Updated 17 Mar 2013
PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
1. General Principles, Definitions, and
Limitations
(Read Sections 128-133 and 186, LGC; Art.
217-287, IRR of the LGC)
Q1.What is the basis of
government’s  taxing  power?
It is only granted by the Constitution and is not
inherent in the Local Government.
In MERALCO V. PROVINCE OF LAGUNA [MAY 5, 1999],
the Supreme Court explained that prior to the 1987
Constitution; the taxing power of LGUs was exercised
under limited statutory authority. Under the present
Constitution, the taxing power of LGUs is deemed to
exist, subject only to specific exceptions that the law
may prescribe. Otherwise stated, the taxing power of
LGUs is a direct grant of the Constitution, and is not a
delegated power of Congress.
Q1.1. Who exercise the
taxation for LGUs?
It is exercised by the Sanggunian through the
passage of local ordinance (see SECTION 132, LGC)
Q1.1.1. What is the significance of a
local tax ordinance?
What determines tax liability is the tax ordinance. The
LGC is simply the enabling law for the local
legislative body. In YAMANE V. BA LEPANTO
CONDOMINIUM CORP [OCTOBER 25, 2005], at issue
was whether the City Government of Makati can hold
condominium corporations liable to pay business
taxes. The Supreme Court noted that the City
Treasurer did not make any reference to any
provision of the Makati City Revenue Code which
would serve as legal authority for the collection of
business taxes from condominiums in the city. The
Supreme Court pointed out that in issuing a notice of
assessment, reference to the local tax ordinance is
vital because the power of LGUs to impose local
PM REYES NOTES ON TAXATION II: LOCAL TAXATION
BY PIERRE M ARTIN DE LEON REYES
This reviewer is a compilation of personal notes in Taxation Two and notes and lectures from Atty. Gruba and Atty. Montero. References have
also been made to the following books: DE LEON & DE LEON, J R. THE FUNDAMENTALS OF TAXATION (2012); DE LEON & DE LEON, JR.
COMPREHENSIVE REVIEW OF TAXATION (2010); VITUG & ACOSTA. TAX LAW AND JURISPRUDENCE (2006); DOMONDON, TAXATION VOLUME II: INCOME
TAX (2009); CO-UNTIAN, JR. TAX DIGEST (2009); MAMALATEO , REVIEWER ON TAXATION (2008). This reviewer is best used with SACDALAN-
CASASOLA, NIRC AND OTHER LAWS (2012).
Possessors are granted the right to reproduce and distribute this reviewer as well as the right to convert the work to any medium for the
purpose   of   preservation   and/or   continued   distribution   provided   that   the   author’s   name   remains   clearly   associated   with   the   work and that no
alterations of the form and content are made.
taxes is exercised through the appropriate ordinance
enacted by the Sanggunian and not by the LGC.
Q1.2. Enumerate the fundamental
principles that shall govern the
exercise of the taxing power of the
LGUs? Section 130, LGC
the local
1. Taxation shall be uniform in each LGU
2. Taxes, fees, charges and other imposition
shall:
a. Be equitable and based as far as
practicable on the taxpayer’s   ability  
to pay
b. Be levied and collected only for
public purposes
c. Not be unjust, excessive, oppressive,
or confiscatory
d. Not be contrary to law, public policy,
national economic policy or in
restraint of trade
3. The collection of local taxes, fees, charges
and other impositions shall in no case be let
power of to any private person
4. The revenue collected shall inure solely to
the benefit of and be subject to disposition by
the LGU levying the tax, fee, charge, or other
imposition unless otherwise specifically
provided;
5. Each LGU shall, as far as practicable, evolve
a progressive system of taxation.
Q1.3. What are the limitations on the
taxing power of LGUs?
As provided in SECTION 133, LGUs cannot impose the
following:
a. Income tax (except on bank and financial
entities)
b. DST
c. Estate  and  Donor’s  taxes
d. Customs Duties
e. Taxes on goods passing through the LGU
f. Taxes on agricultural and aquatic products
sold by marginal farmers and fisherman

PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
g. Taxes on BOI-registered enterprises
h. Excise taxes on articles under the Tax Code
and taxes on petroleum products
i. Percentage tax and VAT
j. Taxes on gross receipts of transportation
contractors
k. Taxes on premium paid by way of
reinsurance
l. Taxes on registration of motor vehicles
m. Taxes on Philippine products actually
exported
n. Taxes on Countryside and Barangay
Business Enterprises and cooperatives
o. Taxes and fees on the National Government
As provided in SECTION 186, LGUs cannot impose
taxes that are specifically enumerated or taxed under
the provisions of the Tax Code.
Section 133(e)
Q1.3.1. Is a municipal ordinance
imposing fees on goods (corn)
that pass through a products. In the latter, the exemption refers not only
municipality’s  territory  valid?
No. As held in PALMA DEVELOPMENT CORP V.
ZAMBOANGA DEL SUR [OCTOBER 16, 2003], LGUs,
through their Sanggunian, may impose taxes for the
use of any public road such as a service fee imposed
on vehicles using municipal roads to a wharf.
However, Section 133(e) prohibits the imposition in
the guise of wharfage, of fees as well as other taxes
or charges in any form whatsoever on goods or
merchandise. In this case, the LGU cannot tax the
goods even in the guise of police surveillance fees.
Section 133(h)
Q1.3.2. The Province of Bulacan passed
an ordinance imposing tax on
minerals extracted from public
lands but went on to collect tax
on minerals extracted from
private lands. Since the LGC
only provides for tax on public
lands, is the action of the
Province of Bulacan valid?
No. As held in PROVINCE OF BULACAN V. CA
[NOVEMBER 27, 1998], generally, the LGU can impose
such tax even if not in LGC since Section 186 of the
Code is sweeping. However, the province cannot levy
PIERRE MARTIN DE LEON REYES
Updated 17 Mar 2013
on minerals from private lands because it is an excise
tax on an article already covered by the Tax Code.1
Q1.3.3. Petron maintains a depot or bulk
plant at the Navotas Fishport
Complex where it engages in the
selling of diesel fuels to vessels
used in commercial fishing.
Navotas City levied business taxes
on its sale of petroleum products.
Can the LGU levy the business tax
on the sale of petroleum?
No, the LGU cannot impose any local tax on
petroleum products. As held in PETRON CORP. V.
T IANGCO [APRIL 16, 2008], the prohibition with respect
to petroleum products extends not only to excise
taxes but all taxes, fees, and charges. Section 133(h)
provides for two possible bases for exemption: (1)
excise tax on articles enumerated under the Tax
Code; and (2) taxes, fees, and charges on petroleum
to direct or excise taxes to be levied by the LGUs on
petroleum products but on all types of taxes on
petroleum products including business taxes.
Section 133(j)
Q1.3.4. What is the rationale for the
exemption of common carriers
from local taxes?
As held in FIRST PHILIPPINE I NDUSTRIAL CORP V. CA
[DECEMBER 29, 1998], the legislative intent in
excluding from the taxing power of the LGU the
imposition of business tax against common carriers is
to prevent a duplication of the so-called common
carrier’s  tax.
Section 186
Q1.3.5. Are broadcasting and
telecommunication companies
liable to pay local transfer
taxes?
No. As held in both SMART COMMUNICATIONS V. T HE
CITY OF DAVAO [SEPTEMBER 16, 2008] and QUEZON
1
This applies the Preemption or Exclusionary Rule wherein the
national government elects to tax a particular area, impliedly
withholding from the LGU the delegated power to tax the same
field.
2
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PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
CITY V. ABS-CBN BROADCASTING CORPORATION admission fees; and (c) billboards,
[OCTOBER 6, 2008], these franchise holders are now signboards and outdoor advertisements
2
subject to VAT.
Common only to Cities and Municipalities
2. Taxing Power of LGUs 1. Community tax

(Read Sections 134-144, 146-149 and 151-164, Common to all LGUs

LGC; Art. 223-240, 241 and 244-252, IRR of the 1. Service fees and charges for services
LGC) rendered
2. Public utility charges
Q2.What is the scope of the taxing power of 3. Toll fees or charges
the following LGUs: (a) province; (b)
Municipalities; (c) Cities; and (d)
Barangays? Q2.1. Who are covered by the local
business tax?
Province
1. Manufacturers, assemblers and producers
1. Local Transfer Tax
2. Business Tax on Printing and Publication 2. Wholesalers, dealers and distributors
3. Local Franchise Tax 3. Exporters, manufacturers of essential
4. Tax on Sand, Gravel and Other Quarry commodities
Resources 4. Retailers (if both wholesale and retail, then
5. Professional Tax pay both taxes)
6. Amusement Tax 5. Contractors
7. Tax on Route Delivery Truck or Vans 6. Banks and other financial institutions3
7. Peddlers
8. Other business not specified4
Municipalities
1. Local Business Tax Q2.1.1. Can an LGU tax a condominium
2. Fees on business and occupation corporation?
3. Fees on sealing and licensing of weights and
measures No. As held by the Supreme Court in YAMANE V. BA
4. Fishery Rentals, Fees and charges LEPANTO CONDOMINIUM CORP [OCTOBER 25, 2005],
condominium   corporations   are   not   “businesses”   as  
Cities the same is defined under the LGC which is a
They may levy taxes which the province and “commercial  activity  regularly  engaged  with  a  view  to  
municipality may impose profit.”   Even   if   a   condominium   corporation   can   levy  
fees, these are used merely to finance the expenses
Barangays of the condominium and nothing more.

1. Taxes on stores with fixed business
establishments (gross receipts of P50,000 or
less for cities, P30,000 for municipalities)
2. Service fees for use of barangay-owned
properties and services rendered
3. Barangay clearance
4. Other fees and charges for (a) commercial
breeding of fighting cocks, cockpits and
cockfighting; (b) on places of recreation with
2
The   Supreme   Court   ruled   in   both   cases   that   the   “in   lieu   of   all
taxes”   clause   in   their   franchises   applies   only   to   national   internal   guidelines for financing companies.
revenue taxes and not to local taxes. As such, they would have
been liable to pay local transfer taxes. However, with the advent of
the VAT law, such franchise holders are instead liable to pay VAT.
Q2.1.2. What is the tax base of the local
business tax?
The local business tax is imposed on gross receipts.
In ERICSSON T ELECOMMUNICATIONS V. CITY OF PASIG
[NOVEMBER 22, 2007], Ericsson was assessed for
3
DOF LOCAL FINANCE CIRCULAR 01-93 provides for the guidelines
governing the power of municipalities and provinces to impose a
business tax on banks and other banking institutions. DOF LOCAL
FINANCE CIRCULAR 2-93 provides for the guidelines for insurance
companies. DOF LOCAL FINANCE CIRCULAR 3-93 provides for
4
Those already subject to tax under (1) to (7) can no longer be
subject to tax under (8) otherwise it will be deemed as double
taxation.

PIERRE MARTIN DE LEON REYES 3

 Updated 17 Mar 2013
PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
deficiency local business tax but countered that the (Read Section 150, LGC; Art. 243, IRR of the
assessment was erroneous for having been based on LGC)
is gross revenue rather than just its gross receipts.
The Supreme Court ruled that the local business tax Q3.Give the rule on situs as stated in Section
must be imposed on gross receipts. In the said case,
150 of the LGC.
the Supreme Court differentiated gross receipts and
gross revenue. Gross receipts include money or its
Section 150(a) –
equivalent actually or constructively received in
consideration of services rendered or articles sold,
If there is branch/sales office in the municipality or
exchanged, or leased, whether actual or constructive
city where the sale or transaction is made, the tax
whereas gross revenue covers money or its
shall accrue and shall be paid where such branch or
equivalent actually or constructively received,
sales outlet is located.
including the value of services rendered or articles
sold, exchanged or leased, the payment of which is
If there is no branch/sales office in the city or
yet to be received.
municipality where the sale or transaction is made,
the sale shall be recorded in the principal office and
Q2.2. ABC Mining was issued a mining the taxes shall accrue and shall be paid to such city
lease contract which granted it the or municipality (where the principal office is located)
right to extract and use for its
purposes all mineral deposits With Recorded at Allocation
within the boundary lines of its branch/sales
mining claim in Benguet. Later, the office
Provincial Treasurer demanded Yes Branch/sales None
payment of sand and gravel tax for office
the quarry materials that ABC No Principal office None
extracted. ABC countered that the
sand and gravel tax applied only to Section 150(b) –
commercial extractions. Is ABC
The following sales allocation shall apply to
correct? manufacturers with factories, plants and plantations,
etc.:
No. In LEPANTO CONSOLIDATED MINING COMPANY V.
AMBANLOC [JUNE 29, 2010], the Supreme Court found If the plantation and factory are located in the same
that under the Revised Benguet Revenue Code, only place
gratuitous permits were exempt from the sand and
gravel  tax,  and  Lepanto’s  permit  was  not  a  gratuitous   1. 30% of all sales recorded in the principal
permit. Hence, Lepanto was liable to pay the office shall be taxable by the city or
provincial sand and gravel tax. municipality where principal office is located
2. 70% shall be taxable by the city or
Q2.3. Is the amusement tax on municipality where
admission tickets to PBA games a
national or local tax? If the plantation and factory are not located in the
same place, the 70% above shall be divided as
It is a national tax. In PBA v CA [AUGUST 8, 2000], follows
the Supreme Court held that it was the National
Government which could collect amusement taxes 1. 60% to the city or municipality where the
from the PBA. While Section 13 of the Local Tax factory is located
Code   mentions   “other   places   of   amusement,”   2. 40% to the city or municipality where the
professional basketball games are definitely not plantation is located
within its scope under the principle of ejusdem
generis.
3. Situs of Local Taxes
Plantation & Allocation to Allocation to
factory in principal factory, etc

PIERRE MARTIN DE LEON REYES 4


PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
same location
Yes 30% 70%
No 30% The 70%
above shall be
divided:
1. Factory –
60%
2. Plantation –
40%
If two or more
factories, etc =
70% is prorated
Note that Section 150(b) is only resorted to if there is
no branch or sales office. In addition, the allocation
shall be applied irrespective of whether or not the
sales are made in the locality where the factory, plant
or plantation is located.
Q3.1. ABC is engaged in manufacturing
If one jurisdiction who household products. It secured the
services of an independent
has the right to collect,
contractor XYZ to provide local
and they don’t, the other
physical distribution facilities
jurisdictions won’t have within the specified places in the
right to claim that which Philippines. XYZ has a warehouse
the rightful jurisdiction in Tacloban City and makes
has. deliveries   to   ABC’s   customers   delivered to customers outside
outside the city. Under the
contract, ABC can also make
deliveries of its products in other
places of the country from its own
warehouse in Makati. What is the
situs of taxation of the sales made
by ABC and XYZ?
As held in BUREAU OF LOCAL GOVERNMENT OPINION
DATED MARCH 7, 1994, the products taken from the
warehouse of PBE in Tacloban City and delivered to
CPI's customers outside the city should be recorded
and the tax thereon paid in Tacloban City where said
warehouse is situated. As to the deliveries or sales
made by CPI of products taken from its warehouse in
Makati to places where it does not have any branch,
sales office, or another warehouse, the same should
be recorded in Makati where its principal office is
located and the taxes due thereon should likewise be
paid to said municipality.
Q3.2. MI is a corporation engaged in
trading books. It holds an office in
PIERRE MARTIN DE LEON REYES
Updated 17 Mar 2013
Pasig where all transactions are
made. However, MI also maintains
a warehouse in Mandaluying
which serves as its storage area
and no transactions are made
therein. What is the situs of
taxation  of  the  sale  of  MI’s  books?
As held in BUREAU OF LOCAL GOVERNMENT OPINION
DATED MARCH 29, 1993, Mi should be liable for gross
sales tax to the then Municipality of Pasig. On the
other hand, Mandaluyong, where the warehouse is
located but where no transactions are made, may
only   collect   Mayor’s   permit   fee   and   other   regulatory  
fees.
Q3.3. How are the sales of route trucks
and vans taxed?
If the sale is made in a place with a branch office, the
sale is reported in the LGU where the branch office is
located. However, if the sale is made in a place
without a branch office, the sale is reported in the
LGU where the sales are withdrawn.
Q3.3.1. The City of Cebu imposed a
gross sales tax on sales of
matches stored by Philippine
Match Co. in Cebu City but
the city. Id the imposition valid?
Yes. As held in PHILIPPINE MATCH CO. V. CITY OF
CEBU [JANUARY 18, 1978], the city can validly tax the
sales of matches to customers outside of the city as
long as the orders were booked and paid for in the
company’s   branch   office   in   the   city.   Those   matches  
can be regarded as sold in the city because the
matches were delivered to the carrier in Cebu City.
Generally, delivery to the carrier is delivery to the
buyer. A different interpretation would defeat the tax
ordinance and encourage tax evasion.
Q3.3.2. ABC Bottlers Inc. maintained a
bottling plant in Pavia, Iloilo but
sold softdrinks in Iloilo City by
means of a fleet of delivery
trucks called rolling stores
which went directly to
customers. Iloilo City passed an
ordinance imposing a municipal
license tax on
distributors/sellers in the area.
5

PM REYES NOTES ON TAXATION II:
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Is ABC liable under the tax
ordinance?
Yes. In ILOILO BOTTLERS INC. V. CITY OF ILOILO
[AUGUST 19, 1988], the Supreme Court found that the
bottling company was engaged in the business of
selling/distributing softdrinks in Iloilo City through its
rolling stores where sales transactions with
customers were entered into and sales were
perfected and consummated by route salesmen,
Hence, the company was subject to municipal license
tax.
4. Collection of Local Taxes
(Read Sections 165-171, LGC; Art. 253-259, IRR of
the LGC)
Q4.When do local taxes accrue?
General Rule: On January 1
Exception: New taxes which will accrue on the 1st
day of the next quarter following effectivity of the
ordinance.
Q5.When are local taxes paid?
General Rule: Within the first 20 days of January or
of each subsequent quarter, as the case may be
Exception: For justifiable reason or cause, the
Sanggunian may extend the time for payment without
surcharge or penalties but only for a period not
exceeding 6 months.
Q6.What penalties are imposable on failure
to pay local taxes?
The penalty of 25% and 2% interest per month not to
exceed 36 months (or a maximum of 72%) may be
imposed
5. Retirement of Business
(Read Sections 145, LGC and Article 241, IRR of the
LGC)
Q7.What is the rule on local taxes when a
business retires?
The business upon termination shall submit a sworn
statement of its gross sales or receipts for the current
PIERRE MARTIN DE LEON REYES
Updated 17 Mar 2013
year. If the tax paid during the year be less than the
tax due on the said gross sales or receipts of the
current year, the difference shall be paid before the
business is considered officially retired.
Q7.1. Are the local tax payments paid for
the privilege of carrying on
business in the year paid or for
having engaged in business the
previous year?
It is paid for the privilege of carrying on business in
the year paid. In MOBIL PHILIPPINES V. T HE CITY
T REASURER OF MAKATI [JULY 14, 2005], for the year
1998, Mobil paid a total of P2,262,122.48 to the City
Treasurer of Makati as business taxes for the year
1998. The amount of tax as computed based on
Mobil’s   gross   sales   for   1998   is   only   P1,331,638.84.  
Since the amount paid is more than the amount
computed   based   on   Mobil’s   actual   gross   sales   for  
1998, Mobile upon its retirement is not liable for
additional taxes to the City of Makati. The Supreme
Court found that the City Treasurer erroneously
reated the assessment and collection of tax as if it
were an income tax by rendering an additional
assessment of P1,331,638.84 for the revenue
generated for the year 1998.5
6. Remedies for the Collection of Local
Taxes
(Read Sections 172-191, LGC; Art. 260-281,
IRR of the LGC)
Q8.What are the remedies available to the
local government? Period to assess will always be on the due
date(?)
1. By administrative action through distraint and
levy6
2. By judicial action for collection of the unpaid
taxes
5
Another example: A corporation whose gross sales was 10
million in 2008 and 20 million in 2009, the local business tax
payable in January 2009 is based on 10 million (gross receipts for
2008) but the same is payment for the right to do business in 2009.
Thus, on the year of retirement, the company will only be liable if
the actual local business tax on the basis of current year sales is
more   than   the   local   business   tax   paid   based   on   previous   year’s  
sales. To continue the example, if the sales of the company are
also P10 million as of the date of retirement in 2010, this means
that the payment made in January 2010 based on the 2009 gross
receipts is sufficient to cover the local business tax due upon
retirement.
6
Note that under Section 185, there are certain persona lroperties
that are exempt from distraint or levy.
6

PM REYES NOTES ON TAXATION II:
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Either of these remedies or all may be pursued
concurrently and simultaneously.
Your business Q8.1. Is closure of business a remedy
permit is available to LGUs? NO. But it indirectly happens
by non-issuance of BP.
necessary for
operations, and
No. In RURAL BANK OF MAKATI V. MUNICIPALITY OF
the same
MAKATI [JULY 2, 2004], the Supreme Court ruled that
necessarily
under the Local Tax Code (which was the applicable
requires
law in this case) and the LGC, LGUs may resort to
payment of tax
administrative action and/or judicial action. Neither
prior to its
issuance.
the Local Tax Code nor the LGC provides for a
closure of business as a remedy available to LGUs.7
Q9.What is the nature of the public hearings
under Section 187 of the LGC?
In HAGONOY MARKET VENDOR ASSOCIATION V.
MUNICIPALITY OF HAGONOY, BULACAN [FEBRUARY 2,
2002], the discussed the nature of the public hearings
on  proposed  tax  ordinances  in  this  light:  “To  be  sure,   Yes. In FIGUERRES V. CA [MARCH 25, 1999], the
public hearings are conducted by local legislative
bodies to allow interested parties to ventilate their
views on a proposed law or ordinance. These views,
however, are not binding on the legislative body and
it  is  not  compelled  by  law  to  adopt  the  same.”
Q9.1. Can a public hearing conducted
after the passage of a tax
ordinance cure the defect in its
enactment (for failure to hold one
prior to the enactment)?
No. As held in ONGSUCO V. MALONES [OCTOBER 27,
2009], the Supreme Court held that a public hearing
conducted after the passage of a tax ordinance does
not cure the defect in its enactment. The LGC
requires that public hearings be held prior to the
enactment by the LGU of the ordinance levying
taxes, fees, and charges.
Q10. What is the effect of non-compliance
with the publication/posting
requirements of tax ordinances laid
down in Section 188 of the LGC?
Failure to follow the procedure in enactment of
tax ordinances renders the same null and void.
7
Note, however, that LGUs may order closure on the basis of the
general welfare clause as when the entity is engaged in illegal or
immoral activities.
PIERRE MARTIN DE LEON REYES
Updated 17 Mar 2013
Q10.1. Can an ordinance with has been The remedy is
declared void for failure to publish to pass a new
for 3 weeks be remedied by ordinance
passing another ordinance with altogether
taxing the
purports to amend the ordinance object they
that has been declared null and want to tax.
void?
They cannot
simply amend.
No. The new ordinance is still void since it
cannot cure something which had never existed
in the first place as the same was void ab initio
(see COCA-COLA BOTTLERS V. CITY OF MANILA
[JUNE 27, 2006]).
Q10.2. Is publication/posting of an
ordinance fixing the assessment
levels for different classes of real
property in an LGU necessary?
Supreme Court held that the publication/posting
requirement under Section 188 of the LGC must be
complied with in case of an ordinance imposing real
property taxes, as well as an ordinance fixing the
assessment levels for different classes of real
property. The latter is in the nature of a tax
ordinance.
Q11. Outline the process on how an appeal
involving questions of constitutionality
or legality of tax ordinances.
1. Appeal to the Secretary of Justice within 30
days from effectivity
2. The Secretary of Justice has 60 days to
decide but an appeal does not suspend the
effectivity of the ordinance
3. Within 30 days from the Secretary of
Justice’s   decision   or   after   60   days   inaction,
an appeal may be filed with the RTC/
Q11.1. Is compliance with the 30-60-30
day period rule mandatory?
Yes. In REYES V. CA [DECEMBER 10, 1999], the
Secretary of Justice dismissed an appeal assailing
the constitutionality of the tax ordinances of the
Municipality of San Juan on the ground that it was
filed out of time. The Supreme Court ruled that
compliance with the three separated periods is
mandatory. The failure of the petitioners in the case
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PM REYES NOTES ON TAXATION II:
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to appeal to the Secretary within 30 days from the
date of effectivity is fatal to their cause.
Q11.2. Is payment under protest required
before a party may appeal to the
Secretary of Justice?
No. As held in JARDINE DAVIS INSURANCE V. ALIPOSA
[FEBRUARY 27, 2003], prior payment under protest is
not required when the taxpayer is questioning the
very authority and power of the assessor to impose
the assessment and of the treasurer to collect the tax
(as opposed to questioning the increase or decrease
in the tax to be paid).
Q11.3. What authority is given to the
Secretary of Justice with respect
to review of tax ordinances?
The Secretary of Justice can declare an ordinance
void for not having followed the requirements of the
law but he cannot replace it with his own law or he
cannot say that is is unwise. In DRILON V. LIM
[AUGUST 4, 1994], then Secretary of Justice Drilon set
aside the Manila Revenue Code on two grounds,
namely the inclusion of certain ultra vires provisions
and its non-compliance with the prescribed procedure
in its enactment. In ruling that the act of then
Secretary Drilon was proper, the Supreme Court
noted that when the Secretary alters or modifies or
sets aside a tax ordinance, he is not allowed to
substitute his own judgment for the judgment of the
LGU that enacted the measure. In the said case,
Secretary Drilon only exercised supervision and not
control.
Q11.4. Olongapo City enacted an
ordinance fixing monthly rental
fees for the different stalls in the
new public market. A questioned
the validity of the said ordinance
by filing an appeal with the
Secretary of Justice. The Secretary
deferred rendering a decision on
the appeal and advised A to file his
appeal with the RTC. Is the act of
the Secretary proper?
No. As held in CITY OF OLONGAPO V. STALLHOLDERS
OF EAST BAJAC-BAJAC PUBLIC MARKET [OCTOBER 19,
2000], the act of the Secretary of Justice was
tantamount to an abdication of his jurisdiction over
PIERRE MARTIN DE LEON REYES
Updated 17 Mar 2013
the appeal of the ordinance. The Secretary may not
abdicate his authority to review tax ordinances.
7. Exemption for Local Taxes
(Read Sections 192-193, LGC; Art. 282-283,
IRR of the LGC)
Q12. Who has the authority to grant tax
exemption privileges for local taxes?
The Sanggunian by passing ordinances granting
exemptions, incentives or reliefs.
Q12.1. Give the requirements for the
Sanggunian to grant exemptions
from local business tax?
1. Natural calamities, civil disturbance, failure of
crops
2. Through an ordinance
3. Shall similarly apply to all businesses
similarly situated
4. Shall only take effect for the next calendar
year and not to exceed 12 months.
Q12.2. Is the 6-year exemption from local
business taxes for BOI-registered
enterprises reckoned from the
date of BOI registration or from
start of commercial operations?
The exemption starts from registration with the BOI
even if the actual operations started some time after
due to force majeure. (see BATANGAS POWER
CORPORATION V. BATANGAS CITY [APRIL 28, 2004])
Q13. What is the effect of Section 193 of the
LGC?
Under Section 193, all existing tax exemption
privileges granted to or presently enjoyed by all
persons whether natural or juridical including GOCCs
(except local water districts, cooperatives registered
under RA 6938, non-stock and non-profit hospitals
and educational institutions) were withdrawn upon
effectivity of the LGC.
In MERALCO V. PROVINCE OF LAGUNA [MAY 5, 1999],
the Supreme Court noted that indicative of the
legislative intent to carry out the Constitutional
mandate of vesting broad tax powers to LGUs, the
8

PM REYES NOTES ON TAXATION II:
LOCAL TAXATION
LGC has effectively withdrawn tax exemptions and
incentives theretofore enjoyed by certain entities.
(see also NAPOCOR V. CITY OF CABANATUAN [APRIL
9, 2003].
Updated 17 Mar 2013
6. Appeal to the SC within 15 days from receipt
of resolution. The treasurer can rule on everything
except the validity of the ordinance or
Q17. What is the rule on refunds? the authority issuing it.

8. Taxpayer’s  Remedies
(Read Sections 194-196, LGC; Art. 284-287,
IRR of the LGC)
Q14. What are the rules on assessments?
General Rule: An assessment must be made within
5 years from the date they become due.
Exception: If there is fraud or intent to evade
payment of the tax, the assessment may be made
within 10 years from discovery of fraud or intent to
evade
The taxpayer must file a written claim within 2 years
from the date of payment of tax or from the date
when the taxpayer is entitled to refund.9
An ordinance came out and you were assessed, but you contest the validity of the ordinance. What is your
remedy? Just contest the assessment on you first, and later na yung ordinance. Because if you prioritize
disputing the ordinance, then you might run out of time for disputing the assessment. You can also just
simultaneously dispute both the assessment (Treasurer) and the ordinance (DOJ) - Jardin Davies v. Aliposa.
— If the ordinance is vacated, there is no certainty for the assessment will be vacated. All the more reason to
pursue both in order to preserve both remedies.
- There can be consolidation of both cases in the RTC level.
REFUND:
- The 2year period is the same as that provided for national taxes.
-The reckoning period is from payment OR when the taxpayer is entitled to refund (supervening clause).
-You file refund with the treasurer, but there is no period within which the treasurer should act. It appears

Q15. What is the rule on collection? SUSPENSION:

1. not in the ph.
Collection must be within 5 years from 2. cannot be bound.
assessment. You can also extend on the ground of fraud. 3. legal prevention of
the treasurer to make
an assessment.
Q15.1. May regular court issue an 4. taxpayer is
injunction to restrain LGUs from applying for
collecting taxes? reinvestigation and
signs a waiver. The
Yes. In ANGELES CITY V. ANGELES ELECTRIC law requires that the
CORPORATION [JUNE 29, 2010], the Supreme Court reinvestigation MUST
held that the LGC does not specifically prohibit an ALWAYS come with a
injunction enjoining the collection of local taxes (as waiver. (In contrast,
compared to the Tax Code which has an express for national taxes,
prohibition). Nevertheless, the Court noted that your request for
injunctions enjoining the collection of local taxes are reinvestigation is not
frowned upon and should therefore be exercised with always accompanied
by a waiver. They are 2
extreme caution.
separate things.)

Q16. Outline the procedure in contesting a

local tax assessment. 60-60-30

1. Assessment notice issued by local treasurer

2. File written protest with the local treasurer
within 30 days from date of payment
3. The Treasurer has to decide within 60 days
4. An appeal to the RTC is then available upon
denial or 60-day inaction by the treasurer
5. The RTC decision is appealable to the CTA
En Banc8

8 9
The mode is Rule 43 The supervening cause doctrine applies.

PIERRE MARTIN DE LEON REYES 9