendar
year
Remarks : - The tax rate can be a percentage tax or a
graduated tax.
- No tax for newly started business.

b. Land-Based Taxes

1. Real Property Tax (Sec 232), (Sec 233), (Sec 271)

Taxing Authority : Province City Municipality of Pateros

Maximum Tax Rate : 1% 2% 2%
Sharing : In case of Province:
Province 35%
Municipality 40%
Barangays 25%
In case of City
City - 70%
Barangay - 30%
- 50% shall accrue to barangay where the
property is located
- 50% shall accrue equally to all barangays
In case of Municipality of Pateros
MMA - 35%
Pateros - 35%
Barangays - 30%
- 50% shall accrue to barangay where the
property is located
- 50% shall accrue equally to all barangays
a. Tax Base: : Assessed value of the property. Based on the appraisal and
assessment made by the local assessor
b. Remarks :

2. Additional Levy on Real Property for the Special Educational Fund

(SEF) (Sec 235), (Sec 271)

Taxing Authority : Province City Municipality of Pateros

Maximum Tax Rate : 1% 1% 1%
Sharing : In case of Province
Provincial School Board - 50%
Municipal School Board - 50%

Guidelines in Reviewing the Local Revenue Measures Page 17

 In case of City
City School Board - 100%
Tax Base: : Assessed value of the property. Based on the appraisal and
assessment made by the local assessor
Remarks : The SEF is fixed uniform rate of 1% of the assessed value
of the real property. The levy is in addition to, and collected
at the same time as, the basic real property tax

3. Additional Ad Valorem Tax on Idle Lands (Sec 236), (Sec 273)

Taxing Authority : Province City Municipality of Pateros

Maximum Tax Rate : 5% 5% 5%
Sharing : Province - 100%
City - 100%
Municipality of Pateros
MMA - 50%
Pateros - 50%
a. Tax Base: : Assessed value of the property. Based on the appraisal and
assessment made by the local assessor
b. Remarks : The proceeds from the collection of idle land tax accrue to
the LGU imposing such tax. However, there is no
prohibition for the local sanggunian of the LGU imposing
such tax to enact an ordinance sharing the proceeds to its
component LGUs.

4. Special Levy by Local Government Units (Sec 240, 241, 242, 243, 244,
245)

Taxing Authority : Province City Municipalities

Maximum Tax Rate : Pro-rated Pro-rated Pro-rated
Tax Base: : Only a maximum 60% of the project cost shall be imposed
and collected from all lands that benefitted from the public
works projects or improvements funded by the LGU. The
project cost includes improvement and acquisition of land if
any.
Collection Period : Between five (5) to ten (10) years only
Sharing/Remarks : An ordinance imposing this tax can only be enacted upon
determination of the cost of the project, location, number of
annual installments, etc.

5. Socialized Housing Tax (Sec 43, RA 7279), (LFC 1-97)

Taxing Authority : City Municipality

Maximum Tax Rate : 0.05% 0.05%

Guidelines in Reviewing the Local Revenue Measures Page 18

 Tax Base: : Assessed value of land in urban areas in excess of fifty
thousand pesos (Php50,000.00)
Remarks : This tax can be imposed by all cities regardless of their
population density and by municipalities with a population
density of at least five hundred (500) persons per square
kilometer.

c. Other Taxes on Business

i. Tax on Mobile Traders

Taxing Authority : City Municipality

Maximum Tax Rate : 3% 2%
Tax Base: : Gross sales/receipts
Remarks : The tax rate can be a percentage tax or a graduated tax.

A mobile trader is a person who travels from place to place

and sells goods and offers to deliver said goods using a
vehicle such as rolling stores, portable stores, among others.

ii. Tax on Operators of Public Utility Vehicles

Taxing Authority : City Municipality

Maximum Tax Rate : 3% 2%
Tax Base: : Number of vehicles
Remarks : Transportation contractors can still be subject to the
business tax if imposed on bases other than gross receipts,
i.e. type of vehicle, number of vehicles, capacity, etc.

This imposition is deemed valid on transport companies

maintaining terminals or booking offices in the LGU
concerned.

iii. Tax on Ambulant and Itinerant Amusement Operations

Taxing Authority : City Municipality

Maximum Tax Rate :
Tax Base: :
Remarks :

iv. Tax on Mining Operations

Taxing Authority : City Municipality

Maximum Tax Rate : 3% 1 2% 1
2 2
Sec 143(a) rates Sec 143 (a) rates
Tax Base: : Gross receipts for the preceding year
Remarks : 1 If mining companies exclusively operate for the extraction

Guidelines in Reviewing the Local Revenue Measures Page 19

 of metallic or non-metallic resources, the maximum rate
is 2% of gross receipts pursuant to Sec 143 of the LGC.
2
If mining companies operations include the processing
of extracted minerals to finished products, the tax shall be
based on gross receipts pursuant to Sec 143(a) of the
LGC as imposed under the LGU Revenue Ordinance.
Further, Mayors Permit and other regulatory fees shall
be collected before the start of the mining operation of a
mining company pursuant to Secs 147 and 151 of the
LGC and as implemented under a duly enacted revenue
code/ordinance of the LGU concerned.

v. Tax on Forest Concessions and Forest Products

Taxing Authority : City Municipality

Maximum Tax Rate : 3% 2%
Tax Base: : Gross receipts for the preceding year
Remarks : Forest products mean timber, pulp wood/chip wood,
firewood, fuel wood and minor forest products such as
bark, tree tops, resins, gum, wood, oil, honey, beeswax,
nipa, rattan or other forest growths like grass shrub and
flowering plants. If the above-mentioned forest products
are sold by marginal farmers, then they are exempt from
business tax.

d. Permit and Regulatory Fees

Permit and regulatory fees are reasonable charges made by law or

ordinance for the regulation or inspection of business or activities. The following
are the essential characteristics of permit and regulatory fees:

- Fees and charges should be commensurate with the cost of regulation,

inspection and licensing. (Sec 147)

- Fees and charges shall be commensurate to the cost of issuing the license
or permit fee and the expenses incurred in the conduct of the necessary
inspection or surveillance (Art 233 of IRR)
- No such fee or charge shall be based on capital investment or gross sales
or receipts of the person or business. (Art 233 of IRR)

- Barangay clearances and certifications shall not exceed the amount of

regulatory fees imposed by the municipality/city concerned

Guidelines in Reviewing the Local Revenue Measures Page 20

 1. Mayors Permit Fee on Business

Legal bases : Sec 147, Sec 458(3)(ii), Sec 447(3)(ii), Sec 458(4)(v), Sec
447(4)(v)
Remarks : The use of the Philippine business classification set by DTI,
for establishing the size and extent of business operations
for purposes of fixing and rationalizing the fees for Mayors
Permit is an acceptable practice. This scheme would abide
by the limitation that no regulatory fee shall be based on
capital investment or gross sales or receipts as provided in
Article 233 of the IRR. This will also provide a convenient
measure for determining the commensurate cost of issuing
the license and the expenses incurred in the conduct of the
necessary inspection or surveillance in the performance of
LGUs regulatory function

A higher permit fee maybe imposed for businesses trading

liquor, wine, distilled spirits, tobacco and other sin goods

A barangay has no authority to regulate business activity.

The role of the barangay is to issue a barangay clearance for
the application and renewal of business license.

2. Fees for Sealing and Licensing of Weights and Measures

Legal bases : Sec 148, Sec 458(2)(xv), Sec 447(2)(xv), R.A. 7394
Remarks : R.A. 7394 provides for a stiffer penalty of five (5) years
imprisonment for violators.

3. Building Permit Fee

Legal bases : Sec 458(2)(ix), Sec 447(2)(ix)

Remarks : Revenue measures imposing building permit fees should
adopt the revised rates of building permit fees prescribed by
the Department of Public Works and Highways pursuant to
the National Building code.

4. Permit Fee for Zoning/Locational Clearance

Legal bases : Sec 458(2)(ix), Sec 447(2)(ix)

Remarks : Adopt the updated rates prescribed by HLURB for
uniformity among LGUs

5. Subdivision Plan Processing Fee

Legal bases : Sec 458(2)( x), Sec 447(2)(x)

Remarks : Adopt the updated rates prescribed by HLURB for

Guidelines in Reviewing the Local Revenue Measures Page 21

 uniformity among LGUs

6. Permit Fees for Tricycle Operation

Legal bases : Sec 458(3)(vi), Sec 447(3)(vi), Sec 457(5)(vi), Sec

447(5)(vi)
Remarks : Establish a minimum standard size, head room and seating
capacity of the sidecars for the convenience and safety of
the riding and paying public

7. Permit Fee for Pedaled Tricycle (Sec )

Legal bases : Sec 458(5)(vi), Sec 447(5)(vi)

Remarks : While this is to be regulated by cities and municipalities, it
is better to assigned this responsibility to the barangays.

8. Permit Fee for Cockpits Owners/Operators/Licensees/Promoters and

Cockpit Personnel (Sec )

Legal bases : Sec 458(3)(v), Sec 447(3)(v), PD 449, PD 1802

Remarks : Even if the regulation of this activity has already been
devolved to the LGUs, provisions of PD 449 (Cockfighting
Law of 1974 and PD 1802 (Creating the Philippine
Gamefowl Commission) and other laws shall apply to all
matters regarding the operation of cockpits and holding of
cockfights.

9. Special Permit Fee for Cockfighting (Sec )

Legal bases : Sec 458(3)(v), Sec 447(3)(v), PD 449, PD 1802

Remarks : Even if the regulation of this activity has already been
devolved to the LGUs, provisions of PD 449 (Cockfighting
Law of 1974 and PD 1802 (Creating the Philippine
Gamefowl Commission) and other laws shall apply to all
matters regarding the operation of cockpits and holding of
cockfights.

10. Permit Fee on Occupation or Calling Not Requiring Government

Examination (Sec )

Legal bases : Sec 458(3)(ii), Sec 447(3)(ii)

Remarks : Professionals who are subject to the Professional Tax
pursuant to Sec 139 of the LGC and government employees
are exempted from payment of this fee.

Workers or employees whether working on temporary or

permanent, resident or non-resident are required to secure
this permit

Guidelines in Reviewing the Local Revenue Measures Page 22

 11. Registration and Transfer Fees on Large Cattle (Sec )

Legal bases : Sec 458(4)(viii), Sec 447(4)(viii)

Remarks : The fee is exclusive of the face value of the certificate of
registration

12. Fees on Impounding of Stray Animals (Sec )

Legal bases : Sec 458(4)(viii), Sec 447(4)(viii)

Remarks : In imposing this fee, the LGU should have the facilities to
house impounded animals as well as the caretaker who will
tend to the needs of the animals

Sometimes this regulation and imposition of fee is better

delegated to the barangays.

13. Cart or Sledge Registration Fee (Sec )

Legal bases : Sec 458(5)(vi), Sec 447(5)(vi)

Remarks : The regulation of this activity and imposition of fee is better
left to the barangay

14. Permit Fee on Caretela or Calesa (Sec )

Legal bases : Sec 457(5)(vi), Sec 447(5)(vi)

Remarks : The regulation of this activity and imposition of fee is better
left to the barangay

15. Permit Fee for Agricultural Machinery and Other Heavy Equipment
(Sec )

Legal bases : Sec 458(5)(v), Sec 447 (5)(v)

Remarks : This fee is imposed for each agricultural and heavy
equipment rented out in the LGU

16. Permit and Inspection Fee on Machineries and Engines (Sec )

Legal bases : Sec 458(4)(i)(ii), Sec 447(4)(i)(ii)

Remarks : This fee is imposed to prevent or abate any nuisance and
maintain sanitary condition.

17. Permit Fee for the Storage of Flammable and Combustible Materials

Legal bases : Sec 457(4)(vi), Sec 447(4)(vi)

Remarks : For public welfare and safety, no person shall keep at his
place of business any flammable, combustible or explosive
substances without first securing a permit.

Guidelines in Reviewing the Local Revenue Measures Page 23

 Are gasoline station and depot exempted from this
imposition?

18. Permit Fee for Temporary Use of Roads, Streets, Sidewalks, Alleys,
Patios, Plazas and Playgrounds

Legal bases : Sec 457(5)(v), Sec 447(5)(v)

Remarks : Roads, streets, sidewalks, alleys, patios, public plazas and
playgrounds are for public use. Therefore, any person that
willl temporarily use and/or occupy such public facilities for
whatever purpose shall first secure a mayors permit and
pay the corresponding fee.

19. Permit Fee for Excavation

Legal bases : Sec 457(5)(viii), Sec 447(5)(viii)

Remarks : It is appropriate to include a provision that will require a
cash deposit of more than the cost of the restoration from
the contractor who will undertake the excavation. Such
provision will ensure that the portion affected by the
excavation will be restored to its original state.

20. Permit Fee on Circus and Other Parades

Legal bases : Sec 458(1)(ii), Sec 447(1)(ii)

Remarks : To ensure public order and welfare

21. Permit Fee for the Conduct of Group Activities (Sec )

Legal bases : Sec 458(1)(ii), Sec 447(1)(ii)

Remarks : To ensure public order and welfare

22. Permit Fee on Film-Making (Sec )

Legal bases :
Remarks :

e. Service Fee
Service fees are collected for services rendered or for conveniences
furnished by the LGU. Such fee amount is commensurate to the cost of providing
the service. The following are the common service fees imposed by LGUs:

1. Secretarys Fee.

Fees collected for requesting copies of official records and documents

from the office of the LGU.
Guidelines in Reviewing the Local Revenue Measures Page 24
 2. Local Civil Registry Fees.

Fees collected for services rendered by the civil registrar office of the
LGU.

3. Police Clearance Fee.

Fees paid for each police clearance certificate obtained from the
station commander of the Philippine National Police located in the
LGU.

4. Sanitary Inspection Fee.

Fee collected from each business establishment or house for rent in

the LGU for the purpose of enforcing sanitary rules and regulations

5. Service Fees for Health Examination.

Fee collected from any person who is given an examination by the

LGU health officer or his authorized representative.

6. Service Fee for Garbage Collection.

Annual fee collected for hauling of garbage from the following:

a. Owner, manager or operators of establishment located in the LGU.

Usually paid during application or renewal of business licenses.
b. Owner of residential properties. Fees are collected during payment
of real property tax.

7. Dog Vaccination Fee.

Fees collected from every dog owner whose dog is vaccinated within
the territorial jurisdiction of the LGU

f. Charges

Impositions for the operation of public enterprises in connection with

the governments exercise of its proprietary functions

1. Fishery Rentals, Fees and Charges

Legal bases : Sec 458(2)(xi), Sec 447(2)(xi)

Guidelines in Reviewing the Local Revenue Measures Page 25

 Remarks : No rental fee, charge or any imposition whatsoever shall be
collected from marginal fishermen.

Marginal fisherman refers to an individual engaged in

subsistence fishing which shall be limited to the sale, barter
or exchange or marine products produced by himself and his
immediate family, and whose annual net income from
fishing does not exceed Php50,000.00 or the poverty line
established by NEDA for the particular region or locality.

2. Rentals of Personal and Real Properties Owned by the LGU (Sec )

Legal bases : Sec 458(2)(v), Sec 447(2)(v), Sec 458(3)(iii), Sec 447(3)(iii)
Remarks : Rental rates of the properties shall be based on full cost
pricing in order to generate revenues and have enough funds
for the maintenance of such properties.

3. Charges for Parking (Sec )

Legal bases : Sec 458(5)(v), Sec 447(5)(v), Sec 458(5)(vi), Sec 447(5)(vi)
Remarks : To regulate traffic and the use of streets

4. Hospital Service Fee (Sec )

Legal bases : Sec 153

Remarks : LGUs may impose reasonable service fees and charges for
services rendered

5. Charges for Use of Waterworks System (Sec )

Legal bases : Sec 154, Sec 458(5)(vii), Sec 447(5)(vii)

Remarks : LGUs may fix rates and impose charges for the operation of
public utilities owned, operated and maintained by them
within their jurisdiction

6. Cemetery Charges (Sec )

Legal bases : Sec 458(4)(ix), Sec 447(4)(ix)

Remarks : To regulate the operation and maintenance of the burial or
cremation of the dead

7. Market Fees and Charges (Sec )

Legal bases : Sec 458(5)(ii), Sec 447(5)(ii), Sec 458(5)(iv), Sec

Guidelines in Reviewing the Local Revenue Measures Page 26

 447(5)(iv)
Remarks : LGUs may fix rates and impose charges and fees for
the use of public markets constructed and operated by
the LGUs in their exercise of proprietary powers

8. Slaughterhouse Fees (Sec )

Legal bases : Sec 458(5)(ii), Sec 447(5)(ii)

Remarks : LGUs may impose fees for the use of slaughterhouses or
animal corrals constructed and operated by LGUs

9. Toll Fees or Charges (Sec )

Legal bases : Sec 155

Remarks : The LGU can only collect toll fees or charges on the for the
use of any public road, pier or wharf, waterway, bridge,
ferry or telecommunication system if such facilities are
funded and constructed by the LGU

Action taken by the reviewing authority

This Guide is intended for local officials tasked to review local revenue codes. The Guide uses
the Model City Revenue Code which includes provincial and municipal impositions as working
reference.
AREAS FOR REVIEW OF THE LOCAL REVENUE CODE
In general, a higher level Sanggunian shall review the following with respect to the
Revenue Ordinance submitted to it:

consistency with constitution and national laws

Scope of Taxing and regulatory power (indicate relevant Sections of the Code)
Rate/frequency of increase
Compliance with mandatory procedures

Consistency with constitution and national laws

xxxxxxxxxxxxxxxxxxxxxx
Scope of Taxing and regulatory power including rate/frequency of increase (indicate
relevant Sections of the Code)

CHAPTER I. GENERAL PROVISIONS

Article A. Short Title and Scope
Article B. Construction of Provisions
Article C. Definition of Terms

FOCUS: Chapter I, General Provisions. Articles A, B and C are provisions common to revenue
codes/ordinances. They are generally accepted in the form and style presented.

CHAPTER II. City Taxes

Guidelines in Reviewing the Local Revenue Measures Page 27

ARTICLE A. Real Property Taxes
ARTICLE B. Tax on Idle Lands
ARTICLE C. Special Levy on Lands
ARTICLE D. Socialized Housing Tax

FOCUS: Land-based taxes are easily explained. Except for special levy, the taxes are based on
assessed values of real properties.
The rates of levy are:
Basic Tax (under Article A. RPT)
o Provinces not exceeding one percent (1%) of the assessed value of the
real property
o Cities and municipalities in the Metropolitan Manila Area not exceeding
two percent (2%) of the assessed value of the real property
Additional Levy for the Special Education Fund For provinces, cities and
municipalities within the Metropolitan Manila Area, a fixed uniform rate of one
percent (1%) of the assessed value of the real property. The levy is in addition
to, and collected at the same time as, the basic real property tax.
Idle Land Tax A province, city or municipality within the Metropolitan Manila
Area: not exceeding five percent (5%) of the assessed value of the real property
which shall be in addition to the basic real property tax.
Special Levy on Lands LGUs may impose a special levy on lands especially
benefitted by public works or improvements funded by the LGU. The special
levy shall not exceed sixty percent (60%) of the cost of such projects and
improvements, including the cost of acquiring land and such other real property in
connection therewith.
o Sec. 240 of LGC provides that: A province, city or municipality may
impose a special levy on the lands comprised within its territorial
jurisdiction especially benefited by public works projects or improvements
funded by the LGU concerned: provided, however, that the special levy
shall not exceed sixty (60) percent of the actual cost of such projects and
improvements, including the costs of acquiring land and such other real
property in connection therewith: provided, further, that the special levy
shall not apply to lands exempt from basic real property tax and the
remainder of the land portions of which have been donated to the LGU
concerned for the construction of such projects or improvements.
o Sec. 241 of LGC stipulates that: A tax ordinance imposing a special levy
shall describe with reasonable accuracy the nature, extent, and location of
the public works projects or improvements to be undertaken, state the
estimated cost thereof, specify the metes and bounds by monuments and
lines and the number of annual installment for the payment of the special
levy which in no case shall be less than five (5) nor more than ten (10)
years. The sanggunian concerned shall not be obliged, in the
apportionment and computation of the special levy, to establish a uniform
percentage of all lands subject to the payment of the tax for the entire
district, but it may fix different rates for different parts or sections thereof,
depending on whether such land is more or less benefited by the proposed
work.
Guidelines in Reviewing the Local Revenue Measures Page 28
 o Sec. 242 of the LGC states that: Before the enactment of an ordinance
imposing a special levy, the sanggunian concerned shall conduct a public
hearing thereon; notify in writing the owners of the real property 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 ordinance.
o Sec. 243 of the LGC provides that: The special levy authorized herein
shall be apportioned, computed and assessed 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 of the
property does not appear of record in his books. Upon the effectivity of
the ordinance imposing special levy, the assessor concerned shall
forthwith proceed to determine the annual amount of special levy assessed
against each parcel of land comprised within the area especially benefited
and shall send to each landowner a written notice thereof by mail, personal
service or publication in appropriate cases.
o Sec. 244 of the LGC stipulates that: Any owner of real property affected
by a special levy or any person having a legal interest therein may, upon
receipt of the written notice of assessment of the special levy, avail of the
remedies provided for in Chapter 3, Title Two, Book II of the LGC.
o Sec. 245 of the LGC states that: The special levy shall accrue on the first
day of the quarter next following the effectivity of the ordinance imposing
such levy.
The Socialized Housing Tax LGUs are authorized to impose an additional one-half percent
(0.5%) tax on assessed value of all lands in urban areas in excess of fifty thousand pesos
(Php50,000.00). (Republic Act 7279)
Urban areas refers to all cities regardless of their population density and to municipalities
with a population of at least five hundred per square kilometer.

ARTICLE E. Tax on Transfer of Real Property Ownership (section 135)*

ARTICLE F. Tax on Printing and Publication (section 136)**
ARTICLE G. Franchise Tax (section 137)**
ARTICLE H. Professional Tax***
ARTICLE I. Amusement Tax on Admission (RA 9640)***
ARTICLE J. Annual Fixed Tax on Delivery Vans (dealer, manufacturer, wholesaler
*the fair market value under Section 135 refers to the current approved schedule of market
values used by the assessor.
** provision on newly started business applies only to tax on printing and publication, and
franchise
***uniform rate for provinces and cities

FOCUS: Taxes under Articles E, F, G, H, I and J impositions allocated to provinces which cities
may also impose at rates not exceeding fifty percent (50%) of the amounts allowed for the
province, except the rates for professional and amusement taxes.
The tax on sand, gravel and other quarry resources is not included in the Model as it is the
province that has the exclusive authority to impose such tax. It is only in the case of highly

Guidelines in Reviewing the Local Revenue Measures Page 29

urbanized city, where the City Mayor issues the permit to extract sand, gravel and other quarry
resources.

ARTICLE L. Graduated Tax on Business

FOCUS: Business taxes under Sections 143 of the Local Government Code (LGC), viz:
a) On manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and
compounders of liquors, distilled spirits and wines
b) On wholesalers, distributors or dealers in any article of commerce of whatever kind or
nature
c) On exporters and on manufacturers, millers, producers, wholesalers, distributors, or
dealers of essential commodities
d) On retailers
e) On contractors and other independent contractors*
f) On banks and other financial institutions
g) On peddlers engaged in the sale of any merchandise or article of commerce
h) On any business, not otherwise specified in the foregoing enumeration

Items a), b) c) and e) are provided with graduated schedule of fixed taxes; while items d), f), g)
and h) are percentage taxes. These impositions are enumerated in Section 143. (T)he
Sanggunian concerned may prescribe a schedule of graduated tax rates for item h) but in no case
to exceed the rates prescribed (t)herein.
A distinguishing characteristic of this set of taxes is that the tax base (except for peddlers) is
gross sales or receipts for the preceding calendar year.
Tax rates can be increased by not more than 10% once every 5 years is provided by the Code
(Section 191).
* Definition of Contractor- expand the enumeration of contractors to include other businesses
providing services for a fee
ARTICLE M. Other Taxes on Business pursuant to Sections 186 and 143(h)
a) Tax on Mobile Traders An annual tax of one percent (1%) on the gross receipts of any
person, who either for himself or commission, travels from place to place and sells goods
or offers to deliver the same, using a vehicle.
[Provinces were authorized under Presidential Decree 231 to impose taxes on peddlers engaged
in the sale of any merchandise or article of commerce within the province using trucks,
motorized bicycles, tricycles or other motorized vehicles. The tax on mobile traders is
impossable on peddlers using vehicles who sell or deliver goods within the city or municipality.]
b) Tax on Ambulant and Itinerant Amusement Operators A fixed tax per day prescribed by
the Sanggunian.
c) Tax on Mining Operations (Department of Finances Local Finance Circular No. 2-09)
c.1 Mining companies which exclusively operate for the extraction of minerals, metallic
or non-metallic, the tax rate shall not exceed two percent (2%) of their gross receipts
pursuant to Section 143(h) of the LGC Imposed under the ordinance of the local
government unit (LGU) concerned.

c.2 Mining companies whose operations include the processing of extracted minerals to
finished products shall be taxed on their gross receipts pursuant to Section 143(a) of the
LGC imposed under the ordinance of the LGUs concerned.

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c.3 Liability Pay to Real Property Tax Any person, grantee or concessionaire who shall
undertake and execute mining operations (exploration, development and commercial utilization)
of certain mineral deposits existing within the mining area shall be subject/liable to real property
tax.
c.4 Payment of Mayors Permits and Other Regulatory Fees Mayors permits and other
regulatory fees shall be collected before the start of the mining operation of a mining company
pursuant to Sections 147 and 151 of the LGC and as implemented under a duly-enacted revenue
code of the LGU concerned.]
d) Tax on Forest Concessions An annual tax not exceeding two percent (2%) of the gross
receipts for the preceding year.
e) Tax on Newly-Started Business A tax of one-twentieth (1/20) of one percent (1%) of the
capital investment. apply only to printing and publication, and franchise

FOCUS: Taxes under Article M are basically impositions under Section 186 of the LGC.
In discussing taxes based on gross sales/receipts, it might be helpful to mention in passing tools
for checking/validating taxpayers declarations, e.g., examination of the books of accounts and
pertinent records, obtaining/sharing information from other government agencies, obtaining
financial statements supporting income tax returns, use of the Presumptive Income Level, in
determining gross receipts of business. The assumption use must be understood by tax payer
A Sanggunian may grant tax exemption. A Municipal Mayor cannot, however, waive the
collection of inspection fees, since it is levied under the police power. (DILG Opinion No. 148-
1964)
The Rule of the Situs of the Tax also needs emphasis. It is observed that many are not aware
that:
1. businesses, maintain or operating branch or sales outlet shall record the
sale in the branch or sales outlet making the sale or transaction, and the tax hereon
shall accrue and shall be paid to the municipality where such branch or sales
outlet is located.
2. Seventy percent (70%) of all sales recorded in the principal office shall be
taxable by the city or municipality where the factory, project office, plant or
plantation is located.
Another mechanism that LGUs could avail of is the Presumptive Income Level Technique. The
methodology is simple but needs explanation and illustration.

CHAPTER III. PERMIT AND REGULATORY FEES

FOCUS: General Considerations

Regulatory fees are impositions in the exercise of the police power, the power to regulate
business and activities.
Fees shall be commensurate to the cost of regulation, inspection and licensing (Section
147, LGC)
Fees and charges shall be commensurate to the cost of issuing the license or permit fee
and the expenses incurred in the conduct of the necessary inspection or surveillance
(Article 233, Implementing Rules and Regulations)
No such fee or charge shall be based on capital investment or gross sales or receipts of
the person or business (Article 233, Implementing Rules and Regulations)

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 Barangay, clearances and certifications shall not exceed regulatory fees imposed by the
municipality/city concerned (Section 152 of the Code and Article 420 (c, d, e,..) of IRR

ARTICLE A. Mayors Permit Fee of Business

The Model suggests the use of the Philippine business classification set by DTI, for establishing
the size and extent of business operations for purposes of fixing and rationalizing the fees for
Mayors Permit. This scheme would abide by the prescription that no regulatory fee shall be
based on capital investment or gross sales or receipts as provided in Article 233 of the IRR. This
will also provide a convenient measure for determining the commensurate cost of issuing the
license and the expenses incurred in the conduct of the necessary inspection or surveillance in
the performance of LGUs regulatory function.

Guidelines in Reviewing the Local Revenue Measures Page 32

Enterprise Scale Asset Limit Work Force
Micro-Industries Php150,000 & below No specific
Cottage Industries Above Php150,000 to Php1.5 M Less than 10
Small Scale Industries Php1.5M to Php15M 10-99
Medium-Scale Industries Php15M to Php60M 100-199
Large-Scale Industries Above Php60M 200 or more

ARTICLE B. Fees for Sealing and Licensing of Weights and Measures

The provisions in the Local Revenue Codes should conform with the Consumer Act of 1992,
Republic Act 7394.

ARTICLE C. Building Permit Fees

The Local Revenue Codes should adopt the Revised Rates of Building Permit Fees prescribed by
the Department of Public Works and Highways pursuant to the National Building Code.

ARTICLE D. Permit Fee for Zonal/Locational Clearance (adopt updated HLURB Rates)
ARTICLE E. Permit Fee for Inspection and Verification of Subdivision (adopt updated HLURB
Rates)

Articles D and E are in pursuance of Sections 457 (2) (ix) and 457 (2) (x) for cities and Sections
447 (2) (ix) and 447 (2) (x) in the case of municipalities.

The following permit fees are imposed under the police power for regulation purposes:

ARTICLE F. Permit Fee for Tricycle Operation

Establish minimum standard size and seating capacity of Side Cars to ensure convenience and
safety of the riding public
ARTICLE G. Permit Fee for Pedaled Tricycle (barangay)
ARTICLE H. Permit Fee for Owners/Operators/Licensees/Promoters and Cockpit Personnel
ARTICLE I. Special Permit for Cockfights
ARTICLE J. Permit Fee for Occupation/Calling not Requiring Government Examination
ARTICLE K. Fees for Registration and Transfer of Large Cattle
ARTICLE L. Fees for Impounding Astray Animals (barangay)
ARTICLE M. Cart of Sledge Registration Fee (barangay)
ARTICLE N. Permit Fee on Caretela or Calesa (barangay)
ARTICLE O. Permit Fee for Agricultural Machinery and Other Heavy Equipment
ARTICLE P. Permit Fee for Inspection of Machineries and Engines
ARTICLE Q. Permit Fee for Storage of Flammable and Combustible Materials
ARTICLE R. Permit Fee for Temporary Use of Streets, Sidewalks, Alleys, Parks and
Playgrounds
ARTICLE S. Permit Fee for Excavations
ARTICLE T. Permit Fee for Circus and Other Parades
ARTICLE U. Permit Fee for Conduct of Group Activities
ARTICLE V. Permit Fee for Film Making

Guidelines in Reviewing the Local Revenue Measures Page 33

FOCUS:
1. Rationalizing rates
2. Preventing issuance of permits for illegal activities
3. Guarding against impositions in restraint of trade, e.g., taxes, fees and charges and other
impositions upon goods carried into or out of, or passing through the territorial
jurisdiction of local government units in the guise of wharfage, tolls for bridges or
otherwise, or other taxes, fees or charges in any form whatsoever upon such goods or
merchandise. (Common Limitations) (Section 133 (e), LGC)
An LGU may impose a market entrance fee, but not a market outgoing fee. (DOF Opinion, April
15, 1993).

CHAPTER IV. SERVICE FEES

In general, fees are collected for the services of a public officer and/or for services provided by
the LGU.

ARTICLE A. Secretarys/Certifications Fees

ARTICLE B. Local Civil Registry Fees
ARTICLE C. Police Clearance Fees
ARTICLE D. Sanitary Inspection Fees
ARTICLE E. Service Fees for Health Examination
ARTICLE F. Garbage Collection Fees
ARTICLE G. Dog Vaccination Fees.

FOCUS:
1. Cost recovery
2. Pricing

CHAPTER V. CITY CHARGES

City charges are imposed in the exercise of the proprietary nature (as legal persons) of LGUs.

ARTICLE A. Fishery Rentals, Fees and Charges (Fishery Code)

ARTICLE B. Rentals of Personal and Real Properties Owned by the City
ARTICLE C. Charges for Parking
ARTICLE D. Hospital Charges
ARTICLE E. Waterworks System Charges
ARTICLE F. Cemetery Charges
ARTICLE G. Market Fees and Charges
ARTICLE H. Slaughterhouse and Corral Fees
ARTICLE I. Toll Fees or Charges
FOCUS:
1. Cost recovery
2. Pricing

CHAPTER VI. COMMUNITY TAX

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CHAPTER VII. GENERAL ADMINISTRATIVE PROVISIONS
ARTICLE A. Collection and Accounting of City Taxes and Other Impositions
ARTICLE B. Civil Remedies for Collection of Revenues
ARTICLE C. Taxpayers Remedies
ARTICLE D. Miscellaneous Provisions
CHAPTER VIII. GENERAL PENAL PROVISIONS
CHAPTER IX. FINAL PROVISIONS
Rate and frequency of increase. Section 191 of the LGCode

Compliance with mandatory procedures (enhanced steps)

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March 27, 2012

INPUT:
RA 7279 Socialized Housing Tax
Section 132 of LGC. LGU is the local taxing authority.
Include in the general opening statements the authority of city to impose franchise tax,
amusement tax. Rules of interpretation in in the IRR.
Get the issuance by DILG on tax codification process for possible inclusion
Agreement of the city/municipality on imposing charges. In case of garbage collections
by the city/municipality and barangays
Provide an explicit statement defining the use of the barangay clearance. Not for
operating a business but as a requirement for the city or municipality to start the
processing of renewal/registration of business.
Check on the e-commerce act on publication of revenue ordinances. No need for
publication if published on the web?
Steps in enacting a revenue ordinance. Publication for approved ordinances vs. Posting
for public hearing?
Issue on the 30days prescriptive period on the review. No action taken? To be issued
by DILG for clarification
Where can the sangguniang bayan refer the revenue measures they are reviewing?
Define legal action on the review of revenue measures.
See Sec 146 of LGC
Franchise
Cooperatives
Preparatory steps in review process

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