SOME

 POINTERS  FOR  THE  2014  BAR  EXAMS  IN  TAXATION  

[By.  Prof.  C.  G.  Baniqued]  
 
 
INCOME  TAX  
 
1. Benefit  provided  for  the  “convenience  of  the  employer”  is  excluded  from  gross  
income.  
2. Distinguish  capital  asset  from  ordinary  asset  and  know  the  tax  consequences  of  
one  classification  vs.  the  other.  
3. Definition  of  capital  assets  relating  to  real  property  under  Sec.  27(D)(5)  that  are  
entitled  to  preferential  6%  capital  gains  tax  rate  covers  only  land  and  buildings.  
Hence,  machineries  and  equipment  (even  if  never  used  in  trade  or  business)  are  
excluded.  SMI-­‐Ed  case  
4. Holding  period  in  Sec.  39(B)  for  capital  gains  not  available  to  corporations.  
5. Holding  period  in  Sec.  39(B)  not  available  to  sale  of  shares  of  stock  and  real  
property  classified  as  capital  assets.    
6. Exclusions  from  gross  income,  particularly  the  following:  
6.1 interest  paid  by  insurer  on  portion  of  insurance  proceeds  not  yet  paid  to  
beneficiaries  is  taxable  
6.2 no  need  to  secure  BIR  ruling  before  treaty  exemption  or  preferential  
treatment  may  be  invoked.  Deutsche  Bank    
6.3 retirement  or  pension  fund  is  exempt  on  earnings  received,  such  as  
dividend,  interest,  capital  gains,  etc.  
6.4 separation  benefits  are  exempt  only  if  the  separation  is  involuntary,  not  
when  employee  applied  for  it  like  in  an  “early  retirement”  program  
6.5 retirement  benefits  received  by  an  employee  who  has  not  rendered  at  least  
10  years  of  service  for  the  same  employer  (i.e.,  single  employer)  even  if  
employed  by  the  same  group  of  related/affiliated  companies)  is  not  exempt  
from  income  tax.  BIR  does  not  honor  “portability  clause”  in  retirement  plans  
established  by  business  conglomerates.  
6.6 only  gains  from  sale  of  long  term  (more  than  5  years  maturity)  bonds  is  
exempt.  Interest  is  not.  
7. St.  Luke’s  Medical  Center  case.  In  order  to  be  exempt  from  income  tax  under  
Section  30(E)  of  the  NIRC,  the  charitable  institution  must  be  “organized  and  
operated  exclusively”  for  charitable  purposes.    Likewise,  in  order  to  be  exempt  
from  income  tax  under  Section  30(G)  of  the  NIRC,  the  organization  must  be  
“operated  exclusively  for  the  promotion  of  social  welfare.  
8. Know  the  source  rules  in  Sec.  42  (Phil.  Source  vs.  Foreign  Source)  for  various  
items  of  income  as  they  apply  to  aliens  and  foreign  corporations.  
9. Branch  Profits  Remittance  Tax  in  Sec.  28(5).  “Constructive”  remittance  also  
subject  to  BPRT.  
10. Taxation  of  Regional  Operating  Headquarters  and  Regional  Headquarters.  Sec.  
28(6)  
11. Transfer  of  property  to  an  irrevocable  trust  for  the  benefit  of  beneficiaries  is  
subject  to  donor’s  tax.  
12. Trusts  and  estates  are  separate  taxable  persons.  They  file  their  own  income  tax  
returns  just  like  individuals.  
13. Know  how  Minimum  Corporate  Income  Tax  in  Sec.  27(E)  works  
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14. Know  how  the  Improperly  Accumulated  Earnings  Tax  in  Sec.  29  works  and  what  
defenses  are  available  against  an  assessment  for  IAET.  
15. Joint  ventures  between  landowner  and  real  estate  developer  for  construction  
projects  no  longer  considered  an  exempt  joint  venture  by  BIR.  Now  taxable  as  a  
corporation.  
 
 
ESTATE  AND  DONOR’S  TAX  
 
1. Basis  of  estate  tax  is  FMV  of  properties  at  the  time  of  death,  not  FMV  at  the  time  
of  filing  of  the  tax  return.  
2. Properties  “in  which  decedent  had  interest”  includible  in  gross  estate,  even  if  not  
registered  in  decedent’s  name.  
3. “Transfers  with  retained  interest”  includible  in  gross  estate,  if  interest  is  
retained  for  life,  for  a  period  not  ascertainable  without  reference  to  death,  or  for  
any  period  that  does  not  in  fact  end  before  death.    
4. Claims  against  the  estate  existing  at  the  time  of  the  decedent’s  death  are  
deductible  from  the  gross  estate  regardless  of  any  post-­‐death  developments  
such  as  when  a  claimant  subsequently  settled  for  a  lesser  amount  or  condoned  
the  debt  altogether.  Dizon  case.  This  subsequent  development  does  not  preclude  
the  heirs  from  claiming  a  deduction  for  the  entire  amount  of  the  obligation  prior  
to  the  reduction  or  condonation.    
5. Reciprocity  provision  in  Sec.  104  as  basis  for  exemption  from  estate  or  donor’s  
tax  in  relation  to  non-­‐resident  aliens.  Applies  only  to  intangibles.  
6. Effect  of  renunciation  by  heirs  of  their  hereditary  share:  
6.1 by  or  among  heirs  of  different  degree  –  renunciation  subject  to  donor’s  tax.  
E.g.,  surviving  spouse  waiving  her  conjugal  share  in  favor  of  her  children  
6.2 by  or  among  heirs  of  same  degree  –  renunciation  NOT  subject  to  donor’s  tax.  
E.g.,  surviving  spouse  waiving  her  share  as  an  heir  (hereditary  share,  not  
conjugal  share)  in  favor  of  her  children,  or  one  child  waiving  in  favor  of  all  
the  siblings.  Exception  to  exception:  when  a  child  renounces  his  share  in  
favor  of  one  or  more  specific  heirs,  in  which  case  donor’s  tax  applies.  
7. Transfers  for  less  than  adequate  consideration  subject  to  donor’s  tax.  Similarly,  
where  a  parent  buys  a  property  and  has  the  property  titled  in  the  name  of  his  
child,  that  is  tantamount  to  a  donation  subject  to  donor’s  tax.  Same  when  shares  
of  stock  are  sold  at  lower  than  book  value.  Philamcare  case.  
8. Generally,  donative  intent  is  essential  before  a  transfer  may  be  considered  a  gift  
subject  to  donor’s  tax.    Where  commercial,  business  or  compensatory  motive  is  
the  overriding  consideration  for  the  supposed  “donor”,  there  is  no  gift  subject  to  
donor’s  tax.  However,  see  Philamcare  case.  
 
VALUE-­‐ADDED  TAX  
 
1. Know  the  concept  of  output  VAT,  input  VAT  and  VAT  payable.  
2. Know  the  transactions  considered  “deemed  sale”  
3. Transaction  incidental  to  conduct  of  trade  or  business  is  VATable.  E.g.,  sale  by  a  
manufacturer  of  scrap  or  used  motor  vehicles  
4. Funds  held  in  trust  or  earmarked  for  a  third  party  not  part  of  VATable  gross  
receipts.  E.g.,  airfare  or  hotel  accommodation  and  land  tour  charges  collected  by  
a  travel  agent  on  behalf  of  their  principals.  
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5. Even  transactions  not  entered  into  for  profit  but  merely  on  “reimbursement  
basis”  are  VATable.  Commonwealth  Mgt.  &  Services  Corp.  
6. Sales  to  PEZA-­‐registered  enterprises  are  zero-­‐rated.  PEZA  zone  considered  like  a  
“foreign  territory’,  hence,  sales  to  enterprises  doing  business  there  considered  
an  “export  sale”.      
7. In  order  for  sale  of  services  to  foreign  persons  to  be  zero-­‐rated,  the  foreign  
person  must  be  doing  business  OUTSIDE  the  Philippines,  or,  if  not  engaged  in  
business,  must  be  physically  outside  the  Phils,  and  consideration  is  in  foreign  
currency  inwardly  remitted.  Burmeister,  Placer  Dome  cases  
8. Know  the  transactions  exempt  from  VAT,  particularly  those  that  personally  
impact  an  ordinary  person,  like  lease  of  apartments  or  residential  properties  
and  sale  of  real  properties.  Note  the  new  thresholds,  P12,800,  P1,919,500,  
P3,199,000  
9. Note  that  transactions  that  are  exempt  from  VAT  under  Sec.  109(W)  because  
less  than  the  P1,919,500  threshold  are  nonetheless  subject  to  the  3%  
percentage  tax  under  Sec.  116.  
10. Allocation  of  input  VAT  between  VATable  and  exempt  transactions.  
11. Amortization  of  input  VAT  on  depreciable  goods  in  Sec  110  
12. Final  withholding  VAT  on  transactions  with  government.  Understand  how  it  
works.  
13. Period  within  which  to  file  a  refund  or  tax  credit  claim  for  input  VAT  on  zero-­‐
rated  transactions  under  Sec.  112.    The  120-­‐30  day  rule.  Aichi  Forging,  Mirant,  
San  Roque.    NOTE:  Compare  Sec.  112  with  Sec.  229  
 
REMEDIES  
 
1. Taxpayer  may  amend  his  tax  return  within  3  years  from  filing,  provided  he  has  
not  yet  been  served  any  notice  for  audit  or  investigation.  
2. What  constitutes  a  denial  of  taxpayer’s  protest?  Issuance  by  the  BIR  of  final  
notice  before  seizure,  final  demand  letter,  filing  of  collection  case,  issuance  of  
warrant  of  distraint  and  levy  or  garnishment,  etc.    
3. Filing  of  MR  of  denial  of  protest  (i.e.,  Final  Decision  on  Disputed  Assessment]  
does  not  toll  the  running  of  the  30-­‐day  period  to  appeal  to  the  CTA.  
4. Scope  of  jurisdiction  of  CTA.  Study  cases  or  matters  on  which  CTA  has  original  
vs.  appellate  jurisdiction.  See  CTA  Charter.  
5. Read  again  British  American  Tobacco,  Asia  International  Auctioneers,  and  Leal  re.  
issue  on  whether  it  is  CTA  or  regular  courts  (e.g.,  RTC)  that  has  jurisdiction.    
6. Adverse  rulings  of  the  CIR  are  appealable  to  the  DOF  Secretary.  Appeal  from  
adverse  decision  of  the  DOF  Secretary,  in  turn,  is  to  the  Court  of  Tax  Appeals,  not  
the  Office  of  the  President  or  the  Court  of  Appeals.  Philamcare  case  
7. Period  to  appeal  to  the  CTA.  See  application  of  the  180-­‐day  rule  in  RCBC  and  
Lascona  cases.  
8. Filing  of  an  MR  with  the  CTA  in  Division  jurisdictional  before  appealing  to  the  
CTA  En  Banc.  Gelmart  Industries,  Marina  Sales,  Inc.  
9. Prescriptive  period  for  refund  or  tax  credit  claims  –  2  years  from  payment.  Sec.  
229.  Distinguish  from  input  VAT  refund  or  tax  credit  claims  relating  to  zero-­‐
rated  sales  –  2  years  from  close  of  the  taxable  quarter  when  sales  were  made.  
Sec.  112    
10. Effect  of  supervening  event  on  period  to  file  refund  or  tax  credit  claim  –  none.  It  
does  not  toll  the  running  of  the  period.  
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11. Proper  party  to  file  a  refund  or  tax  credit  claim.  Wander  Phils.,  Procter  &  Gamble,  
Silkair  
12. Taxes  not  subject  of  set-­‐off.  
13. Once  chosen  or  indicated  in  tax  return,  option  to  carryover  overpaid  tax  or  
excess  withholding  tax  to  succeeding  taxable  year  or  claim  a  refund  or  tax  credit  
is  irrevocable.  
14. May  the  Gov’t  offset  deficiency  assessments  against  refund/tax  credit  claims  of  
the  taxpayer?    
No,  said  the  Supreme  Court  in  the  earlier  cases  of  Republic  v.  Mambulao  Lumber  
Co.  and  Domingo  v.  Garlitos  because  the  offsetting  deprives  the  taxpayer  of  due  
process   considering   that   the   deficiency   assessment   will   have   to   be   acted   upon  
independently  of  the  refund  claim,  and  defenses  raised  by  the  taxpayer  will  have  
to   be   addressed.     If   offsetting   were   automatically   allowed,   the   right   of   the  
taxpayer  to  protest  the  assessment  is  rendered  nugatory.    
Yes,   said   the   Supreme   Court,   however,   in   Commissioner   of   Internal   Revenue   v.  
Cebu   Portland   Cement   Company   where   a   judgment   debt   representing  
overpayment  of  ad  valorem  taxes  on  cement  produced  and  sold  by  the  taxpayer  
that   the   CTA   ordered   the   Commissioner   of   Internal   Revenue   to   refund   to   the  
taxpayer   was   offset   by   the   Commissioner   against   an   outstanding   sales   tax  
deficiency   assessment   that   the   taxpayer   protested   but   which   protest   was  
pending  resolution  by  the  Commissioner.    Permitting  the  offsetting,  the  Supreme  
Court   explained,   “the   argument   that   the   assessment   cannot   as   yet   be   enforced  
because  it  is  still  being  contested  loses  sight  of  the  urgency  of  the  need  to  collect  
taxes  as  “the  lifeblood  of  the  government.”  The  Court  added,  “if  the  payment  of  
taxes  could  be  postponed  by  simply  questioning  their  validity,  the  machinery  of  
the   state   would   grind   to   a   halt   and   all   government   functions   would   be  
paralyzed.”     Thus,   the   NIRC   provides   that   no   injunction   shall   be   granted   to  
restrain  the  collection  of  taxes.    The  Court  also  reasoned  that  if  no  injunction  is  
allowed,   except   as   provided   by   law   such   as   in   Republic   Act   No.   1125   (CTA  
Charter),  in  judicial  proceedings,  more  so  where  the  challenge  to  an  assessment  
is  still  in  the  administrative  level.    The  Court  even  mockingly  said,  “to  require  the  
petitioner   to   actually   refund   to   the   private   respondent   the   amount   of   the  
judgment  debt,  which  he  will  later  have  the  right  to  distrain  for  payment  of  its  
sales  tax  liability  is  in  our  view  an  idle  ritual.”  
15. Zonal  values  may  not  be  unilaterally  or  arbitrarily  changed  by  the  BIR  without  
complying  with  the  legal  procedure  for  doing  the  same.  Thus,  where  the  existing  
schedule  of  zonal  values  classifies  ALL  the  properties  in  one  locality  or  barrio  as  
residential,  the  BIR  may  not  unilaterally  re-­‐classify  a  property  therein  as  
commercial  and  impose  higher  taxes  without  going  through  the  mandated  
procedure  for  revision  of  zonal  values.  Aquafresh  Seafoods  
16. BIR  may  inquire  into  bank  deposits  of  decedent’s  estate  or  persons  applying  for  
compromise  on  the  ground  of  financial  incapacity  
17. Whistleblowing  on  government  agencies  and  GOCCs  entitles  the  whistleblower  
to  the  informer’s  reward.  Not  only  private  sector  is  covered.  
18. Issuance  of  a  PAN  is  mandatory.  Non-­‐compliance  renders  the  final  assessment  
void.  
19. Assessment  notice  need  not  be  received  within  the  3-­‐year  prescriptive  period  
for  as  long  as  it  was  released  or  mailed  within  the  said  period.  Collector  v.  
Bautista  
20. Assessment  notice  must  state  the  factual  and  legal  basis.  Otherwise,  void.  
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21. No  need  for  prior  assessment  notice  before  BIR  may  file  a  criminal  action  for  tax  
evasion/fraud  or  non-­‐filing  of  a  return.  Pascor  Realty,  Ungab  v.  Cusi  
22. Failure  to  remit  to  the  BIR  taxes  withheld  may  not  be  compromised.  It  is  in  fact  a  
felony.  
23. Tax  obligations  are  purely  personal  to  the  corporation.  Its  stockholders  and  
officers  are  not  liable  for  the  same.  Proton  Pilipinas.    However,  officers  and/or  
employees  who  are  responsible  for  the  commission  of  a  criminal  violation  of  the  
NIRC  by  the  corporation  may  be  held  criminally  liable.  E.g.  tax  evasion,  non-­‐
filing  of  a  return,  etc.    
24. Distinguish  deficiency  interest  [Sec.  249(A)  and  (B)]  from  delinquency  interest  
[Sec.  249(C)].    Deficiency  interest  is  reckoned  from  the  date  prescribed  for  the  
payment  of  the  deficiency  tax  until  full  payment  thereof.    On  the  other  hand,  
delinquency  interest  is  computed  from  the  date  prescribed  in  the  Assessment  
Notice  until  full  payment  thereof.  Under  Section  249(C)(3)  of  the  NIRC,  non-­‐
payment  of  the  deficiency  tax  assessment  within  the  period  prescribed  for  its  
payment  justifies  the  imposition  of  delinquency  interest  at  the  rate  of  20%  per  
annum,  counted  from  the  date  prescribed  for  its  payment  in  the  demand  
letter/assessment  notice  until  full  payment  is  made.  First  Lepanto  Taisho  
Insurance  
25. See  requisites  of  a  valid  waiver  of  the  statute  of  limitations.  Philippine  
Journalists,  FMF  Dev.  Corp.,  CIR  v.  CA,  et.  al,  303  SCRA  614,  Acebedo  
26. Effect  of  filing  an  amended  return  –  prescriptive  period  counted  from  filing  of  
amended  return  
27. Effect  of  filing  an  erroneous  return  –  as  if  no  return  was  filed,  thus,  10  yr  
prescriptive  period  applies.  
28. Effect  of  filing  by  Government  of  a  tax  return  on  behalf  of  taxpayer  –  as  if  no  tax  
return  was  filed,  so  10-­‐year  prescriptive  period  applies.  Tulio  
29. Distinguish  prescriptive  period  to  assess    [Sec.  203]  from  prescriptive  period  to  
collect  [Sec.  222].    
30. Effect  of  request  for  reinvestigation  on  prescriptive  period  to  collect.    It  must  be  
granted  in  order  for  it  to  toll  the  running  of  the  prescriptive  period.  BPI  cases.  
 
LOCAL  TAXATION  
[By  Prof.  C.  G.  Baniqued]  
 
 
Extent  of  Taxing  Power  of  LGUs  
 
Local   government   units   enjoy   wide   discretion   in   determining   the   rates   of   imposable  
taxes,   subject   only   to   the   limitations   provided   in   the   LGC.     Thus,   unless   the   rate   of   tax  
imposed   by   a   LGC   is   so   excessive   as   to   be   prohibitive,   the   courts   would   normally   be  
reluctant  to  strike  it  down  as  confiscatory  or  oppressive.  
 
  According   to   local   government   units   the   widest   latitude   to   raise   revenues   to   meet  
their  own  needs  and  finance  services  dispensed  to  their  constituents,  the  Supreme  Court  in  
William  Lines,  Inc.  v.  City  of  Ozamis1  upheld  the  power  of  Ozamis  to  levy  a  gross  sales  tax  1  ½  
%   of   the   gross   freight   and   fares   of   the   cargo   and   passengers   shipped   or   transported   out  
from   Ozamis   City   by   any   of   their   vessels,   ships   or   boats   plying   between   Ozamis   City   and  
                                                                                                               
1  56  SCRA  590,  594  (1974)  
   6  

other   ports.     The   Supreme   Court   also   dismissed   the   taxpayer’s   argument   that   the   tax   was   in  
the   nature   of   an   export   tax   because   the   prohibition   pertains   only   to   export   of   a   product   to   a  
foreign  country.2  
   
  Under  the  LGC,  “gross  sales  or  receipts”  includes  the  “total  amount  of  money  or  its  
equivalent   representing   the   contract   price,   compensation   or   service   fees,   including   the  
amount  charged  for  materials  supplied  with  the  services  and  deposits  or  advance  payments  
actually   or   constructively   received   during   the   taxable   quarter   for   the   services   performed   or  
to  be  performed  for  another  person  excluding  discounts  if  determinable  at  the  time  of  sales,  
sales   return,   excise   tax,   and   value-­‐added   tax   (VAT).”3     Thus,   only   income   arising   from  
services   performed   or   to   be   performed   is   subject   to   local   business   tax.     Consequently,  
foreign   exchange   gain,   dividends,   and   interest   income   of   the   taxpayer   do   not   form   part   of  
gross  receipts  that  are  subject  to  local  business  tax.  
 
Situs  of  Taxation  
 
  All   sales   shall   be   recorded   in   the   branch   or   sales   outlet   making   the   sale   or  
transaction,  and  the  tax  thereon  shall  accrue  and  be  paid  to  the  city  or  municipality  where  
such  branch  or  sales  outlet  is  located.4  In  cases  where  there  is  no  such  branch  or  sales  outlet  
in   the   city   or   municipality   where   the   sale   or   transaction   is   made,   the   sale   shall   be   duly  
recorded   in   the   principal   office   and   the   taxes   due   shall   accrue   and   be   paid   to   such   city   or  
municipality.5     Thus,  sales  not  properly  recorded  and  taxed  in  a  branch  office  may  only  be  
subjected  to  deficiency  business  taxes  in  the  city  or  municipality  where  such  branch  office  is  
located  and  not  in  the  principal  office.  
 
Incidental  Business  
 
  A   person   or   entity   that  is   already   taxed   by   a   local   government   unit   on   his   main   or  
principal   business   may   not   be   further   taxed   for   engaging   in   an   activity   that   is   merely  
incidental  to,  or  constitutes  an  integral  part  of,  the  main  business.6  
 
  In   Standard-­‐Vacuum   Oil.   Co.   v.   Antigua,   etc.,   et.   al.,   plaintiff,   engaged   in   the  
importation,   distribution   and   sale   of   gasoline,   kerosene   and   other   fuel   oils,   also  
manufactured   5-­‐gallon   tin   cans   used   as   containers   for   its   kerosene   and   other   petroleum  
products   sold   in   small   towns   and   remote   barrios.     The   Supreme   Court   held   that,   being  
already   subject   to   the   specific   tax   of   P0.02   and   P0.07   per   liter   of   kerosene   and   gasoline   sold  
by   it,   respectively,   plaintiff   may   not   be   taxed   separately   for   the   manufacture   of   tin   cans  
which  is  not  conducted  as  an  independent  business  but  rather  merely  as  an  incident  to  or  
part  of  its  main  business.7      
                                                                                                               
2  See  also  Procter  &  Gamble  Trading  Co.  v.  Municipality  of  Medina,  43  SCRA  130  

(1972),  cited  in  Procter  &  Gamble  Philippine  Manufacturing  Corp.  v.  Municipality  of  
Jagna,  94  SCRA  894,  904  (1979)  
3  Sec.  131(n)  
4  Sec.  150  
5  Id.  
6  Standard-­‐Vacuum  Oil  Co.  v  Antigua,  etc.,  et.  al.,  96  Phil.  909,  913  (1955)  
7  Id.  at  912,  citing  Smith,  Bell  &  Co.,  v.  Municipality  of  Zamboanga,  55  Phil.  466,  

involving  a  company  engaged  in  the  purchase  and  sale  of  hemp  which  operated  a  
   7  

 
One  should  distinguish   Standard  Vacuum  Oil  Co.,  however,  from  Municipality  of  Opon  
v.   Caltex   (Phil.),   Inc. 8  where   roughly   15%   of   Caltex’s   total   production   of   tin   cans   was  
delivered  to  a  third  party  on  cost-­‐plus  basis  and  Caltex  paid  the  requisite  taxes  and  license  
fees   corresponding   to   the   tin   cans   produced   and   delivered   for   such   third   party.   The  
Supreme   Court   held   that   Caltex   may   not   be   taxed   separately   on   its   entire   production   or  
output   of   tin   cans   but   rather   only   on   such   portion   of   it   as   it   contracted   to   produce   and  
deliver   to   the   third   party.     The   85%   of   its   output   that   it   uses   for   its   own   purposes   as  
containers  of  its  petroleum  products  for  sale  and  distribution  may  not  be  separately  taxed.9  
 
   
 
  Based  on  the  same  reasoning  above,  the  Supreme  Court  held  in  Manila   Press,   Inc.   v.  
Sarmiento,10  that   a   printing   company,   that   is   already   taxed   as   such   printer,   may   not   be  
separately   taxed   as   a   retail   dealer   of   paper,   stationeries   and   book   supplies   used   in  
performing   its   printing   jobs   for   its   customers.     As   the   Court   explained   in   City  of  Manila  v.  
Fortune   Enterprises,   Inc.,   “all   the   various   transactions   tending   to   better   accomplish   the  
principal  end  in  view  must  be  treated  as  merely  incidental  to  the  principal  purpose  of  the  
business,  in  the  absence  of  circumstances  evidencing  a  different  intent.”11      
 
  In   Ah   Nam   v.   City   of   Manila,   et.   al.12,   the   Court   also   held   that   the   sale   by   a   bakery  
business   of   flour   bags   after   the   latter   are   emptied   of   their   contents   for   use   in   the   bakery  
business   is   merely   incidental   to   the   latter   and   does   not   make   the   owner   of   the   bakery  
business  a  dealer  of  used  bags  that  is  separately  subject  to  license  and  permit  fees  as  such  
dealer  in  second-­‐hand  goods.  
   
Oppressive,  Excessive  and  Confiscatory  
 
  The   Supreme   Court   in   Procter   &   Gamble   Philippine   Manufacturing   Corp.   v.  
Municipality  of  Jagna13  did   not   find  excessive  and  confiscatory   a   municipal  license  tax   or   fee  
of   P0.10   per   100   kilos   of   copra   stored   by   P&G   PMC   in   a   bodega   within   the   local  
government’s  territory.    Said  the  Supreme  Court,  “municipal  corporations  are  allowed  wide  

                                                                                                                                                                                                                                                                                                                                         
motor  engine  used  for  bailing  hemp  for  shipment.  The  Court  struck  down  the  
ordinance  that  levied  an  annual  license  fee  of  P100  for  every  motor  engine  used  for  
bailing  hemp,  saying,  “a  company  that  has  already  paid  taxes  or  impost  for  the  
operation  of  its  main  business  of  purchase  and  sale  of  hemp  may  not  be  further  
taxed  for  its  possession  and  operation  of  a  motor  engine  to  bale  hemp  for  the  reason  
that  the  bailing  of  hemp  is  connected  with,  incidental  to  and  part  of  plaintiff’s  
business,  particularly  its  sale  and  shipment  of  said  commodity.”  
8  22  SCRA  755  (1968)  
9  Citing  the  cases  of  Standard  Vacuum  Oil  Company,  Fortune  Enterprises,  Inc.,  and  

Manila  Press,  Inc.,  supra.  

10  99  Phil.  31,  cited  in  City  of  Manila  v.  Fortune  Enterprises,  Inc.,  supra,  note  _  at  

1060-­‐1061.  
11  Supra,  note  _  at  1061  
12  109  Phil.  808,  811-­‐812  (1960)  
13  94  SCRA  894,  902-­‐903  (1979)  
   8  

discretion  in  determining  the  rates  of  imposable  license  fees  even  in  cases  of  purely  police  
power  measures.”    
 
  Moreover,  the  Court  in  Procter  &  Gamble  noted  that  storing  copra  in  a  bodega  poses  
some   hazard   to   public   safety   in   view   of   its   high   oil   content   which   can   give   rise   to  
conflagration,   thus   the   Ordinance   itself   directs   the   authorities   to   put   such   bodegas   on  
regular   surveillance.     The   Court   also   dismissed   the   taxpayer’s   argument   that   the   imposition  
is   beyond   the   cost   of   regulation   and   surveillance.     The   Court   cited   its   decision   in  Victorias  
Milling   Co.   v.   Municipality   of   Victorias14  that   “the   cost   of   regulation   cannot   be   taken   as   a  
gauge,   if   the   municipality   really   intended   to   enact   a   revenue   ordinance.     For,   if   the   charge  
exceeds  the  expense  of  issuance  of  a  license  and  costs  of  regulation,  it  is  a  tax.    And  if  it  is,  
and   it   is   validly   imposed,   the   rule   that   license   fees   for   regulation   must   bear   a   reasonable  
relation  to  the  expense  of  the  regulation  has  no  application.”  
 
  In   Punsalan,   et.   al.   v.   Municipal   Board   of   Manila,   et.   al.,15  two   lawyers,   a   doctor,   an  
accountant,   a   dentist   and   a   pharmacist   filed   a   class   suit   that   assailed   the   validity   of   an  
ordinance   of   the   city   of   Manila   that   levied   an   occupation   tax   (now   professional   tax),   in   an  
amount   not   exceeding   P50   per  annum,   on   persons   engaged   in   the   various   professions   like  
them.    They  argued  that  since  they  have  already  paid  their  occupation  tax  under  the  NIRC,  
to   be   made   again   to   pay   another   occupation   tax   to   the   city   of   Manila   is   unjust   and  
oppressive,  and  amounts  to  double  taxation.  
 
The  Supreme  Court  ruled  in  Punsalan  dismissed  the  argument  about  double  taxation  
because   one   tax   is   imposed   by   the   local   government,   city   of   Manila,   while   the   other   is  
imposed  by  the  state.    Besides,  it  is  well-­‐settled  that  double  taxation  is  not  per  se  illegal  or  
unconstitutional.  
 
Common  Limitations  on  Taxing  Powers  of  Local  Governments  
 
  Income   Taxes.     The   taxpayer   in   Progressive   Development   Corporation   v.   Quezon  
City16  challenged   a   supervision   fee   or   license   tax   of   5%   (formerly   10%)   of   gross   receipts  
from   market   stall   rentals   imposed   by   an   ordinance   on   owners   and   operators   of   public  
markets  on  the  ground  that  it  partook  of  a  tax  on  income  which  the  LGU  may  not  impose.    
The   Court,   after   expounding   on   the   distinction   between   a   license   fee   and   a   tax,   held   that   the  
5%  tax  constitutes  not  a  tax  on  income  but  rather  a  license  tax  or  fee  for  the  regulation  of  
the  business  in  which  the  taxpayer  was  engaged  in.    The  taxpayer,  said  the  Court,  failed  to  
show  “that  the  tax  is  so  unreasonably  large  and  excessive  and  so  grossly  disproportionate  to  
the   costs   of   the   regulatory   service   being   performed   by   the   respondent   as   to   compel   the  
Court  to  characterize  the  imposition  as  a  revenue  measure  exclusively.”17    Besides,  the  Court  
took   judicial   cognizance   of   the   fact   that   fresh   meat,   fish,   poultry   and   other   foodstuffs   are  
sold   in   the   taxpayer’s   public   market,   which   requires   close   supervision   and   control   by   the  
local   government   for   the   protection   of   the   health   of   the   public   by   insuring   that   sanitary   and  
hygienic  conditions  are  at  all  times  observed  in  the  market.    The  Court  added  that  the  use  of  
the   gross   amount   of   stall   rentals   as   basis   for   determining   the   amount   of   license   tax   to   be  

                                                                                                               
14  25  SCRA  192  (1968),  citing  in  turn  Cu  Unjieng  v.  Patstone,  42  Phil.  818  (1922)  
15  95  Phil.  46,  47-­‐49  (1954)  
16  172  SCRA  629  (1989)  
17  Id.  at  638-­‐639  
   9  

paid   does   not   by   itself   make   the   license   tax   a   tax   on   income   that   the   local   government   is  
prohibited  from  imposing.18  
 
Excise  Taxes.    A   province   may   not   tax   or   levy   excise   taxes   on   articles   already   taxed  
by  the  NIRC,  such  as  a  tax  on  quarry  resources  extracted  from  private  lands,  because  these  
are  already  taxed  under  the  NIRC,  as  held  in  Province  of  Bulacan,  et.  al.  v.  Court  of  Appeals19.    
However,   the   province   may   impose   a   tax   on   stones,   sand,   gravel,   earth,   and   other   quarry  
resources   extracted   from   public   lands   or   from   the   beds   of   seas,   lakes,   rivers,   streams,  
creeks,   and   other   public   waters   within   its   territorial   jurisdiction   because   it   is   expressly  
authorized  to  do  so  by  Article  227  of  the  Local  Government  Code.  
 
  Notwithstanding   that   petroleum   products   are   already   subject   to   specific   tax   under  
the   NIRC,   the   Supreme   Court   in   Philippine  Petroleum  Corp.  v.  Municipality  of  Pililla,  Rizal20  
nevertheless  upheld  the  validity  of  an  ordinance  that  imposed  local  tax  and  mayor’s  permit  
fee  on  the  business  of  manufacture  of  petroleum  products.    The  Court  explained  that  while  
the  local  government  is  barred  from  levying  tax  on  petroleum  products,  the  tax  and  fee  in  
question  are  levied  on  the  business  and  not  on  the  petroleum  products  themselves.21      
 
Contrast   Philippine  Petroleum  Corp.  with   Petron  Corporation  v.  Tiangco22  where   the  
Supreme  Court  explained  that  the  decision  in  Philippine   Petroleum   Corp.  was  rendered  at  a  
time   when   there   was   yet   no   national   law   like   Section   133(h)   of   the   LGC   which   now  
expressly  bars  local  government  units  from  imposing  “excise  taxes  on  articles  enumerated  
under   the   National   Internal   Revenue   Code,   as   amended,   and   taxes,   fees   or   charges   on  
petroleum   products”   [underscoring   supplied].     Article   232(h)   of   the   IRR,   in   fact,   now  
expressly   provides   that   “in   line   with   existing   national   policy,   any   business   engaged   in   the  
production,  manufacture,  refining,  distribution  or  sale  of  oil,  gasoline,  and  other  petroleum  
products  shall  not  be  subject  to  any  local  tax  imposed  in  this  Article.”  
 
Percentage   or   Sales/Value-­‐Added   Taxes.     Section   133   of   the   LGC   provides   that  
local  government  units  may  not  levy  “percentage  or  value-­‐added  tax  (VAT)  on  sales,  barters  
or   exchanges   or   similar   transactions   on   goods   or   services   except   as   otherwise   provided  
herein.”   A   percentage   tax   is   “a   tax   measured   by   a   certain   percentage   of   the   gross   selling  
price  or  gross  value  in  money  of  goods  sold,  bartered  or  imported;  or  of  the  gross  receipts  
or  earnings  derived  by  any  person  engaged  in  the  sale  of  services.”23  Thus,  where  there  is  a  
set  ratio  between  the  amount  of  the  local  tax  and  the  volume  of  sales,  it  is  more  likely  than  
not  that  the  tax  partakes  the  nature  of  a  sales  or  percentage  tax  that  LGUs  are  barred  from  
imposing.    
 

                                                                                                               
18  Id.  at  639  
19  299  SCRA  442,  456-­‐457  (1998),  involving  Republic  Cement  Corporation.  
20  198  SCRA  82,  89  (1991)    
21  Id.  at  89.  
22  551  SCRA  484  (2008)  
23  Commissioner  of  Internal  Revenue  v.  Citytrust  Investment  Phils.,  Inc.,  503  SCRA  

398,  414  (2006),  cited  in  Pelizloy  Realty  Corporation  v.  Province  of  Benguet,  G.R.  No.  
183137,  April  10,  2013,  695  SCRA  491,  502;  see  also  Commissioner  of  Internal  
Revenue  v.  Solidbank  Corporation,  G.R.  No.  148191,  Nov.  25,  2003,  416  SCRA  436  
   10  

The   Supreme   Court   in   The  San  Miguel  Corporation  v.  The  Municipal  Council24  struck  
down  an   ordinance  that   imposed   on   proprietors   or   operators   of   breweries   within   the   LGU’s  
territorial   jurisdiction   a   graduated   quarterly   fixed   tax   based   on   the   gross   value   in   money   or  
actual  market  value  at  the  time  of  removal  of  the  manufactured  articles  from  their  factories.    
The  Supreme  Court  said  that  the  term  “gross  value  in  money”  of  goods  sold  is  synonymous  
with   “gross   selling   price”   which   can   only   refer   to   the   “total   amount   of   money   or   its  
equivalent   which   the   purchaser   pays   to   the   vendor   to   receive   or   get   the   goods.”     Citing  
Marinduque   Iron   Mines   Agents,   Inc.   v.   Municipal   Council   of   the   Municipality   of   Hinabagan,  
Samar25  the  Court  said,  “an  ordinance  providing  for  a  graduated  tax  based  on  either  “gross  
output  or  sales”  violates  the  prohibition  on  municipalities  against  imposing  any  percentage  
tax   on   sales,   or   other   taxes   in   any   form   based   thereon,   as   the   only   standard   provided   for  
measuring   the   gross   output   is   its   peso   value,   as   determined   from   true   copies   of   receipts  
and/or  invoices  that  the  taxpayer  is  required  to  submit  to  the  municipal  treasurer.”26  
 
Moreover,  citing  its  decision  in  Laoag   Producers’   Cooperative   Marketing   Association,  
Inc.   v.   Municipality   of   Laoag27,   where   the   Supreme   Court   considered   an   ordinance   that  
imposed   a   “municipal   tax   or   inspection   fee   of   ½   centavo   on   every   kilo   of   Virginia   leaf  
tobacco,  garlic  and  onion  on  all  wholesale  dealers  and  vendors”  as  a  tax  based  on  sales,  the  
Supreme   Court   rejected   the   LGU’s   argument   in   The  San  Miguel  Corporation  that   the   tax   is  
not  a  sales  tax  because  it  is  imposed  at  the  time  of  removal  and  not  on  the  date  of  actual  sale.    
The  Supreme  Court,  short  of  finding  the  said  argument  absurd,  noted  that  the  taxpayer,  in  
the   end,   would   sell   the   beer   removed   from   the   factory   because,   by   the   very   nature   of   its  
business,  it  has  no  alternative  but  to  sell  what  it  has  manufactured.  
 
Similarly,  an  ordinance  enacted  by  the  Municipality  of  Dipolog  that  imposed  a  local  
tax  of  fixed  amount  based  on  per  liter  of  gasoline,  lubricating  oil,  diesel  fuel  oil  or  per  gallon  
can   of   kerosene   sold   and   distributed   by   the   retail   seller   was   considered   a   sales   tax,   which   is  
beyond  the  power  of  the  municipality  to  levy.28  
 
In   Pepsi-­‐Cola   Bottling   Co.   of   the   Philippines,   Inc.   v.   Municipality   of   Tanauan,   Leyte29  
the  municipality  levied  a  tax  of  P0.01  for  every  gallon  (128  fluid  ounces,  U.S.)  of  softdrinks  
produced  or  manufactured  within  its  territorial  jurisdiction.    This  time,  the  Supreme  Court  
bought  the  LGU’s  argument  that  the  tax  in  question  was  not  in  the  nature  of  a  percentage  tax  
on  sales  because  the  tax  is  levied  on  the  produce  (whether  or  not  sold)  and  not  on  the  sales.    
The  Court  added,  “there  is  no  set  ratio  between  the  volume  of  sales  and  the  amount  of  the  
tax.” 30     Furthermore,   in   Ormoc   Sugar   Co.,   Inc.   v.   Municipal   Board   of   Ormoc   City 31 ,   the  
Supreme   Court   ruled   that   a   tax   imposed   on   Ormoc   Sugar   Company   and   all   other   sugar   mills  
at  the  rate  of  P0.20  per  picul  of  centrifugal  sugar  produced  and  locally  sold  or  sold  by  them  
within  the  Philippines  and  1%  of  the  gross  sales  of  their  derivatives  and  by-­‐products  is  not  
                                                                                                               
24  52  SCRA  43  (1973)  
25  11  SCRA  416,  421  (1954);  see  also  dissenting  opinion  of  Justice  Teehankee  in  

Tatel  v.  Municipality  of  Virac,  48  SCRA  79,  97  (1972)  
26  The  San  Miguel  Corporation  v.  The  Municipal  Council,  supra,  note  _  at  47  
27  37  SCRA  594  
28  Arabay,  Inc.  v.  Court  of  First  Instance  of  Zamboanga,  66  SCRA  617,  621  (1975)  
29  69  SCRA  460,  465  (1976)  
30  Id.  at  468  
31  20  SCRA  739  (1967)  
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in   the   nature   of   a   percentage   tax   or   sales   tax,   absent   any   showing   that   it   is   so.32     Neither   is   a  
police   inspection   fee   imposed   under   an   ordinance   at   the   rate   of   P.30   per   sack   of   cassava  
starch  produced  and  shipped  out  of  a  municipality  because  it  is  not  based  on  sales.33  
 
While   the   LGC   prohibits   local   government   units   from   imposing   percentage   or   value-­‐
added   tax,   it   provides   for   exceptions.   Section   133   of   the   LGC   states   that   local   government  
units  may  not  levy  “percentage  or  value-­‐added  tax  (VAT)  on  sales,  barters  or  exchanges  or  
similar   transactions   on   goods   or   services   except   as   otherwise   provided   herein.”     Among   the  
exceptions   is   amusement   tax   that,   under   Section   140,   provinces   may   levy.     Amusement  
taxes   are   evidently   in   the   nature   of   a   percentage   tax   in   that   they   are   fixed   at   a   certain  
percentage   of   the   gross   receipts   derived   by   some   establishments.   In   Section   140   of   the   LGC,  
the   amusement   tax   is   fixed   at   a   rate   of   not   more   than   30%   of   the   gross   receipts   from  
admission   fees   charged   by   proprietors,   lessees,   or   operators   of   theaters,   cinemas,   concert  
halls,  circuses,  boxing  stadia,  and  other  places  of  amusement.      
 
In   Pelizloy   Realty   Corporation   v.   Province   of   Benguet34,   the   LGU   included   in   its   tax  
ordinance  a  provision  levying  an   amusement   tax   of  10%  of  gross  receipts  from   admission  
fees   to   resorts,   swimming   pools,   bath   houses,   hot   springs,   and   tourist   spots,   considering  
such  venues  as  “other  places  of  amusement”  as  mentioned  in  Section  140  of  the  LGC.    The  
petitioner   challenged   the   said   provision   of   the   ordinance   before   the   Secretary   of   Justice  
within  30  days  from  the  effectivity  thereof  pursuant  to  Section  187  of  the  LGC  on  the  ground  
that  it  levies  a  prohibited  percentage  tax.    
 
Agreeing   that   the   said   tax   is   in   the   nature   of   a   percentage   tax,   the   Supreme   Court  
went   on   to   determine   whether   the   imposition   falls   under   the   exception   pertaining   to  
amusement  tax  as  the  respondent  LGU  contended.  Invoking  the  principle  of  ejusdem  generis,  
the  Supreme  Court  held  that  resorts,  swimming  pools,  bath  houses,  hot  springs,  and  tourist  
spots   do   not   belong   to   the   same   category   or   class   as   theaters,   cinemas,   concert   halls,  
circuses,   and   boxing   stadia   and,   therefore,   may   not   be   considered   as   among   the   “other  
places   of   amusement”   which   may   ne   subject   to   amusement   tax   under   Section   140   of   the  
LGC.    The  Supreme  Court  also  noted  that  Section  131  of  the  LGC  defines  “amusement  places”  
as  including  theaters,  cinemas,  concert  halls,  circuses  and  other  places  of  amusement  where  
one   seeks   admission   to   entertain   oneself   by   seeing   or   viewing   the   show   or   performances.    
Verily,   theaters,   cinemas,   concert   halls,   circuses,   and   boxing   stadia   are   imbued   with   a  
common  characterisitic,  namely,  they  are  all  venues  primarily  for  the  staging  of  spectacles  
or   the   holding   of   public   shows,   exhibitions,   performances,   and   other   events   meant   to   be  
viewed  by  an  audience.    This  characteristic  obviously  does  not  apply  to  resorts,  swimming  
pools,  bath  houses,  hot  springs,  and  tourist  spots.      
 
Common   Carriers.       The   Supreme   Court   held   in   First   Philippine   Industrial  
Corporation   v.   Court   of   Appeals 35  that   the   definition   of   “common   carriers”   makes   no  
distinction   as   to   the   means   of   transporting,   as   long   as   it   is   by   land,   water,   or   air.     Neither  
does   the   law   prescribe   that   the   transportation   of   the   passengers   or   goods   should   be   by  

                                                                                                               
32  Id.  at  741  
33  Matalin  Coconut  Co.,  Inc.  v.  Municipal  Council  of  Malabang,  Lanao  del  Sur,  143  

SCRA  404,  410  (1986)  

34  G.R.  No.  183137,  April  10,  2013,  695  SCRA  491  
35  300  SCRA  661,  670  (1998)  
   12  

moving  vehicles  or  vessels  either  by  land,  sea  or  water.    Thus,  a  pipeline  concessionaire  that  
is  engaged  in  the  business  of  transporting  petroleum  products  from  the  Batangas  refineries,  
via  pipelines,  to  Sucat  and  Pandacan  terminals  is  considered  a  common  carrier,  thus  exempt  
from  local  tax  under  Section  133(j)  of  the  LGC.      The  Court  rejected  the  local  government’s  
contention  that  the  term  “common  carrier”  refers  only  to  ordinary  carriers  such  as  trucks,  
trains,  ships  and  the  like.36      
 
Condominium  and  Homeowners’  Associations  
 
  Although   they   collect   condominium   or   homeowners’   association   dues,  
condominium  corporations  are  not  liable  to  business  taxes,  fees  and  charges  since  they  may  
not   be   considered   at   all   to   be   engaged   in   business.37  In   order   that   a   corporation   may   be  
subjected   to   business   taxes,   its   activities   must   fall   within   the   definition   of   business   as  
provided   in   the   Local   Government   Code.38  Absent   such   showing,   the   corporation   is   not  
subject  to  tax.    The  liability  of  the  corporation  may  not  be  anchored  on  the  all-­‐encompassing  
or   catch-­‐all   phrase   “et   cetera”   appearing   after   the   enumeration   of   the   class   of   businesses  
subject  to  tax.39    
 
Challenging  Tax  Ordinance  
 
  A   taxpayer   who   wishes   to   question   the   constitutionality   or   legality   of   a   tax  
ordinance   or   revenue   measure   may   file   an   appeal   with   the   Secretary   of   Justice   within   thirty  
(30)  days  from  the  effectivity  of  the  ordinance.  The  Secretary  of  Justice  has  sixty  (60)  days  
from   the   date   of   receipt   of   the   appeal   within   which   to   decide.     The   taxpayer   may   appeal   the  
decision   of   the   Secretary   of   Justice   to   a   court   of   competent   jurisdiction,   i.e.   Regional   Trial  
Court,  within  thirty  (30)  days  from  receipt  of  the  decision  or  the  lapse  of  the  60-­‐day  period  
in  case  of  inaction  on  the  part  of  the  Secretary  of  Justice.40  
 
  The  appeal  to  the  Secretary  of  Justice  does  not,  however,  suspend  the  effectivity  of  
the   ordinance.     Consequently,   the   LGU   may   enforce   the   same   and   collect   the   taxes   or   fees  
levied  thereunder  even  while  the  appeal  is  pending  resolution.41  
 
Appeal  to  Court  of  Competent  Jurisdiction  
 
  Regional   trial   courts   have   jurisdiction   to   review   denials   of   protest   by   local  
treasurers   in   the   exercise   of   their   original   jurisdiction.   The   Tax   Court   recently   held   that  
when   the   Regional   Trial   Court   entertains   an   appeal   from   a   decision   of   a   local   government  
official,  such  as  the  municipal  treasurer,  pursuant  to  Section  195  of  the  LGC,  it  does  so  in  the  

                                                                                                               
36  The  local  government  imposed  on  petitioner  business  tax  based  on  its  gross  

receipts  of  “contractors  and  independent  contractors”.  

37  Yamane  v.  BA  Lepanto  Condominium  Corporation,  474  SCRA  258  (2005)    
38  Id.  at  277  
39  Id.  at  275-­‐276  
40  Sec.  187,  LGC;  see  also  Pelizloy  Realty  Corporation  v.  Province  of  Benguet,  supra  

note    
41  Ibid.  
   13  

exercise   of   its   original,   not   appellate,   jurisdiction.42     The   Tax   Court   explained   in   National  
Transmission   Corporation  that  only  judgments  or  orders  rendered  by  a  lower  court  may  be  
reviewed   on   appeal   by   the   Regional   Trial   Court.     Since   the   decision   of   the   municipal  
treasurer  denying  a  protest  against  an  assessment  is  not  one  rendered  by  a  judicial  court,  
the  Regional  Trial  Court  may  review  it  in  the  exercise  of  its  original  jurisdiction.43        
 
Withdrawal  by  LGC  of  Incentives  Earlier  Granted  
 
  In   Mactan   Cebu   International   Airport   Authority   v.   Marcos 44 ,   the   Supreme   Court  
affirmed  that,  indeed,  the  Authority  was  not  exempt  from  real  property  tax  since  its  earlier  
exemption  granted  under  its  charter  has  been  repealed  or  withdrawn  by  express  provision  
of  the  LGC.      
 
  Subsequently,   however,   in   Manila   International   Airport   Authority   v.   Court   of  
Appeals45,  the  Supreme  Court  held  that  the  MIAA  is  not  a  government-­‐owned  or  controlled  
corporation  but  an  instrumentality  of  the  National  Government  and  thus  exempt  from  local  
taxation.     Moreover,   the   Republic   of   the   Philippines   actually   owns   the   real   properties   of  
MIAA   and   that   MIAA   is   merely   holding   title   thereto   in   trust   for   the   Republic   of   the  
Philippines,   hence,   exempt   from   real   property   tax.     MIAA   cannot   be   a   GOCC   because   it   is  
neither   a   stock   nor   a   non-­‐stock   corporation.     Rather,   MIAA   is   a   government   instrumentality  
vested  with  corporate  powers  to  perform  efficiently  its  governmental  functions.    
 
  The   withdrawal   by   the   LGC   of   incentives   earlier   granted   was   also   invoked   in   Manila  
Electric  Company  v.  Province  of  Laguna46  where   the   Supreme   Court   affirmed   the   authority   of  
the  Province  of  Laguna  to  impose  a  franchise  tax  on  Meralco  at  the  rate  of  50%  of  1%  of  its  
gross   annual   receipts   notwithstanding   the   “in   lieu   of”   clause   in   the   charter   of   Meralco.     In  
the   Meralco  case,   the   Supreme   Court   reiterated   the   principle   that   a   franchise   partakes   the  
nature  of  a  grant,  which  is  not  covered  by  the  non-­‐impairment  clause.    
 
Contractual  tax  exemption,  in  the  real  sense  of  the  term  and  
where   the   non-­‐impairment   clause   of   the   Constitution   can  
rightly   be   invoked,   are   those   agreed   to   by   the   taxing  
authority   in   contracts,   such   as   those   contained   in  
government   bonds   or   debentures,   lawfully   entered   into   by  
them  under  enabling  laws  in  which  the  government,  acting  in  
its   private   capacity,   sheds   its   cloak   of   authority   and   waives  
its   governmental   immunity.   Truly,   tax   exemptions   of   this  
kind   may   not   be   revoked   without   impairing   the   obligations  
of  contracts.    These  contractual  tax  exemptions,  however,  are  

                                                                                                               
42  National  Transmission  Corporation  v.  Municipal  Treasurer  of  Labrador,  

Pangasinan,  CTA  AC  No.  67,  June  25,  2012.  

43  National  Transmission  Corporation  v.  The  Municipality  of  Magallanes,  Agusan  del  

Norte,  CTA  AC  No.  68  (RTC  Civ.  Case  No.  Q-­‐09-­‐64637),  Jan.  5,  2012  
44  261  SCRA  667  (1996)  
45  495  SCRA  591  (2006);  see  also  Manila  International  Airport  Authority  v.  City  of  

Pasay,  583  SCRA  234  (2009)  

46  306  SCRA  750  (1999)  
   14  

not   to   be   confused   with   tax   exemptions   granted   under  

franchises.”47  
 
Claim  for  Refund  or  Tax  Credit  
 
  Under   Section   196   of   the   LGC,   a   written   claim   for   refund   or   tax   credit   of   the   tax,   fee,  
or   charge   alleged   to   have   been   erroneously   or   illegally   collected   must   be   filed   with   the   local  
treasurer,  and  the  judicial  proceeding  relating  to  such  claim  for  refund  or  tax  credit  must  be  
filed  within  two  (2)  years  from  the  date  of  payment  of  such  tax,  fee,  or  charge,  or  from  the  
date  the  taxpayer  is  entitled  to  a  refund  or  credit.    Absent  any  proof  that  an  administrative  
claim   for   refund   or   credit   has   been   filed   previously   with   the   local   treasurer,   the   judicial  
action  will  not  prosper.48  
 
 
 
REAL  PROPERTY  TAXATION  
[By.  Prof.  C.  G.  Baniqued]  
 
 
General  Principles  and  Definitions  
 
  Under  the  old  Assessment  Law,  Commonwealth  Act  470,  the  basis  of  real  property  
taxation   was   ownership   or   interest   tantamount   to   ownership.49  Subsequently,   in   1974,  
Presidential   Decree   No.   464   prescribed   a   new   Real   Property   Tax   Code   that   adopted   the  
policy  of  taxing  real  property  on  the  basis  of  actual  use,  even  if  the  user  is  not  the  owner.50  
The  LGC  adheres  to  the  latter  principle.  
 
Meaning  of  Real  Property  
 
         In   Manila   Electric   Company   v.   Central   Board   of   Assessment   Appeals51,   oil   storage  
tanks   that   are   not   attached   to   the   land   and   that   were   placed   on   leased   land   were  
nevertheless   considered   taxable   improvements   on   the   land,   enhancing   its   utility   and  
rendering   it   useful   to   the   industry.     The   tanks   were   installed   with   some   degree   of  
permanence  as  receptacles  for  the  considerable  quantities  of  oil  needed  by  Meralco  for  its  
operations.   Similarly,   machineries   of   breweries   used   in   the   manufacture   of   liquor   and  
softdrinks,   though   movable   in   nature,   are   immobilized   because   they   are   essential   to   said  
businesses.   The   radio   relay   station   tower,   radio   station   building,   and   machinery   shed   of   a  
telecommunications   firm,   RCPI,   were   likewise   considered   real   properties,   thus   subject   to  
real  property  tax.52     Gas  station  equipment  and  machineries  permanently  affixed  by  Caltex  
to   its   gasoline   station   and   pavement,   such   as   underground   tanks,   elevated   tank,   elevated  
water  tanks,  water  tanks,  gasoline  pumps,  computing  pumps,  water  pumps,  car  washer,  car  
                                                                                                               
47  Id.  at  761  
48  Metro  Manila  Shopping  Mecca  Corp.  v.  Toledo,  G.R.  No.  190818,  June  5,  2013,  697  

SCRA  425,  436-­‐440  

49  Province  of  Nueva  Ecija  v.  Imperial  Mining  Co.,  Inc.,  118  SCRA  632,  633  (1982)  
50  Id.  at  634  
51  114  SCRA  273  (1982)  
52  RCPI  v.  Provincial  Assessor  of  South  Cotabato,  456  SCRA  1  (2005)  
   15  

hoists,   truck   hoists,   air   compressors   and   tireflators,   all   of   which   fixtures   are   necessary   to  
the   operation   of   the   gasoline   station,   are   taxable   improvements   subject   to   real   property  
tax.53       The   Court   rejected   Caltex’s   argument   that   under   Davao   Saw   Mill   Co.   v.   Castillo54  
machinery  which  is  movable  in  nature  only  becomes  immobilized  when  placed  in  a  plant  by  
the   owner   of   the   property   or   plant   but   not   when   so   placed   by   a   tenant   (such   as   Caltex),   a  
usufructuary,  or  any  person  having  only  a  temporary  right,  unless  such  person  acted  as  the  
agent   of   the   owner.     The   Court   distinguished   Caltex   from   Davao   Saw   Mill   Co.   in   that   the  
latter  involved  the  issue  of  whether  the  machinery  mounted  on  foundations  of  cement  and  
installed  by  the  lessee  on  leased  land  should  be  regarded  as  real  property  for  purposes  of  
execution   of   a   judgment   against   the   lessee   and   not,   as   in   this   case,   for   purposes   of   imposing  
the  realty  tax.55  
 
  Power   barges   are   also   considered   real   property.     In   Fels  Energy,  Inc.  v.  Province  of  
Batangas56,  the  Supreme  Court  reasoned  that  under  Article  415(9)  of  the  Civil  Code,  “docks  
and   structures   which,   though   floating,   are   intended   by   their     nature   and   object   to   remain   at  
a   fixed   place   on   a   river,   lake,   or   coast   are   considered   immovable   property.”     The   Court  
added,  “thus,  power  barges  are  categorized  as  immovable  property  by  destination,  being  in  
the   nature   of   machinery   and   other   implements   intended   by   the   owner   for   an   industry   or  
work   which   may   be   carried   on   in   a   building   or   on   a   piece   of   land   and   which   tend   directly   to  
meet  the  needs  of  said  industry  or  work.”      
 
Compare   the   above   cases,   however,   with   Board   of   Assessment   Appeals   v.   Manila  
Electric  Company57  where  Meralco’s  steel  towers  were  held  not  subject  to  realty  tax  because  
the   steel   towers   were   regarded   as   poles   and   were   not   attached   to   any   land   or   building,   but,  
instead,  were  attached  to  square  metal  frames  by  means  of  bolts  and  could  be  moved  from  
place  to  place  when  unscrewed  and  dismantled.      
 
Personal   or   movable   properties,   indeed,   may   not   pose   that   much   of   a   problem.    In  
Mindanao   Bus   Co.   v.   City   Assessor 58 ,   the   Supreme   Court   held   that   tools                                                    
typewriters,   etc.   usually   found   and   used   in   hotels,   restaurants,   theatres,   etc.   are   merely  
incidentals  and  are  not  and  should  not  be  considered  immobilized  by  destination,  for  these  
businesses   can   continue   or   carry   on   their   functions   without   these   equipments.   Airline  
companies   use   forklifts,   jeep-­‐wagons,   pressure   pumps,   IBM   machines,   etc.   which   are  
incidentals,  not  essentials,  and  thus  retain  their  movable  nature.  
 
  One   must,   therefore,   distinguish   those   movables   which   become   immobilized   by  
destination   because   they   are   essential   and   principal   elements   in   the   industry   from   those  
which   may   not   be   so   considered   immobilized   because   they   are   merely   incidental,   not  
essential  and  principal.59    
 
                                                                                                               
53  Caltex  (Phil.)  Inc.  v.  Central  Board  of  Assessment  Appeals,  114  SCRA  296,  301  

(1982)  
54  61  Phil.  709  
55  Caltex  (Phil.)  Inc.  v.  Central  Board  of  Assessment  Appeals,  supra  
56  516  SCRA  186,  204-­‐205  (2007)  
57  119  Phil.  328  
58  116  Phil.  501  
59  Mindanao  Bus  Co.  v.  City  Assessor  and  Treasurer,  6  Phil.  197  (1962)  
   16  

Proper  Taxing  Authority  

 
  It  is  basic  that  the  real  property  owner  ought  to  pay  the  real  property  tax  to  the  local  
government  unit  where  the  property  is  located.  The  transfer  certificate  of  title  covering  the  
property  is  generally  conclusive  as  to  its  ownership  and  location.60      However,  where  there  
is   a   dispute   between   two   local   government   units   who   both   claim   that   the   property   in  
question  (like  a  mall)  is  within  their  respective  locality,  the  territorial  boundaries  must  first  
be   ascertained   and   the   location   as   technically   described   in   the   TCT   would   have   to   be  
rectified,   if   needed.     In   the   meantime,   the   real   property   owner   who   has   been   religiously  
paying   its   real   property   taxes   to   one   of   the                               local   government   units   party   to   the  
dispute  may  not  be  compelled  by  the  other  local  government  unit  to  pay  again  real  property  
taxes  to  it  pending  resolution  of  the  dispute  between  the  two  local  government  units.  It  is  
axiomatic   that   while   a   local   government   unit   may   tax   real   properties   falling   under   its  
territorial   jurisdiction,   it   must   first   show   that   the   real   properties   are   unquestionably  
situated  within  its  geographical  boundaries.61          
   
Appraisal  of  Real  Property  
 
  Section   198   of   the   LGC   expressly   states   that   real   property   must   be   assessed   at   its  
current   and   fair   market   value.     Where   there   are   special   circumstances   that   impact   the  
market  value  of  a  real  property,  these  must  be  taken  into  account  so  as  to  fairly  determine  
the  true  market  value  of  the  property.  Reyes  v.  Almanzor62  
 
  The  local  assessor  may  not  base  his  assessment  or  appraisal  of  real  property  on  the  
consideration   appearing   in   the   deed   of   conveyance.     In   Allied  Banking  Corporation  v.  Quezon  
City  Government63,  the  Supreme  Court  enumerated  the  reasons,  namely:    (1)  the  appraisal,  
assessment,   levy   and   collection   of   real   property   tax   shall   not   be   let   to   any   private   person,  
(2)  it  will  completely  destroy  the  fundamental  principle  in  real  property  taxation  that  real  
property   shall   be   classified,   valued   and   assessed   on   the   basis   of   its   actual   use,   (3)   it  
mandates   an   exclusive   rule   in   determining   the   FMV,   (4)   it   departs   from   the   established  
procedures   stated   in   the   Local   Assessment   Regulations   No.   1-­‐92   (which   suggests   three  
approaches  in  estimating  the  FMV,  (5)  it  unduly  interferes  with  the  duties  statutorily  placed  
upon  the  local  assessor  by  completely  dispensing  with  his  analysis  and  discretion  which  the  
Code  and  the  regulations  required  to  be  exercised,  and  (6)  it  is  contrary  to  public  policy  and  
restrains  trade  since  it  will  provide  a  chilling  effect  on  real  property  owners  to  enter  freely  
into   contracts   reflecting   the   increasing   value   of   real   properties   in   accordance   with  
prevailing  market  conditions.  
                                                                                                               
60  De  Pedro  v.  Romasan  Development  Corporation,  452  SCRA  564  (2005),  cited  in  

Sta.  Lucia  Realty  &  Development,  Inc.  v.  City  of  Pasig,  G.R.  No.  166838,  June  15,  2011  
652  SCRA  44,  55-­‐57  
61  Sta.  Lucia  Realty  &  Development,  Inc.  v.  City  of  Pasig,  supra,  note  _  at  54.  In  the  

meantime,  the  Supreme  Court  directed  the  two  local  government  units  to  await  the  
judgment  in  their  boundary  dispute  case  pending  before  a  Regional  Trial  Court  in  
Antipolo  City.    The  Supreme  Court  also  directed  petitioner  Sta.  Lucia  to  deposit  the  
succeeding  real  property  taxes  in  an  escrow  account  with  the  Land  Bank  of  the  
Philippines.      
62  196  SCRA  322,  328  (1991)  
63  472  SCRA  303  (2005)  
   17  

 
Assessment  of  Real  Property  
 
  Real   property   must   be   assessed   in   the   name   of   the   person   “owning   or  
administering”   the   property.     A   tax   declaration   in   the   name   of   a   person   who   has   not   proven  
any  successional  or  administrative  rights  to  the  property  owner’s  estate  is  null  and  void.64      
 
  In   City   Assessor   of   Cebu   City   v.   Association   of   Benevola   de   Cebu,   Inc.65,   the   Supreme  
Court  held  that  a  5-­‐story  medical  arts  center  building  (located  abo  ut  100  meters  away  from  
the  main  hospital)  which  houses  the  doctors’  clinics  and  where  the  doctors  conduct  medical  
check-­‐up,   diagnosis,   treatment   and   care   of   their   patients   and   which   also   serves   as   a  
specialized   out-­‐patient   department   of   the   main   hospital   where   treatment   and   diagnosis   are  
done   by  the  accredited  medical   specialists   in   their  respective   fields   of   anesthesia,   radiology,  
pathology   and   more,   is   an   integral   part   of   the   main   hospital,   thus,   subject   to   the   special  
assessment  level  of  10%  under  the  Cebu  City  Tax  Ordinance.    The  Court  added  that  the  mere  
fact   that   the   doctors   hold   office   in   a   separate   building   and   that   the   hospital   charges   them  
rent   do   not   transform   the   medical   arts   center   building   into   a   commercial   building   or  
commercial   venture   that   would   thereby   render   it   subject   to   the   35%   assessment   level  
applicable   to   commercial   buildings.     The   fact   remains,   according   to   the   Court,   that   the  
doctors’   services   are   essential   to   the   over-­‐all   operation   of   the   hospital   and   benefit   the  
hospital’s  patients.      
   
Exemptions  from  Real  Property  Tax  
 
  A   person   who   claims   to   be   exempt   from   real   property   tax   must   avail   of   the  
exemption   provided   for   in   the   statute   and   submit   the   requirements   to   establish   that   it   is  
exempt.    Section  206  of  the  LGC  states:  
 
“Sec.  206.    Proof  of  Exemption  of  Real  Property  from  Taxation.  
–   Every   person   by   or   for   whom   real   property   is   declared,  
who   shall   claim   tax   exemption   for   such   property   under   this  
Title  shall  file  with  the  provincial,  city  or  municipal  assessor  
within   thirty   (30)   days   from   the   date   of   the   declaration   of  
real   property   sufficient   documentary   evidence   in   support   of  
such   claim   including   corporate   charters,   title   of   ownership,  
articles   of   incorporation,   by-­‐laws,   contracts,   affidavits,  
certifications  and  mortgage  deeds,  and  similar  documents.  
 
  If   the   required   evidence   is   not   submitted   within   the  
period   herein   prescribed,   the   property   shall   be   listed   as  
taxable  in  the  assessment  roll.    However,  if  the  property  shall  
be  proven  to  be  tax  exempt,  the  same  shall  be  dropped  from  
the  assessment  roll.”  
 

                                                                                                               
64  Cenido  v.  Apacionado,  et.  al.,  318  SCRA  688  (1999)  
65  524  SCRA  128  (2007),  citing  Herrera  v.  Quezon  City  Board  of  Assessment  Appeals,  

3  SCRA  186  (1961)  and  Abra  Valley  College,  Inc.  v.  Aquino,  162  SCRA  106  (1988)  
   18  

  Nonetheless,   pending   the   resolution   of   the   claim   for   exemption   of   the   property  
owner,  it  is  incumbent  upon  the  latter  to  pay  the  assessed  real  property  tax  under  protest  as  
prescribed  in  Section  252  of  the  LGC.66    
 
  Real  Property  Owned  by  the  Government.      Section  234  of  the  LGC  exempts  “real  
property  owned  by  the  Republic  of  the  Philippines  or  any  of  its  political  subdivisions.”     In  
National   Development   Company   v.   Cebu   City67,   the   Supreme   Court   interpreted   the   phrase  
“property   owned   by   the   Republic   of   the   Philippines”   to   mean   property   owned   by   the  
Government   and   by   its   agencies   which   do   not   have   separate   and   distinct   personalities.”     So,  
once  it  is  established  that  a  property  is  owned  by  the  Government  or  by  its  unincorporated  
agency,   the   exemption   applies   regardless   of   whether   the   property   is   used   by   the  
Government  or  agency  for  sovereign  or  proprietary  purposes.      
 
Thus,  a  public  land  reserved  by  the  President  for  warehousing  purposes  in  favor  of  
the   National   Development   Company   (NDC),   a   government-­‐owned   or   –controlled  
corporation,   with   the   Government   retaining   ownership   of   the   property,   was   held   exempt  
from   the   real   property   tax.    However,  the  improvement   (warehouse)  erected  by  NDC  on  the  
property  was  held  taxable  because  the  improvement  did  not  belong  to  the  Government  but  
to   NDC,   an   entity   that   has   a   personality   separate   and   distinct   from   the   Government   and  
performs  purely  corporate,  proprietary  or  business  functions.        
 
The  penultimate  paragraph  of  Section  234  states  that  “except  as  otherwise  provided  
herein,   any   exemption   from   payment   of   real   property   tax   previously   granted   to,   or  
presently   enjoyed   by,   all   persons,   whether   natural   or   juridical,   including   all   government-­‐
owned   or   –controlled   corporations,   are   hereby   withdrawn   upon   the   effectivity   of   this  
Code.”68      
 
 In   Mactan   Cebu   International   Airport   Authority   v.   Marcos69 ,   the   Supreme   Court  
affirmed   an   assessment   issued   by   the   local   government   for   the   reason   that   the   Authority  
was  not  exempt  from  real  property  tax  since  its  earlier  exemption  granted  under  its  charter  
has  been  repealed  or  withdrawn  by  express  provision  of  the  LGC  as  mentioned  above.      
 
  The   above   case   also   defined   “Republic   of   the   Philippines”,   “National   Government”,  
“agency”,  and  “instrumentality”.  
 
  Subsequently,   however,   in   Manila   International   Airport   Authority   v.   Court   of  
Appeals70,  the  Supreme  Court  held  that  the  MIAA  is  not  a  government-­‐owned  or  controlled  
corporation   but   rather   an   instrumentality   of   the   National   Government,   thus   exempt   from  
real   property   tax.     Moreover,   the   Court   also   reasoned   that   the   Republic   of   the   Philippines  
                                                                                                               
66  Digital  Telecommunications  Philippines,  Inc.  v.  Cantos,  G.R.  No.  180200,  Nov.  25,  

2013,  710  SCRA  514,  528  

67  G.  R.  No.  51593,  Nov.  5,  1992,  citing  Board  of  Assessment  Appeals,  Province  of  

Laguna  v.  Court  of  Tax  Appeals  and  NWSA,  118  Phil.  227  (1963)  
68  See  also  City  Government  of  San  Pablo,  Laguna  v.  Reyes,  et.  al.,  G.R.  No.  127708,  

March  25,  1999.  

69  261  SCRA  667  (1996)  
70  495  SCRA  591  (2006);  see  also  Manila  International  Airport  Authority  v.  City  of  

Pasay,  583  SCRA  234  (2009)  

   19  

actually  owns  the  real  properties  of  MIAA  and  that  MIAA  is  merely  holding  title  thereto  in  
trust  for  the  Republic  of  the  Philippines,  hence,  exempt  from  real  property  tax.    MIAA  cannot  
be   a   GOCC   because   it   is   neither   a   stock   nor   a   non-­‐stock   corporation.     Rather,   MIAA   is   a  
government   instrumentality   vested   with   corporate   powers   to   perform   efficiently   its  
governmental  functions.    
 
  Section  234  of  the  LGC,  however,  also  provides  that  the  exemption  of  real  property  
owned  by  the  Republic  of  the  Philippines  or  any  of  its  political  subdivisions  does  not  apply  
when   the   beneficial   use   thereof   has   been   granted,   for   consideration   or   otherwise,   to   a  
taxable   person.”       Thus,   in   Philippine  Fisheries  Development  Authority  v.  Court  of  Appeals71,  
the  Supreme  Court  held  that  the  portions  of  the  Iloilo  Fishing  Port  Complex  (IFPC)  leased  by  
the   Philippine   Fisheries   Development   Authority   (PFDA)   to   private   firms   and   individuals  
engaged  in  fishing  related  business  are  subject  to  real  property  tax.    The  Court  also  said  that  
PFDA  is  not  a  government-­‐owned  or  –controlled  corporation  but  an  instrumentality  of  the  
national  government.      
 
While   PFDA   is   not   exempt   from   real   property   tax   on   such   properties   leased   to  
private  persons,  its  non-­‐payment  of  the  real  property  taxes  due  on  such  properties  leased  
out   to   private   persons   would   not   warrant   the   sale   of   such   properties   at   public   auction   since  
the   properties   are   of   public   dominion   and,   as   such,   may   not   be   sold   at   public   auction   to  
satisfy   the   tax   delinquency   of   the   PFDA.     Compare   the   Philippine   Fisheries   Development  
Authority  case,   however,   with   GSIS  v.  City  Assessor  of  Iloilo  City72  where   the   Supreme   Court  
upheld   the   validity   of   the   auction   sale   of   GSIS’s   properties   for   non-­‐payment   of   real   estate  
taxes.    In  the  GSIS  case,  the  real  properties  auctioned  were  titled  in  the  name  of  GSIS  but  c/o  
another   person   to   whom   actual   use   or   beneficial   ownership   was   conveyed   by   GSIS,  
prompting   the   Court   to   rule   that   such   properties   ceased   to   be   exempt   despite   the   blanket  
exemption  in  the  GSIS  charter.  
 
In   a   subsequent   case   also   involving   GSIS,   the   Supreme   Court   made   a   turn-­‐around  
and  made  up  for  its  earlier  adverse  ruling  against  GSIS.    In  GSIS  v.  City  Treasurer  of  the  City  of  
Manila 73 ,   GSIS   leased   its   property   to   a   taxable   entity,   the   Manila   Hotel   Corporation.    
Consequently,   pursuant   to   the   “beneficial   use”   principle,   the   City   of   Manila   assessed   GSIS  
real   property   tax.     The   Supreme   Court   held   that   while   GSIS,   under   its   charter,   is   exempt  
from  real  property  tax  and  considered  an  instrumentality74  of  the  national  government  [just  
like   the   Manila   International   Airport   Authority],   its   property   that   is   leased   to   the   Manila  
Hotel   Corporation   is   subject   to   real   property   tax.     Nonetheless,   GSIS   is   not   the   one   liable   for  
                                                                                                               
71  528  SCRA  706  (2007),  citing  Manila  International  Airport  Authority  v.  Court  of  

Appeals,  supra,  note  _  at  615;  see  also  Chavez  v.  Public  Estates  Authority,  384  SCRA  
152,  202-­‐203  (2002),  where  the  Supreme  Court  held  that  reclaimed  lands  are  lands  
of  the  public  domain  and  cannot,  without  congressional  fiat,  be  subject  of  a  sale,  
public  or  private.    
72  493  SCRA  169,  174-­‐176  (2006),  citing  City  of  Baguio  v.  Busuego,  100  SCRA  116  

(1980)  
73  609  SCRA  330  (2009)  
74  It  is  doubtful  though  how  GSIS,  a  government-­‐owned  and  –controlled  corporation,  

can  be  considered  an  instrumentality  of  the  national  government  in  the  likes  of  
Manila  International  Airport  Authority  and  Philippine  Fisheries  Development  
Authority  
   20  

the  tax  but  rather  the  beneficial  user  (i.e.  Manila  Hotel  Corporation).75     The  Court  said  that  
the  City  of  Manila  must  issue  an  assessment  against  MHC,  which  has  not  been  impleaded  in  
this  case.    Moreover,  the  property  of  GSIS  is  exempt  from  levy  under  its  charter,  even  in  case  
of  non-­‐payment  by  the  Manila  Hotel  of  the  assessment.    The  City  of  Manila,  therefore,  may  
collect  the  assessed  tax  through  means  other  than  the  auction  sale  of  GSIS’s  leased  property.      
Real   properties   owned   by   the   Social   Security   System   (SSS)   are   likewise   exempt   from   real  
property  taxes,  regardless  of  whether  SSS  performs  proprietary  or  ministrant  functions.76  
 
 
The   National   Power   Corporation   (NPC),   a   government-­‐owned   and   –controlled  
corporation,  also  enjoys  exemption  from  real  property  tax  under  its  charter.    However,  this  
exemption  does  not  extend  to  NPC’s  BOT  contractor  and  neither  does  NPC’s  entitlement,  as  
a  GOCC,  to  a  lower  assessment  level  of  10%  benefit  the  contractor.    Thus,  the  Supreme  Court  
in   National   Power   Corporation   v.   Central   Board   of   Assessment   Appeals77  held   that   the   BOT  
contractor   who   has   complete   ownership,   both   legal   and   beneficial,   of   the   power   plant,  
including  the  machineries  and  equipment  used  therein,  subject  only  to  the  agreed  transfer  
of  these  properties  without  cost  to  NPC  after  25  years,  is  the  actual,  direct  and  immediate  
owner  of  the  machineries  and  equipment,  hence,  the  party  liable  for  the  real  property  tax.    
An  undertaking  by  NPC  that  it  shall  be  responsible  for  the  payment  of  all  real  estate  taxes  
and  assessments  would  nevertheless  not  exempt  the  contractor.    The  Supreme  Court  held  in  
Fels   Energy,   Inc.   v.   Province   of   Batangas78  that   the   privilege   granted   to   NPC   cannot   be  
extended   to   the   contractor.     Furthermore,   the   undertaking   to   pay   all   real   estate   taxes   and  
assessments   is   a   covenant   between   NPC   and   the   contractor   and   it   does   not   bind   a   third  
person  not  privy  thereto,  in  this  case  the  Province  of  Batangas.  
 
Portions   of   real   properties   turned   over   to   the   Presidential   Commission   on   Good  
Government   (PCGG)   by   a   self-­‐confessed   crony   of   the   late   President   Ferdinand   E.   Marcos  
that  are  leased  out  to  private  parties  or  business  establishments  are  subject  to  real  property  
tax.     In   the   event   of   delinquency,   such   properties   may   be   sold   in   a   public   auction   because  
they  are  not  considered  properties  of  public  dominion.79     Portions  of  the  hospital  and  land  
owned  by  the  Lung  Center  of  the  Philippines  that  are  leased  to  private  persons  as  clinics  or  
to  business  establishments  are  subject  to  real  property  tax  while  the  remaining  portions  of  
the   land   and   hospital   occupied   by   the   Lung   Center   for   treatment   and   care   of   patients,  
whether  paying  or  non-­‐paying,  are  exempt.80  
 
Auction  Sale  of  Delinquent  Properties  
                                                                                                               
75  See  also  Republic  v.  City  of  Kidapawan,  477  SCRA  324,  333-­‐337  (2005),  where  the  

Supreme  Court  held  that  where  real  property  owned  by  the  government  is  leased  to  
a  private  person  (i.e.  beneficial  user)  or  where  the  assessment  is  made  on  the  basis  
of  the  actual  use  of  the  property,  the  personal  liability  for  the  tax  is  on  any  person  
who  has  such  beneficial  or  actual  use  at  the  time  of  the  accrual  of  the  tax.  
76  Social  Security  System  v.  City  of  Bacolod,  115  SCRA  412,  417  (1982)  
77  577  SCRA  418,  434-­‐438  (2009);  see  also  National  Power  Corporation  v.  Province  

of  Quezon  and  Municipality  of  Pagbilao,  593  SCRA  47  (2009)  and  611  SCRA  71  
(2010)  
78  Supra,  note  _  at  207  
79  City  of  Pasig  v.  Republic,  656  SCRA  271,  291-­‐292  (2011)  
80  Lung  Center  of  the  Philippines  v.  Quezon  City,  433  SCRA  119  (2004)  
   21  

 
  Real   properties   owned   by   the   Republic   of   the   Philippines   but   the   beneficial   use   of  
which  is  granted  to  a  private  person,  by  consideration  or  otherwise,   may  not  be  levied  upon  
or  sold  in  an  auction  sale  if  they  are  considered  “properties  of  public  domain  or  dominion”.    
The   Civil   Code   defines   “properties   of   public   dominion”   as   “those   intended   for   public   use,  
such   as   roads,   canals,   rivers,   torrents,   ports   and   bridges   constructed   by   the   State,   banks,  
shores,   roadsteads,   and   others   of   similar   character”   as   well   as   “those   which   belong   to   the  
State,   without   being   for   public   use,   and   are   intended   for   some   public   service   or   for   the  
development  of  the  national  wealth.”    
 
As  properties  of  public  dominion,  they  cannot  be  sold  at  public  auction  to  satisfy  a  
real   property   tax   delinquency   of   either   the   private   person   who   has   beneficial   use   thereof   or  
of   the   agency   or   instrumentality   of   Government   in   whose   name   the   properties   may   be  
registered   or   titled.   Thus,   the   fishing   port   in   Philippine   Fisheries   Development   Authority   v.  
Court  of  Appeals81  may   not   be   sold   at   public   auction.   The   same   is   true   with   the   reclaimed  
lands   in   Chavez   v.   Public   Estates   Authority82  and   the   airport   land   and   buildings   in   Manila  
International  Airport  Authority  v.  Court  of  Appeals83.    
 
  However,  where  the  properties  are  not  of  public  dominion,  they  may  be  levied  upon  
and   sold   in   an   auction   sale,   even   though   owned   by   the   Republic   of   the   Philippines,   if   the  
taxable  entities  who  are  granted  beneficial  use  or  possession  of  such  properties  do  not  pay  
the   real   property   taxes   due   on   such   properties   or   portions   thereof   that   are   occupied   or  
leased  by  such  taxable  entities.84     It  is,  therefore,  incumbent  upon  the  Government  to  see  to  
it   that   real   property   taxes   due   on   such   properties   leased   to   taxable   entities   are   paid   fully  
and   on   time   such   as   by   passing   them   on   to   the   lessees   and   adding   them   on   to   the   rental  
invoices  to  the  latter  as  a  separate  item.    
 
  The   auction   sale   of   real   property   due   to   delinquency   is   an   action   in  personam,   not   in  
rem.    The  local  treasurer  must  serve  a  notice  directly  to  the  delinquent  real  property  owner,  
and  not  merely  by  publication.    Without  notice  to  the  delinquent  real  property  owner,  the  
latter  might  not  have  an  opportunity  to  redeem  the  property  despite  the  lapse  of  one  year  
from  the  date  the  sale  was  registered.    Moreover,  in  case  of  an  auction  sale,  the  balance  of  
the  proceeds  from  the  sale,  after  deducting  the  amount  of  the  taxes  and  penalties  due  and  
the  costs  of  sale,  should  be  returned  to  the  property  owner.    Thus,  failure  to  serve  a  notice  of  
the   auction   sale   to   the   delinquent   property   owner   renders   the   auction   sale   null   and   void.    
Consequently,   the   buyer   at   the   auction   sale   does   not   acquire   valid   title.85     Holding   of   the  
auction   sale   without   the   requisite   notice   to   the   property   owner   is   a   denial   of   the   owner’s  
right  to  due  process.86  
                                                                                                               
81  Supra,  note  _  at,    _;  see  also  Philippine  Fisheries  Development  Authority  v.  Central  

Board  of  Assessment  Appeals,  638  SCRA  644  (2010)  and  GSIS  v.  City  Treasurer  of  
the  City  of  Manila,  supra,  note  _  at  _    
82  Supra,  note  _  at  _  
83  Supra,  note  _  at  _  
84  City  of  Pasig  v.  Republic,  supra,  note  _  at  _  
85  Tan  v.  Bantegui,  473  SCRA  663  (2005);  see  also  Vizarra  v.  Rodriguez,  509  SCRA  

504,  515  (2006)      

86  Puzon  v.  Abellera,  169  SCRA  789,  795  (1989);  Meralco  Securities  Industrial  

Corporation  v.  Central  Board  of  Assessment  Appeals,  et.  al.,  114  SCRA  260,  263  
   22  

 
  The  Supreme  Court  in  Aquino   v.   Quezon   City87  held  that  local  governments  need  not  
even   post   or   publish   the   notice   of   delinquency   notwithstanding   the   provisions   of   Section  
254   of   the   LGC.     It   is   sufficient   that   personal   service   was   done   on   the   delinquent   real  
property  owner.    However,  if  the  property  owner  furnished  an  inadequate  address,  such  as  
when   he   merely   wrote   “Butuan   City”   in   the   assessor’s   tax   rolls,   and   never   took   steps   to  
correct  or  complete  it  all  this  time,  he  cannot  later  on  complain  that  he  did  not  receive  the  
notice  of  delinquency  sent  to  his  last  known  address.    It  is  irrelevant  that,  in  all  likelihood,  
he  would  not  be  receiving  any  notice  due  to  his  incorrect  or  inadequate  address.    After  all,  
said   the   Court   in   Aquino   v.   Quezon   City,   nowhere   in   the   law   is   it   required   that   the   notice  
must  actually  be  received  by  the  intended  recipient.88     Similarly,  if  the  property  owner  fails  
to   amend   or   update   its   address   as   shown   in   the   tax   rolls   or   property   tax   records,   it   is  
estopped   from   claiming   that   it   did   not   receive   a   copy   of   the   notice   of   assessment   or   tax  
delinquency  that  the  assessor  or  treasurer  sent  to  the  address  on  file.89  
 
See,  however,  the  earlier  case  of  De   Knecht   v.   Court   of   Appeals90  where  the  Supreme  
Court   held   that   notices   and   publication,   as   well   as   the   legal   requirements   for   a   tax  
delinquency,  are  mandatory  and  the  failure  to  comply  therewith  can  invalidate  the  sale.  
 
  It  is  important  that  if  a  real  property  is  sold  or  otherwise  transferred  to  another,  the  
latter   must   apply   for   a   new   tax   declaration   in   his   name.     Otherwise,   in   the   event   of  
delinquency   in   the   payment   of   real   property   taxes,   the   local   treasurer   would   naturally   send  
the   notice   of   delinquency   to   the   previous   owner   and   to   the   latter’s   address   as   he   still  
appears  to  be  the  owner  of  the  property  based  on  the  Tax  Declaration  on  record.    This  can  
be   costly   to   the   new   owner   of   the   property   especially   if   the   property   has   been   sold   in   a  
public   auction   to   the   highest   bidder   who   forthwith   applies   for   a   new   title   and   tax  
declaration  in  his  name.91    
 
Injunction  Against  Collection  of  Taxes  
 

                                                                                                                                                                                                                                                                                                                                         
(1982);  De  Asis  v.  Intermediate  Appellate  Court,  169  SCRA  314,  323-­‐324  (1989);  
Cagayan  Electric  Power  and  Light  Co.,  Inc.  v.  City  of  Cagayan  De  Oro,  G.R.  No.  191761,  
Nov.  14,  2012,  685  SCRA  609;  Moday  v.  Court  of  Appeals,  268  SCRA  586,  593  
(1997);  Valbueco,  Inc.  v.  Province  of  Bataan,  G.R.  No.  173829,  June  10,  2013,  698  
SCRA  57,  65-­‐66  
87  497  SCRA  497,  508  (2006),  citing  Talusan  v.  Tayag,  356  SCRA  263,  276-­‐277  

(2001)  
88  Id.  at  510-­‐511  
89  Valbueco,  Inc.  v.  Province  of  Bataan,  G.R.  No.  173829,  June  10,  2013,  698  SCRA  57,  

75  
90  290  SCRA  223  (1998)  
91  De  Asis  v.  Intermediate  Appellate  Court,  169  SCRA  314  (1989),  except  that  in  this  

case,  there  was  a  finding  that  the  owner  did  in  fact  file  with  the  Assessor’s  Office  
“Sworn  Statement  of  the  True  Current  and  Fair  Market  Value  of  Real  Properties”,  
thus  putting  the  Assessor  and  the  Treasurer  on  notice  that  she  was  indeed  the  
owner  of  the  property,  and,  therefore,  notice  of  delinquency  should  have  been  sent  
to  her  at  the  address  she  indicated  in  the  Sworn  Statement.  
   23  

  Injunction  generally  does  not  lie  against  the  collection  of  taxes.    However,  it  may  be  
issued  where  the  taxpayer  has  shown  a  clear  and  unmistakable  right  to  refuse  or  to  hold  in  
abeyance   the   payment   of   taxes   such   as   in   the   instant   case   where   the   taxpayer   contested   the  
assessment   on   the   ground   that   (1)   it   pertained   to   properties   that   have   been   previously  
declared,  (2)  it  covers  more  than  ten  years  which  is  not  allowed  under  the  LGC,  (3)  the  FMV  
or   replacement   cost   used   includes   items   which   should   be   properly   excluded,   (4)   prompt  
payment   discounts   were   not   considered   in   determining   the   FMV,   and   (5)   the   revised  
assessment  should  take  effect  only  the  following  year.    The  Supreme  Court  held  in  Talento  v.  
Escalada92  that   the   resolution   of   these   issues   is   imperative   before   the   properties   of   the  
taxpayer  are  sold  in  public  auction.  
 
Appeal  Procedure  and  Jurisdiction  of  the  LBAA  
 
  The   LGC   provides   for   a   procedure   of   appeal   from   decisions   or   actions   of   the   local  
assessor.     If   a   property   owner   is   dissatisfied   with   an   action   of   the   local   assessor,   such   as  
when  he  finds  the  assessment  excessive  or  erroneous,  he  may  pay  the  tax  under  protest  and  
then  file  with  the  local  treasurer  a  protest  in  writing  within  thirty  (30)  days  from  payment  
of  the  tax.93    The  local  treasurer  has  sixty  (60)  days  from  receipt  of  the  protest  within  which  
to  decide  the  same.94  If  the  local  treasurer  denies  the  protest  or  fails  to  act  on  it  within  the  
60-­‐day   period,   the   property   owner   may   appeal   by   verified   petition   to   the   Local   Board   of  
Assessment  Appeals  within  sixty  (60)  days  from  receipt  of  denial  of  the  protest  or  receipt  of  
the  assessment  notice.95     The  LBAA  has  one  hundred  twenty  (120)  days  from  receipt  of  the  
appeal   within   which   to   decide   it.96     The   property   owner   or   the   local   assessor   who   is   not  
satisfied   with   the   decision   of   the   LBAA   has   thirty   (30)   days   from   receipt   of   the   decision  
within  which  to  appeal  to  the  Central  Board  of  Assessment  Appeals  (CBAA).97      
 
While  the  above-­‐described  appeal  procedure  looks  straightforward,  some  property  
owners  bypass  the  LBAA  and  the  CBAA.  Worse,  some  property  owners  get  away  with  non-­‐
payment  of  the  questioned  real  property  tax  during  the  pendency  of  the  protest  or  appeal  
notwithstanding   the   clear   statutory   requirement   in   Section   252   that   “no   protest   shall   be  
entertained  unless  the  taxpayer  first  pays  the  tax.”    It  is  quite  clear  from  Section  252  that  the  
real   property   owner   must   first   pay   in   full   the   realty   tax   subject   of   the   assessment   before  
filing   a   protest.98  What   is   not   clear   is   whether   it   is   only   the   amount   of   tax   outstanding   at   the  
time   of   filing   of   the   protest   that   must   be   paid,   or   also   the   real   property   taxes   that  
subsequently  fall  due  during  the  period  that  the  protest  is  pending  with  the  local  treasurer,  
LBAA,   CBAA,   CTA   and,   eventually,   the   Supreme   Court.     In   City   of   Pasig   v.   Republic99,   the  
                                                                                                               
92  Supra,  note  _  at  _  
93  Section  252,  LGC  
94  Id.  
95  Section  226,  LGC  
96  Section  229,  LGC  
97  Id.  
98  Camp  John  Hay  Development  Corporation  v.  Central  Board  of  Assessment  Appeals,  

G.R.  No.  169234,  Oct.  2,  2013,  706  SCRA  547  (the  real  property  owner  questioning  
the  assessment  should  first  pay  the  tax  due  before  his  protest  can  be  entertained  
and  in  no  case  is  the  local  treasurer  obliged  to  entertain  the  protest  unless  the  tax  
due  has  been  paid)  
99  Supra,  note  _  at  _  
   24  

taxpayer  made  only  a  partial  payment  under  protest  of  P2,000,000  out  of  a  total  assessment  
of  P389,027,814.48,  prompting  the  Court  of  Appeals  to  point  this  out  as  one  of  the  grounds  
for  the  dismissal  of  the  action,  but  the  Supreme  Court  reversed,  without  at  all  touching  such  
and   other   procedural   issues. 100     Again,   in   City   Government   of   Quezon   City   v.   Bayan  
Telecommunications101,  the  Supreme  Court  saw  nothing  wrong  with  the  non-­‐payment  under  
protest  of  the  tax  assessed,  even  lamenting  that  an  appeal  to  the  LBAA  would   have  required  
payment   under   protest   of   the   amount   of   P43,878,208.18   which,   given   the   then   prevailing  
Asian  financial  crisis,  would  have  been  difficult  to  raise.  
 
It  is  also  not  clear  whether  the  tax  that  needs  to  be  paid  under  protest  refers  to  the  
“real   property   tax”   itself   or   to   the   “real   property   tax”   plus   the   2%   monthly   “interest”   that  
has   so   far   accrued   at   the   time   of   the   filing   of   the   protest.     In   Quimpo   v.   Mendoza102,   the  
Supreme  Court  opined  that  what  needs  to  be  paid  under  protest  is  only  the  real  property  tax  
itself  because  the  interest,  which  is  in  the  nature  of  a  penalty  or  surcharge,  is  not  a  “tax”  in  
itself.  
   
Bypassing   the   LBAA   or   the   CBAA,   for   that   matter,   is   not   without   some   precedent,  
too.  As  early  as  in  the  1906  case  of  Roman  Catholic  Church  v.  Hastings  et.  al.103,  the  Supreme  
Court  made  a  pronouncement  that  while  a  taxpayer  who  finds  an  assessment  excessive  or  
erroneous  must  seek  redress  by  appeal  to  the  board  of    tax  appeals    as  a  board  of  review,  yet  
where  the  tax  sought  to  be  collected  is  itself  illegal,  the  taxpayer  may  resort  to  the  courts.      
 
In  City   Government   of   Quezon   City   v.   Bayan   Telecommunications,   Inc.104,   the  Supreme  
Court   approved   of   the   property   owner’s   withdrawal   of   its   appeal   to   the   LBAA   and,   in   lieu  
thereof,   filing   with   the   RTC   a   petition   for   prohibition   with   an   urgent   prayer   for   TRO   and/or  
writ  of  preliminary  injunction.    The  Court  said,  considering  that  Bayantel’s  real  properties  
were  already  levied  upon  on  account  of  the  delinquency,  an  appeal  to  the  LBAA  would  not  
be   a   speedy   and   adequate   remedy   within   the   context   of   Section   2   of   Rule   65.     Besides,   an  
appeal  to  the  LBAA  would  require  payment  under  protest  of  the  amount  of  P43,878,208.18  
which,  given  the  then  prevailing  Asian  financial  crisis,  would  have  been  difficult  to  raise.  
 
  Compare  City  Government  of  Quezon  City  v.  Bayan  Telecommunications,  Inc.   with  the  
earlier   case   of   Republic  v.  City  of  Kidapawan105  where   the   Supreme   Court   held   that   even   if  

                                                                                                               
100  Id.  at  274  and  282.  
101  484  SCRA  169  (2006)  
102  107  SCRA  73,  84  (1981),  citing  Collector  of  Internal  Revenue  v.  Bautista,  G.R.  No.  

L-­‐12250  and  L-­‐12259,  May  27,  1959.  

103  Supra,  note  _  at  707.  
104  Id.  at  179-­‐180  (2006);  see  also  Talento  v.  Escalada,  Jr.,  556  SCRA  491  (2008),  

where  the  property  owner  (Petron)  also  withdrew  its  appeal  earlier  filed  with  the  
LBAA  and  subsequently  filed  with  the  RTC  a  petition  for  prohibition  with  prayer  for  
the  issuance  of  a  TRO  and/or  preliminary  injunction.    Petron  was  allowed  to  post  a  
surety  bond  equivalent  to  the  amount  of  the  assessment  but  its  petition  filed  with  
the  Supreme  Court  under  Rule  65  was  dismissed  for  being  erroneous  (for  it  should  
have  been  under  Rule  45)  and  filed  out  of  time.  
105  477  SCRA  324,  337  (2005),  citing  Systems  Plus  Computer  College  of  Caloocan  

City  v.  Local  Government  of  Caloocan  City,  408  SCRA  494,  499  (2003)  
   25  

the  issue  raised  is  purely  a  question  of  law,  the  owner  should  have  still  followed  the  appeal  
procedure   (to   LBAA   or   the   CBAA)   under   Sections   226   and   229   of   the   LGC,   instead   of   filing   a  
petition   for   prohibition   with   prayer   for   TRO   and/or   preliminary   injunction   with   the   RTC  
after   receiving   a   notice   from   the   treasurer   that   the   delinquent   property   would   be   sold  
through   a   public   auction.   The   Supreme   Court   also   held   in   Camp   John   Hay   Development  
Corporation   v.   Central   Board   of   Assessment   Appeals 106  that   a   claim   for   exemption   from  
payment   of   real   property   tax   does   not   actually   question   the   assessor’s   authority   to   assess  
and  collect  such  taxes  [which  may  be  the  subject  of  a  petition  for  certiorari,  prohibition,  or  
mandamus   filed   with   the   Regional   Trial   Court]   but,   rather,   it   raises   a   question   as   to   the  
reasonableness   or   correctness   of   the   assessment   by   the   local   assessor   [which   must   be  
resolved,  at  the  first  instance,  in  the  level  of  the  LBAA  and  then  CBAA]  as  may  be  inferred  
from  the  provisions  of  Section    206  of  the  LGC.    Under  Section  206,  a  real  property  that  is  
not   declared   and   proved   as   tax-­‐exempt   shall   be   included   in   the   assessment   roll,   hence  
implying  that  that  the  local  assessor  has  the  authority  to  assess  such  property.      
 
  The  tax  due  and  that  is  being  challenged  may  be  paid  under  protest  either  in  cash  or  
surety  bond.107  
 
  Effect   of   Motion   for   Reconsideration.     A   motion   for   reconsideration   of   the  
assessor’s  decision  does  not  suspend  the  running  of  the  60-­‐day  period  (from  receipt  of  the  
notice  of  assessment)  within  which  to  appeal  to  the  LBAA.    A  motion  for  reconsideration  is  
not   sanctioned   by   law.     Thus,   failure   to   promptly   file   an   appeal   to   the   LBAA   renders   the  
assessment  of  the  local  assessor  final,  executory  and  demandable.108    The  assessment  notice  
is   the   last   action   of   the   local   assessor   on   a   particular   assessment,   and   it   is   this   last   action  
that  gives  the  owner  of  the  property  the  right  to  appeal  to  the  LBAA.109     The  procedure  laid  
down   by   law   does   not   permit   the   filing   of   a   motion   for   reconsideration.     Otherwise,  
explained   the   Court   in   Callanta   v.   Office   of   the   Ombudsman,   this   would   invite   corruption  
where   values   of   real   property   may   be   initially   set   unreasonably   high   and   then   subsequently  
reduced  upon  request  of  the  property  owner  in  an  illicit  or  covert  trade-­‐off.  
 
Proper  Party  to  Protest  or  Appeal  Assessment  
 
  Section   226   states   that   “any   owner   or   person   having   legal   interest   in   the   property  
who   is   not   satisfied   with   the   action   of   the   provincial,   city   or   municipal   assessor   in   the  
assessment   of   his   property   may,   within   sixty   (60)   days   from   the   date   of   receipt   of   the  
written   notice   of   assessment,   appeal   to   the   Board   of   Assessment   Appeals   of   the   province   or  
city   by   filing   a   petition   under   oath   in   the   form   prescribed   for   the   purpose,   together   with  
copies  of  the  tax  declarations  and  such  affidavits  or  documents  submitted  in  support  of  the  
appeal.”  
 
                                                                                                               
106  Id.,  supra,  note  67  at  564;  see  also  Dr.  Olivares  v.  Mayor  Marquez,  438  SCRA  679,  

National  Power  Corporation  v.  Province  of  Quezon  and  Municipality  of  Pagbilao,  G.R.  
No.  171586,  Resolution  dated  25  January  2010,  611  SCRA  71,  94,  cited  Camp  John  
Hay  Development  Corporation  v.  Central  Board  of  Assessment  Appeals,  supra.  
107  Camp  John  Hay  Development  Corporation  v.  Central  Board  of  Assessment  

Appeals,  supra,  note  __  at  570  

108  Fels  Energy,  Inc.  v.  Province  of  Batangas,  supra,  note  _  at  _  
109  Callanta  v.  Office  of  the  Ombudsman,  285  SCRA  648  (1998)  
   26  

  In  National  Power  Corporation  v.  Province  of  Quezon  and  Municipality  of  Pagbilao110,  
the   Supreme   Court   held   that   NAPOCOR,   which   assumed   the   real   property   tax   liability   of  
Mirant,  the  owner  of  the  machineries  and  equipment  supplied  under  the  BOT  contract  for  
the   construction   and   operation   of   a   power   plant,   is   not   the   “owner   or   person   having   legal  
interest  in  the  property”  who  may  appeal  an  assessment  to  the  LBAA.    The  Court  said  that  
“the   legal   interest   should   be   one   that   is   actual   and   material,   direct   and   immediate,   not  
simply   contingent   or   expectant”   as   in   this   case   where   ownership   of   the   machineries   and  
equipment  will  vest  in  NAPOCOR  only  at  the  end  of  the  fixed  term  of  the  project,  which  is  25  
years.    Until  such  time,  NAPOCOR’s  claim  of  ownership  is  merely  contingent.  
 
  The   Supreme   Court   further   explained   in   National   Power   Corporation   that   while  
NAPOCOR   indeed   assumed   responsibility   for   the   taxes   due   on   the   power   plant   and   its  
machineries,   the   tax   liability   that   can   vest   in   the   taxpayer   the   personality   to   protest   the  
assessment  is  that  which  arises  from  law  that  the  local  government  unit  can  enforce  against  
the   taxpayer   and   not   the   contractual   liability   that   is   enforceable   between   the   parties   to   a  
contract   as   in   this   case.111     The   Court   also   somewhat   rebuked   NAPOCOR   for   assuming   by  
contract  the  tax  liability  of  the  contractor,  Mirant,  and  thereafter  turn  around  and  invoke  its  
own   exemption   as   a   GOCC   against   the   local   government   unit   that   wants   to   tax   the  
contractor.112  
 
Challenging  an  Ordinance  
 
  As   a   general   rule,   a   taxpayer   may   file   a   complaint   assailing   the   validity   of   an  
ordinance   and   praying   for   a   refund   of   its   perceived   overpayments   without   first   filing   a  
protest  to  the  payment  of  taxes  due  under  the  ordinance.    As  held  in  Ty   v.   Judge   Trampe113,  
where   petitioners   are   questioning   the   very   authority   and   power   of   the   assessor,   acting  
solely  and  independently,  to  impose  the  assessment  and  of  the  treasurer  to  collect  the  tax,  
these   are   not   questions   relating   to   the   reasonableness   of   an   increase   in   a   real   estate   tax  
assessment  but  attacks  on  the  very  validity  of  any  increase.    Consequently,  the  petitioners  
must   have   appealed   the   ordinance   to   the   Secretary   of   Justice   within   30   days   from   the  
effectivity   of   the   ordinance.   Otherwise,   the   petitioners   could   not   now   seek   redress   in  
court.114    
 
  In   Lopez   v.   City   of   Manila115,   the   Court   ruled   that   the   taxpayer   did   not   exhaust  
administrative  remedies  when  he  filed  with  the  RTC  a  special  proceeding  for  the  declaration  
of  nullity  of  the  City  of  Manila  Ordinance  prescribing  a  general  revision  of  the  valuation  of  
real   properties   in   Manila,   with   prayer   for   preliminary   injunction   and   TRO.     The   Court  
pointed   out   that   petitioner   could   have   questioned   the   ordinance   with   the   Secretary   of  
Justice  within  30  days  from  its  effectivity,  or  he  could  have  appealed  to  the  LBAA  a  notice  of  
assessment  on  his  property.  
 
                                                                                                               
110  611  SCRA  71,  83-­‐90  (2010)  and  593  SCRA  47,  57-­‐  (2009)  
111  593  SCRA  47,  61  (2009)  
112  Id.  at  67  
113  250  SCRA  500  (1995)  
114  Jardine  Davies  Insurance  Brokers,  Inc.  v.  Aliposa,  et.  al.,  G.R.  No.  118900,  Feb.  27,  

2002  
115  Supra,  note  _  at  458-­‐461    
   27  

Payment  Under  Protest  

 
  This  is  jurisdictional.    Non-­‐payment  of  the  tax  warrants  dismissal  of  the  protest  or  
any   action   filed   in   court   contesting   the   assessment.     However,   payment   under   protest   is  
required  only  when  the  local  assessor  has  issued   an  assessment   notice  in  the  form  of  real  
property  tax  declaration,  the  validity  of  which  is  being  questioned.    Thus,  in  Manila  Electric  
Company  v.  Barlis116  where  what  the  local  assessor  sent  to  the  taxpayer  were  allegedly  only  
tax   collection   notices   with   a   tenor   similar   to   a   demand   letter,   the   Court   held   that   the  
obligation   to   pay   under   protest   did   not   arise   and   the   requirement   of   exhaustion   of  
administrative  remedies,  such  as  appealing  to  the  LBAA/CBAA  would  not  apply.117      
 
  In  National  Power  Corporation  v.  Province  of  Quezon  and  Municipality  of  Pagbilao118,  
the   taxpayer   argued   that   the   payment   under   protest   requirement   applies   only   when   the  
taxpayer   is   questioning   the   reasonableness   or   excessiveness   of   an   assessment,   but   not  
where  the  legality  of  the  assessment  is  put  in  issue  such  as  when  the  property  owner  claims  
it   is   exempt   from   real   property   tax.   The   Supreme   Court,   however,   ruled   that   a   “claim   of  
exemption”   from   real   property   tax   is   in   fact   a   question   on   the   correctness   of   the  
assessment;119  consequently,  the  requirement  of  payment  under  protest  must  be  complied  
with.        
 
The   Court   distinguished   the   National  Power  Corporation  case   from   Ty  v.  Trampe120  
where  the  taxpayer  questioned  the  very  authority  and  power  of  the  assessor,  acting  solely  
and  independently,  to  impose  the  assessment  and  of  the  treasurer  to  collect  the  tax.121     The  
Supreme   Court   explained   in   Victorias   Milling   Co.,   Inc.   v.   Court   of   Tax   Appeals122  that   “an  
assessment   is   illegal   and   void   when   the   assessor   has   no   power   to   act   at   all”   and   “it   is  
erroneous  when  the  assessor  has  the  power  but  errs  in  the  exercise  of  that  power.”    Thus,  
where   the   assessor   erred   in   the   manner   of   computing   the   depreciation   allowance   for   the  
machineries   assessed,   the   assessment   is   erroneous,   hence,   the   taxpayer   should   have  
appealed  to  the  local  board  of  assessment  appeals  instead  of  filing  a  refund  claim  with  the  
Court  of  First  Instance  (now  RTC).123  
 

                                                                                                               
116  375  SCRA  570  (2002)  
117  Id.  at  576-­‐577  
118  611  SCRA  71,  91-­‐95  (2010)  
119  Id.  at  94  
120  250  SCRA  500  (1995)  
121  The  case  of  Ty  v.  Trampe  involved  an  issue  of  whether  the  requirement  in  Pres.  

Decree  No.  921  that  the  schedule  of  values  of  real  properties  in  the  Metro  Manila  
area  shall  be  prepared  jointly  by  the  city  assessors  in  the  districts  created  therein  
was  repealed  by  Section  212  of  the  LGC  which  provides  that  the  schedule  shall  be  
prepared  by  the  provincial,  city  or  municipal  assessors  of  the  municipalities  within  
the  Metro  Manila  area  for  the  different  classes  of  real  properties  situated  in  their  
respective  local  government  units  for  enactment  into  an  ordinance  of  the  
Sanggunian  concerned.  
122  22  SCRA  1008,  1012  (1968)  
123  Ibid.  
   28  

  The   Supreme   Court   likewise   distinguished   National   Power   Corporation   from  

Olivarez   v.   Marquez124  where  the  taxpayer  questioned  the  correctness  of  the  assessments,  a  
question  of  fact  that  is  not  allowed  in  a  petition  for  certiorari,  prohibition,  and  mandamus.    
The   Court   therein   said   that   the   taxpayer   should   have   exhausted   administrative   remedies  
first,   particularly   payment   of   the   assailed   tax   under   protest   and,   if   the   protest   is   denied,  
appeal   to   the   LBAA.     The   Supreme   Court   thus   clarified   that   Section   226   should   be   read   in  
conjunction   with   Section   252(d),   such   that   the   “action”   referred   to   in   Section   226   (in  
relation   to   a   protest   of   real   property   tax   assessment)   refers   to   the   local   assessor’s   act   of  
denying  the  protest  filed  pursuant  to  Section  252.        
 
Interest  on  Unpaid  Realty  Tax  
 
  Section  250  allows  the  property  owner  to  pay  the  basic  tax  and  the  SEF  additional  
tax   without   interest   in   four   (4)   equal   installments   due   on   or   before   March   31,   June   30,  
September   31,   and   December   31,   respectively.     Where   the   taxpayer   fails   to   pay   on   time,   say  
the  last  installment  due  on  December  31,  on  what  would  the  2%  monthly  interest  imposed  
in  Section  255  be  based?  The  Supreme  Court  ruled  in  Quimpo  v.  Mendoza125  that  the  interest  
must  be  based  only  on  the  last  installment  that  was  not  paid  on  time.    To  base  the  interest  
on   the   entire   amount   of   real   property   tax   due   for   the   entire   year   would   be   unjust,   arbitrary  
and  an  abuse  of  power  since  the  taxpayer  is  permitted  by  law  to  pay  the  tax  in  four  (4)  equal  
installments  and  he  in  fact  paid  promptly  the  first  three  installments  but  paid  late  the  last  
one.126     This   is   precisely   why   the   law   subjects   the   taxpayer   to   the   payment   of   interest   of   2%  
on  the  amount  of  delinquent  tax  for  each  month  of  delinquency  or  fraction  thereof.127  
 
Prescriptive  Period  for  Collection    
 
  Under   Section   270   of   the   LCG,   the   LGU   has   five   (5)   years   from   the   date   the   real  
property   tax   became   due   within   which   to   collect   the   same,   whether   administratively   or  
judicially.     In   case   of   fraud   or   intent   to   evade   payment   of   the   tax,   the   LGU   has   ten   (10)   years  
from  discovery  of  such  fraud  or  intent  to  evade  payment  of  tax.      
 
Claim  for  Refund  
   
  Although  the  Supreme  Court  has  ruled  that  the  real  property  owner  is  entitled  to  a  
refund  of  real  property  taxes  paid  on  the  basis  of  the  consideration  appearing  in  a  deed  of  
sale   or   the   BIR-­‐approved   zonal   value   at   the   time   of   sale,   the   owner   must   still   file   a   claim   for  
refund   or   credit   with   the   city   treasurer   [instead   of   the   LBAA   which   the   Supreme   Court  
initially  indicated  in  its  earlier  decision]  in  accordance  with  Section  253  of  the  LGC.128     The  
property   owner   cannot   shortcut   the   procedure   laid   down   in   the   LGC   for   the   refund   of   taxes  
paid  under  protest.  
 

                                                                                                               
124  438  SCRA  679,  686-­‐687  (2004)  
125  107  SCRA  73,  82-­‐83  (1981)  
126  Id.  at  82  
127  Id.  at  83  
128  Allied  Banking  Corporation  v.  Quezon  City  Government,  502  SCRA  113,  117-­‐118  

(2006)  
   29  

  In   Testate  Estate  of  Concordia  T.  Lim  v.  City  of  Manila129,  the   City   of   Manila   demanded  
payment  from  the  property  owner  of  realty  taxes  on  two  parcels  of  land  earlier  foreclosed  
by  the  GSIS  but  which  the  owner  bought  back  more  than  two  years  later,  the  non-­‐payment  
of   which   would   preclude   the   issuance   of   new   titles   in   the   name   of   the   owner/buyer.     The  
back  taxes  that  owner  paid  under  protest  pertained  to  1977,  1978,  and  first  quarter  of  1979  
during  which  time  GSIS  owned  the  property  but  leased  them  to  taxable  persons.    In  ordering  
the  City  of  Manila  to  give  a  refund  to  the  property  owner,  the  Supreme  Court  ruled  that  the  
taxes   are   payable   by   the   person   who   had   actual   or   beneficial   use   and   possession   of   the  
property   regardless   of   whether   or   not   he   is   the   owner.     Unfortunately,   GSIS   was   held  
exempt   and   its   lessees   for   the   period   in   question   who   should   have   borne   the   back   taxes  
were   unknown   parties   and   never   impleaded.     Furthermore,   the   Court   ruled   that   the   RTC  
had   jurisdiction   to   entertain   the   complaint   for   a   sum   of   money   and/or   recovery   of   real  
estate  taxes  paid  under  protest.130          
     
 
TARIFF  AND  CUSTOMS  CODE  
[Prof.  C.  G.  Baniqued]  
 
 
 
I. Basis  of  Assessment  of  Duty  
A. Basis  of  dutiable  value  
Sec.  201,  TCCP  
-­‐     Ad  Valorem  
- (1)  Transaction  Value  (TV)  adjusted  by  adding  commissions,  brokerage  fees,  
cost  of  containers,  cost  of  packing,  royalties  if  applicable,  freight,  insurance,  
(2)   TV   of   identical   goods,   (3)   TV   of   similar   goods,   (4)   Deductive   Value,   (5)  
Computed  Value,  and  (6)  Fall-­‐Back  Value  
-­‐   In   case   of   doubt,   Collector   may   consider   reports   of   the   Revenue   Attache   or  
Commercial  Attache  in  the  country  of  exportation.  
B. Basis  of  dutiable  weight  
Sec.  202,  TCCP  
-­‐   Specific  
 
II. Special  Duties  
A. Anti-­‐Dumping  Duty  
Sec.  301,  TCCP  
- export  price  is  less  than  normal  value  in  country  of  origin  
- material  injury  to  domestic  industry  
- materially  retards  establishment  of  domestic  industry  producing  like  goods  
B. Countervailing  Duty  
Sec.  302,  TCCP  
- government   subsidy/financial   contribution   (e.g.   grant,   loans,   foregone  
revenues,  government  purchase  of  goods,  etc.)  
- with  adverse  effects  as  in  dumping  duty  on  domestic  industry  
C. Marking  Duty  

                                                                                                               
129  182  SCRA  483,  487  (1990)  
130  Id.  at  487  
   30  

Sec.  303,  TCCP  

- name  country  of  origin  of  the  article  
- otherwise,  article  subject  to  5%  ad  valorem  marking  duty  
D. Discriminating  Duty  
Sec.  304,  TCCP  
- discriminates   against   Phil.   goods,   e.g.,   unreasonable   charge,   exaction,   fee,  
regulation  or  limitation  not  applied  to  goods  from  other  countries  
- 100%  ad  valorem  
 
III. Ascertainment  and  Collection  of  Import  Duty  
A. When  importation  begins  and  deemed  terminated  
Sec.  1202,  TCCP  
- Importation   begins:   when   the   carrying   vessel   or   aircraft   enters   Phil.  
jurisdiction  with  intent  to  unload  
- Importation   ends:   upon   payment   of   duties,   etc.   and   issuance   of   permit   for  
withdrawal,  or  if  exempt,  upon  leaving  customs  jurisdiction  
B. Who  is  deemed  owner  of  imported  articles  
Sec.  1203,  TCCP  
- consignee  
- holder  of  bill  of  lading  duly  endorsed  by  consignee  
- if  consigned  to  order,  consignor  
- underwriters  of  abandoned  articles  
- salvors  of  articles  recovered  from  shipwrecks    
C. Liability  of  importer  for  duties  
Sec.  1204  ,TCCP  
- personal  debt  of  importer  
- lien   on   goods,   enforceable   only   while   goods   are   in   customs   custody;  
otherwise,  file  collection  case  in  RTC.    
D. Liquidation  
Secs.  1301,  1302,  1304-­‐1308,  TCCP  
- 30   days   from   discharge   of   last   package   from   vessel   or   aircraft   (non-­‐
extendible)  
- pay  duties  and  taxes  within  15  days  (also  non-­‐extendible)  
- FAILING   BOTH   TASKS   ABOVE,   GOODS   DEEMED   ABANDONED.   SEE  
CHEVRON  CASE.  
PSPC  v.  Republic,  547  SCRA  701  (2008)  
- assessment   is   in   the   form   of   a   liquidation   made   on   the   face   of   the   import  
entry   and   internal   revenue   declaration   (IERD)   approved   by   the   Collector.  
Liquidation   is   the   final   computation   and   ascertainment   by   the   Collector   of  
the   duties   and   taxes   due   on   imported   goods   based   on   official   reports   as   to  
the  quantity,  character  and  value  thereof,  and  the  Collector’s  own  findings  as  
to  the  applicable  rate  of  duty.    
- A   liquidation   is   considered   to   have   been   made   when   the   entry   is   officially  
stamped  “liquidated”.  
- An  assessment  or  liquidation  by  the  BOC  attains  finality  and  conclusiveness  
three   years   from   the   date   of   the   final   payment   of   duties,   except   when:   (a)  
there  was  fraud,  (b)  there  is  a  pending  protest,  (c)  there  is  compliance  audit,  
or  (d)  the  liquidation  of  the  IEIRD  was  merely  “tentative”.  
Chevron  Philippines,  Inc.  v.  Commissioner  of  the  Bureau  of  Customs,  561  SCRA  
710  (2008)  
   31  

- both   the   import   entry   declaration   (IED)   and   import   entry   and   internal  
revenue  declarations  (IERD)  must  be  filed  with  the  BOC  within  30  days  from  
the   date   of   discharge   of   the   last   package   from   the   vessel   or   aircraft.  
Otherwise,  the  goods  are  deemed  abandoned  in  favor  of  the  Government.    
 
IV. Remedies  of  Government    
A. Search,  seizure  and  arrest  
Secs.  2202-­‐2212,  TCCP  
Secs.  2301-­‐2306,  TCCP  
- BOC,  PN,  and  BIR  may  seize  
- In   case   of   seizure,   Collector   must   report   to   Commissioner   and   COA,   notify  
owner,   owner   can   settle,   except   if   there   was   fraud,   by   paying   fine   of   20%-­‐
80%  of  landed  cost  
- BOC  may  search  stores,  warehouses,  vessels,  aircrafts,  vehicles,  beasts,    
- BOC   may   also   remove   false   bottoms,   partitions,   WITHOUT   BEING   HELD  
LIABLE  FOR  DAMAGES    
Republic  v.  CFI  of  Manila,  Branch  XXII,  213  SCRA  222,  228-­‐230  (1992)  
Government  v.  Gale,  24  Phil.  95  
Commissioner  v.Cloribel,  19  SCRA  234  (1967)  
Auyong  Hian  v.  CA,  19  SCRA  10  (1967)  and  59  SCRA  110  (1974)  
Ponce  Enrile  v.  Vinuya,  37  SCRA  381  (1971)  
Papa  v.  Mago,  22  SCRA  857  (1968)  
Mison  v.  Natividad,  213  SCRA  734,  744-­‐745  (1992)  
- in  all  of  the  above  7  cases,  the  SC  held  that  the  RTC  has  no  jurisdiction  over  
seizure  and  forfeiture  proceedings.  Collector-­‐Commissioner-­‐CTA.  Thus,  RTC  
may   not   issue   injunction   against   the   Collector.   The   mere   fact   that   the  
complainant  in  the  RTC  case  alleges  ownership  over  the  vehicles  (20  chop-­‐
chop  found  in  a  compound  in  San  Fernando,  Pampanga)  does  not  divest  the  
Collector   (who   had   earlier   issued   a   warrant   of   seizure   and   detention)   of  
jurisdiction.  Ownership  can  be  raised  as  a  defense  in  the  seizure  proceeding.    
Asian  Terminals,  Inc.  v.  Bautista-­‐Ricafort,  505  SCRA  748,  760-­‐762  (2006)  
- Collector   seized   72   second   hand   right   hand   drive   buses   imported   from  
Japan.  He  issued  warrants  of  distraint  and  scheduled  them  for  auction  sale.  
Importer   filed   a   replevin   suit   with   the   RTC,   which   granted   the   same   upon  
filing   of   a   bond.   HELD:   The   RTC   has   no   jurisdiction.   Only   the   Collector   has  
jurisdiction  to  determine  all  questions  relating  to  the  seizure  and  forfeiture  
of  dutiable  goods.  
Commissioner  of  Customs  v.  CA,  481  SCRA  109  (2006)  
- Same   ruling   as   in   Asian   Terminals   but,   in   this   case,   the   vessel   itself   was  
seized.    
 
B. Impose  surcharges,  fines  and  forfeitures  
Sec.  2307,  TCCP  
Secs.  2501-­‐2536,  TCCP  
- SURCHARGE    
- For  late  payment:  10%  if  10-­‐day  delinquency,  25%  if  more  than  1  year    
- For   unauthorized   withdrawal:   50%   of   unpaid   duties   and   taxes,   but   if  
delinquency  lasts  more  than  1  year,  additional  25%  annually  
- FOR  UNDERVALUATION,  MISCLASSIFICATION  AND  MISDECLARATION  
- If  more  than  30%  difference,  forfeiture.  
   32  

Carreon  Tong  Tek  v.  Commissioner,  105  Phil.  1071  

-­‐Forfeiture  proceedings  are  “in  rem”  and  are  directed  against  the  “res”,  like  the  
vessel.  Owner  of  vessel  cannot  raise  as  a  defense  that  he  had  no  knowledge  that  
his  property  was  used  illegally.    
Ute  Paterok  v.  Bureau  of  Customs,  193  SCRA  132,  137  (1991)  
-­‐in   a   forfeiture   proceeding   where   owner   of   imported   prohibited   article   is  
known,   notice   of   hearing   must   be   served   upon   him.   Posting   on   the   bulletin  
board  not  enough  as  this  is  allowed  only  where  owner  is  unknown.  
Farolan  v.  CTA  and  Bagong  Buhay  Trading,  G.R.  No.  L-­‐42204,  Jan.  21,  1993  
Farm  Implement  and  Machinery  Co.  v.  Commissioner  of  Customs,  24  SCRA  905  
(1968)  
-­‐in   both   cases   above,   the   misdeclaration   must   be   willful.   Where   the  
misdeclaration   was   attributable   to   negligence   of   the   foreign   supplier   and   the  
importer   had   no   knowledge   of   the   defect   in   the   shipping   documents,   importer  
may  not  be  held  guilty  of  misdeclaration.  
-­‐moreover,  in  Farolan   case,  supra,   the  SC  held  the  BOC  cannot  be  held  liable  for  
actual   damages   sustained   by   an   importer   arising   from   the   deterioration   of   the  
goods   seized/forfeited   by   the   BOC   for   misdeclaration.     Doctrine   of   “sovereign  
immunity”.  
 
C. File  civil  or  criminal  action  
Sec.  2401,  TCCP  
-­‐   with  approval  of  Commissioner  
PSPC  v.  Republic,  547  SCRA  701  (2008)  
-­‐   In   this   case,   BOC   invalidated   the   TCCs   used   by   PSPC   in   payment   of   its   duties  
and  taxes  and  demanded  payment  from  PSPC.    PSPC  protested  the  demand  and,  
due   to   inaction   of   BOC   on   the   protest,   PSPC   appealed   to   the   CTA   questioning   the  
invalidation   of   the   TCCs.   Meanwhile,   BOC   filed   a   collection   case   with   the   RTC.  
PSPC  questioned  the  RTC’s  jurisdiction.  HELD:  In  this  case,  the  goods  have  long  
been   released   from   BOC’s   custody   and   therefore   it   has   no   more   lien   on   the  
goods.  It  can  only  enforce  the  payment  of  duties  and  taxes  through  a  collection  
case  filed  in  the  RTC.  
D. Impose  fine  and  imprisonment  
Secs.  3601-­‐3612,  TCCP  
E. Compulsory  Acquisition  
Sec.  2317,  TCCP  
F. Automatic   review   by   Secretary   of   Finance   of   adverse   ruling   in   seizure  
proceedings  
Sec.  2313,  TCCP  
- Collector  to  transmit  docket  within  5  days  
- Commissioner  to  decide  appeal  within  30  days  from  receipt  of  docket  
- If  Commissioner  reverses,  final  
- If   Commissioner   affirms,   or   no   decision,   automatic   review   by   Secretary   of  
Finance.  
- If  Secretary  affirms,  or  no  action  with  30  days,  decision  of  Commissioner  or  
Collector  is  final.  
 
V. Remedies  of  Importer  
A. Payment  under  protest  
Secs.  2308-­‐2312,  TCCP  
   33  

- protest  when  payment  is  made  

- or  protest  within  15  days  from  payment  
- Collector  sets  a  hearing  within  15  days  from  receipt  of  protest  
- Collector  renders  decision  within  30  days  from  termination  of  hearing  
B. Appeal  to  Commissioner  of  Customs  
Sec.  2313,  TCCP  
- 15  days  from  notice  of  Collector’s  decision  
- notice  of  appeal  with  Collector,  cc.  Commissioner  
- Collector  to  transmit  docket  to  Commissioner  
- In   seizure   proceedings   where   decision   of   Collector   is   adverse   to  
Government,  there  is  automatic  review  by  Commissioner  (and  docket  should  
be   elevated   to   Commissioner   within   5   days   from   promulgation   of   Collector’s  
decision);   Commissioner   decides   automatic   appeal   within   30   days   from  
receipt  of  docket  
- Automatic   review   by   Finance   Secretary;   if   no   decision   within   30   days,  
Collector’s   or   Commissioner’s   decision   adverse   to   Govt   becomes   final   and  
executory.  
Nestle  Phils.,  Inc.  v.  Commissioner  of  Customs,  CTA  Case  No.  4478,  Aug.  30,  2002  
-­‐  before  an  importer  may  appeal  a  decision  of  the  Collector  to  the  CTA,  it  must  
first  seek  a  review  thereof  by  the  Commissioner.  
C. Compromise  
Sec.  2316,  TCCP  
  D.      Judicial  Relief/Appeal  to  Court  of  Tax  Appeals  
               Republic  Act  No.  1125,  as  amended  by  Rep.  Act  No.  9282      
 
VII.   Authority  of  the  President  to  Revise  or  Remove  Tariff  Rates  
  Secs.  104  and  401,  TCCP  
  Sec.  28(2),  Article  VI,  Constitution  
  Garcia  v.  Executive  Secretary,  211  SCRA  219,  222-­‐226  (1992)  
- While   it   is   true   that   under   the   Constitution   all   appropriation,   revenue   or  
tariff   bills,   etc.   shall   originate   exclusively   in   the   House   of   Representatives,  
Congress  itself  has  authorized  the  President,  through  the  TCCP,  to  increase,  
decrease  or  even  remove  tariff  rates  and  other  duties  on  imports,  or  revise  
classifications,  subject  only  to  the  limitations  and  restrictions  provided  for  in  
the   law   (e.g.   prior   recommendation   of   NEDA,   periodic   investigation   by   TC,  
maximum   100%   ad   valorem,   additional   duty   on   all   imports   not   exceeding  
10%   ad   valorem,   etc.).   This   case   involved   2   EOs,   one   reducing   the   additional  
duty  on  imports  from  9%  to  5%  ad  valorem  (except  on  oil  products),  and  the  
other,   levying,   in   addition   to   the   9%   ad   valorem   on   oil   products,   a   special  
duty  of  P.95  per  liter  of  imported  crude  oil  and  P1  per  liter  of  imported  oil  
products.  
-