Of Res Mobilia Sequuntur Personam and Situs of Taxation)
Of Res Mobilia Sequuntur Personam and Situs of Taxation)
TRANSFER TAXATION
Transfer Taxes
gratuitous
BARCOM2008-09
2)
Transfer in contemplation of death
- A transfer with the thought of death.
- The term in contemplation of death means
that the impelling or controlling motive is the
thought of death, regardless of whether the
transferor is near the possibility of death or
not, which induces the disposition of the
property for the purpose of avoiding the tax.
- Example: donation was made concurrently
with the execution of a will (Vidal de Rocs vs.
Posadas, 58 Phil 108)
Circumstances
taken
into
account
in
determining in whether the transfer was made
in contemplation of death:
A.) Age and state of health of the decedent at
the time of the gift;
B.) Length of time between the gift and the
date of death; and
C.) Concurrent making of a will or making a
will within a short time after the transfer.
Note: Check the factual settings before and at
time of death because proximity to death is not
always conclusive.
Note:
The THREE (3) YEAR PRESUMPTION provides
that any transfer of a material part of his property
in the nature of a final disposition or distribution
thereof made by the decedent within three years
prior to his death without such adequate and full
consideration shall, unless shown to the contrary,
be deemed to be have been made in
contemplation of death.
This provision, however, has been already
deleted in Sec. 100 (b) now sec. 85 (B) of the Tax
Code by PD No. 1705.
Under BIR Ruling No. 261 September 2, 1987, the
law does not specify the number of years prior to
a decedents death within which a transfer can be
considered in contemplation of death.
BARCOM2008-09
4.)
- It includes:
A. Transfer without retention of interest but
intended to take
effect at or after the decedents death.
- Example: donations mortis causa.
BARCOM2008-09
property
of
the
surviving
NOTE:
In most of these transfers the property
remains substantially that of the transferor during
his lifetime notwithstanding the transfer since he
still retains either the beneficial ownership or
naked title to the property.
Note:
In the determination of the gross estate, the
nature of the property, whether common
property of the spouses, separate or exclusive
property either of the deceased or of the
surviving
spouse,
becomes
of
vital
importance.
BARCOM2008-09
Requisites:
a) The expenses must be due to the
interment, wake and burial; hence,
expenses on the death anniversary are not
included
b) The expenses must have been shouldered
by the estate and not by other people
- Examples:
a) fees of the executor or administrator;
b) attorneys fees;
c) accountants fees;
d) court fees;
e) salaries of employees; and
f) All other expense related to the
administration of the estate.
Accommodated Loan
- Ex: X owns a house and lot worth 5M. Y obtained
a 3M loan from Z with Xs house and lot as
collateral. Y paid 1M. Z died. X died.
Effect: Include in the gross estate of X the 5M as
receivable
from
Y
(reason:
right
of
reimbursement); and claim as deduction the
unpaid 2M.
Note:
This includes all expenses necessary to
settle or preserve the estate hence,
extrajudicial expenses are included.
BARCOM2008-09
otherwise;
b) Losses that were not claimed as a
deduction for income tax purposes; and
c) Losses incurred not later than the last day
for
payment of the estate tax (6 months
from death).
d) Include the worth of the property in the
gross estate
e) File a sworn declaration of the fact of loss
within 45 days from its occurrence
7) Unpaid Taxes
- Unpaid income tax on income due or received
before death of the decedent, and real
property taxes, which have accrued prior to
the death of the decedent (real property taxes
accrued at the beginning of the year but may
be paid before or at the end of each quarter)
are deductible.
-
the
not
tax
are
a.
b.
- Rationale:
The deduction operates to ease the
harshness of successive taxation of the same
property within a relatively short period of time.
Requisites for deductibility:
1. The present decedent must have acquired
the property by inheritance or by donation.
2. The property must have been acquired within
five (5) years prior to the death of the present
decedent
3. The property must have formed part of the
gross estate of the prior decedent if acquired by
inheritance, or the taxable gift of the donor if
acquired by donation.
- Requisites to be deductible:
a. The family home must be the actual residential
home of the decedent and his family at the
time of his death. (Decedent is married and
BARCOM2008-09
Conjugal
20 M lot
_______
20 M
Deductions
BARCOM2008-09
BARCOM2008-09
4.) Copies:
The return shall be filed in triplicate, two (2)
for the BIR and one (1) copy for the taxpayer.
5.) When to Pay
Pay the estate tax at the time you will file
your estate tax return.
(Pay as you file
system)
6.) Extension for Payment:
- allowed in meritorious cases when the
Commisioner finds that the payment of the
esate tax on the due date would impose
undue hardships upon the estate or any heir :
At most 2 years if estate extrajudicially
settled
At most 5 years if estate judicially
settled
- NOTE: The taxpayer must not be guilty of
a) negligence
b) intentional disregard of the rules
regulations, or
c) fraud
and
BARCOM2008-09
DISTINCTION
ESTATE TAX
BETWEEN
DONORS
AND
DONORS TAX
Tax on the privilege to
transmit
property
during the lifetime of
the donor
Tax rates are lower (2
to 15)
Exemption is only P
100,000.00
Notice of donation is
generally not required
ESTATE TAX
Tax on the privilege to
transmit property upon
ones death
Extension of payment
is not provided
Extension of payment
may be granted by the
Commissioner
of
Internal Revenue
10
BARCOM2008-09
Payable
within
6
months from the date
of death
Imposed on the net
estate
2.)
Stranger
1.) one who is not a :
(a) brother/sister (whole or half blood),
spouse,
ancestor and lineal descendant
(b) relative by consanguinity in the collateral
line
within the fourth degree of relationship
2.) donations made between individuals and
business
organizations are considered donations to
strangers
11
BARCOM2008-09
considered
Note:
For purposes of exemption, a non-profit
educational and/or charitable corporation,
institution,
accredited
non-government
organization,
trust
or
philanthropic
organization is defined as:
school, trust or university and/ or
charitable corporation, foundation trust or
philanthropic
organization
and/
or
research
institution
or
organization
incorporated as a non-stock entity:
paying no dividends.
governed by trustees who receive no
compensation; and
devoting
all
its
income
to
the
accomplishment and promotion of the
purposes enumerated in its articles of
incorporation.
Note:
Only donations made to non-stock, non-profit
educational institutions are exempt from gift
taxes as although Article 14 of the Constitution
D.
TAX
TREATMENT
OF
PROPERTIES
TRANSFERRED FOR LESS THAN FULL /
ADEQUATE CONSIDERATION
General Rule: The amount by which the FMV of
the property exceeded the value of the
consideration shall be deemed a gift
Exception: real properties classified as capital
assets (not used in business) as there were
already subjected to Capital Gains Tax
E.
TAX
TREATMENT
OF
POLITICAL
CONTRIBUTIONS
- any contribution in cash or in kind to any
candidate, political party or coalition of parties for
campaign purposes shall be governed by the
Election Code; hence, this is not subject to gift
tax (report to COMELEC?)
12
BARCOM2008-09
Limitations:
A.) For donors tax paid to one foreign country;
H. VALUATION
- the gift tax is based on the fair market value of
the gift at the time it was given
I. LAW APPLICABLE
Formula:
1. Donors Tax Paid to 1 Foreign Country
Tax Credit Limit =
Net gift situated in a foreign country X Phil.
Donors Tax
Entire net gifts
G. NET GIFT
- the total amount of gifts less the allowable
deductions and specific exemptions.
- the total net gifts made during the SAME
calendar year is used as basis for computing the
donors tax
13
BARCOM2008-09
PROBLEMS
1. Donations made by X
January 300,000 to his brother
April 400,000 to his sister
August 500,000 to his mother
b) A renounced his share without specifying a coheir who will receive the same. Is there liability
for donors tax?
A
250,000
-10,000
240,000
*2 to 15%
3, 600
B
250,000
_______
250,000
* 30%
75,000
14
BARCOM2008-09
B.
a. Composition Functions
- The Bureau of Internal Revenue
shall have a chief to be known as
Commissioner of Internal Revenue,
hereinafter referred to as the
Commissioner
and
four
(4)
assistant chiefs to be known as
Deputy Commissioners. (Sec. 3,
NIRC)
D.
E.
15
BARCOM2008-09
a.
b.
What
is
third-party
verification rule?
- In ascertaining the correctness of
any return, or in making a return when
none
has
been
made,
or
in
determining the liability of any person
for any internal revenue tax, or in
collecting any such liability, or in
evaluating
tax
compliance,
the
Commissioner is authorized to obtain
on a regular basis from any person
other than the person whose internal
revenue tax liability is subject to audit
or investigation, or from any office or
officer of the national and local
governments, government agencies
and instrumentalities, including the
Bangko Sentral ng Pilipinas and
government-owned
or
-controlled
corporations, any information such as,
but not limited to, costs and volume of
production, receipts or sales and gross
incomes of taxpayers, and the names,
addresses, and financial statements of
corporations, mutual fund companies,
insurance
companies,
regional
operating
headquarters
of
multinational
companies,
joint
accounts, associations, joint ventures
of
consortia
and
registered
partnerships, and their members;
c. Inquiry into bank deposits (Sec 6
{f}), NIRC)
General Rule:
The Bureau of Internal Revenue has
no power to inquire into the bank
deposits of a person or taxpayer.
Exceptions:
Notwithstanding
any
contrary
provision of Republic Act No. 1405 and
other general or special laws, the
Commissioner is hereby authorized to
inquire into the bank deposits of:
1) a decedent to determine his
gross estate; and
(2) any taxpayer who has filed an
application for compromise of his tax
liability under Sec. 204 (A) (2) of this Code
by reason of financial incapacity to pay his
tax liability.
In case a taxpayer files an application to
compromise the payment of his tax liabilities on
his claim that his financial position demonstrates
a clear inability to pay the tax assessed, his
application shall not be considered unless and
until he waives in writing his privilege under
Republic Act No. 1405 or under other general or
special laws, and such waiver shall constitute the
authority of the Commissioner to inquire into the
bank deposits of the taxpayer.
16
BARCOM2008-09
d.
Summons
persons,
take
prescribe
the
correct
amount
of
tax:
Provided, however; That failure to
file a return shall not prevent the
Commissioner from authorizing the
examination of any taxpayer.
Any return, statement of
declaration filed in any office
authorized to receive the same
shall not be withdrawn: Provided,
That within three (3) years from
the date of such filing, the same
may be modified, changed, or
amended: Provided, further, That
no notice for audit or investigation
of such return, statement or
declaration has in the meantime
been actually served upon the
taxpayer.
i.
Amendment of Returns
17
BARCOM2008-09
filed income
Sec.71, NIRC)
tax
returns.
(see
the
provisions
of
this
Code,
the
Commissioner, after taking into account
the sales, receipts, income or other
taxable base of other persons engaged in
similar businesses under similar situations
or circumstances or after considering
other relevant information may prescribe a
minimum amount of such gross receipts,
sales and taxable base, and such amount
so prescribed shall be prima facie correct
for purposes of determining the internal
revenue tax liabilities of such person.
18
BARCOM2008-09
consultation
with
competent
appraisers both from the private
and public sectors, determine the
fair market value of real properties
located in each zone or area. For
purposes of computing any internal
revenue tax, the value of the
property shall be whichever the
higher is of:
Individuals
and
general
professional partnerships and their
representatives who are denied
accreditation by the Commissioner
and/or the national and regional
accreditation boards may appeal
such denial to the Secretary of
Finance, who shall rule on the
appeal within sixty (60) days from
receipt of such appeal. Failure of
the Secretary of Finance to rule on
the Appeal within the prescribed
period shall be deemed as
approval of the application for
accreditation of the appellant.
g.
Power
to
prescribe
procedural/documentary
requirements
the BIR has the power to prescribe
the manner of filing of a returns
h. Power to delegate (see
Sec.7, NIRC)
The Commissioner may delegate
the powers vested in him under
the pertinent provisions of the Tax
i.
Non-delegable
powers
in
relation to Section 16 of NIRC
-
to
19
BARCOM2008-09
The
Commissioner,
the
Deputy
Commissioners, the Revenue Regional
Directors, the Revenue District Officers
and other internal revenue officers shall
have authority to make arrests and
seizures for the violation of any penal law,
rule or regulation administered by the
Bureau of Internal Revenue. Any person so
arrested shall be forthwith brought before
a court, there to be dealt with according to
law.
j.
Authority
to
Abate
and
Compromise Tax Liabilities (see
Sec.6 {f}{2}, 204 in relation to
Rev. Regs.30-2002 as amended
by RR No.8-2004)
SEC.
204.
Authority
of
the
Commissioner to Compromise, Abate
and Refund or Credit Taxes. - The
Commissioner may -
be
All
criminal
violations
compromised except those
may
b. power to abate
For
cases
of
financial
incapacity,
a
minimum
compromise rate equivalent
to ten percent (10%) of the
basic assessed tax; and
For
other
cases,
a
minimum
compromise rate equivalent
to forty percent (40%) of the
basic assessed tax.
when:
(B)
20
BARCOM2008-09
21
BARCOM2008-09
prescription
unequivocally
particularly
where the language of the document is
equivocal. For the purpose of safeguarding
taxpayers
from
any
unreasonable
examination, investigation or assessment,
out tax law provides a statute of limitation
in collection of taxes. Thus the law on
prescription, being a remedial measure
should be liberally construed in order to
afford such protection/
ii. CIR v. CA and Carnation, G. R. No.
115712, 25 February 1999
Finality of findings of facts as a matter of
principle, this court will not set aside the
conclusion reached by an agency such as
the CTA unless there has been an abuse or
improvident exercise of authority. By the
very nature of its function, dedicated
exclusively to the study and consideration
of tax problems and has necessarily
developed an expertise of the subject.
e. Instances where the running of the
prescriptive period is suspended (section
223)
i. Republic v. Hizon, 13 December
1999
Sec. 229 of the code mandates that a
request for reconsideration must be made
within thirty (30) days from the tax
payers
receipt
of
tax
deficiency
assessment, otherwise the assessment
becomes
final,
unappealable
and,
therefore, demandable. The notice of
assessment
for
respondents
tax
deficiency was issued by petitioner on July
18, 1986. On the other hand, respondent
made her request for reconsideration
thereof only on November 3. 1992,
without stating when she received the
notice of tax assessment. She explained
that she was constrained to ask for a
reconsideration in order to avoid the
harrrasment of BIR collectors. In all
likelihood, she must have been referring to
the distraint and levy of her properties by
petitioners agents which took place of
January 12, 1989. Even assuming that she
first learned of the deficiency assessment
on
this
date
her
request
for
reconsideration was nonetheless filed late
since she made it more than 30 days
thereafter.
Hence,
her
request
for
reconsideration did not suspend the
running for the prescriptive period
provided under section 223. Although the
commissioner acted on her request by
eventually denying it on August 11, 1994,
this is of no moment and does not distract
from the fact that the assessment had
become demandable
ii. BPI v. CIR, G.R. No. 139736, 17
October 2005
The court had consistently ruled in a
number of cases that a request for
reconsideration by the tax payer without a
valid waiver of the prescriptive period for
the assessment and collection of tax, as
required
by
the
tax
code
and
the
process
of
22
BARCOM2008-09
23
BARCOM2008-09
24
BARCOM2008-09
during
the
A. Direct Denial
The decision of the Commissioner or his duly rep
shall (a) state the facts, applicable law, rules and
regulations or jurisprudence on which his protest
is based, otherwise the protest shall be
considered void and without force and effect, in
which case the same shall not be considered a
decision a disputed assessment and (b) that the
same is his final decision. (sec. 3.1.5, RR 12-99)
B.Indirect Denial
a. Commissioner did not rule on the taxpayers
MR of the assessment it was only when
respondent received summons on the civil action
for the collection of deficiency income tax that
the period to appeal commenced to run. (CIR vs.
Union Shipping
b. Referral by the Commissioner of request for
reinvestigation to the Solicitor General (Republic
vs.Lim Tian Teng Sons)
c. Reiterating the demand for immediate
payment of the deficiency tax due to taxpayers
continued refusal to execute waiver (CIR vs. Ayala
Securities Corp.)
d. Preliminary collection letter may serve as
assessment notice (United Intl Pictures vs. CIR)
Acts of BIR Commissioner Considered as
Denial of Protest which serves as a Basis for
Appeal to CTA:
1. Filing by the BIR of a civil suit for
collection of the deficiency tax (CIR v. Union
Shipping Corp . 185 SCRA 547)
2. Indication to the taxpayer by the
Commissioner in clear and unequivocal language
of his final denial. (CIR v. Union Shipping Corp)
3.
BIR demand letter reiterating his
previous demand to pay, sent to taxpayer after
his protest of the assessment (Surigao Electric
Co. Inc. v. CTA, 57 SCRA 523)
4. The actual issuance of a warrant of
distraint and levy in certain cases cannot be
25
BARCOM2008-09
f.
i.
b. Other Remedies
1. Action to Contest Forfeiture of Chattel (Sec.
231)
taxpayers
contemplating
26
BARCOM2008-09
CASES:
REPUBLIC V. HIZON, DEC. 13, 1999
Revenue Adm. Order No. 10-95
specifically
authorizes
the
Litigation and Prosecution section
of the Legal Division of regional
district offices to institute the
necessary civil and criminal actions
for tax collection. As the complaint
filed in this case was signed by the
BIRs Chief of Legal Division for
Region 4 and verified by the
Regional Director, there was,
therefore, compliance with the law.
Sec. 7 of NIRC, authorizes the BIR
Commissioner to delegate the
powers vested in him under the
pertinent provision of the Code to
any subordinate official with the
rank equivalent to a division chief
or higher.
CIR V. JAVIER, JULY 31, 1991
There was no actual intentional
fraud in filing the return. Private
respondents notation on the tax
return was at most an error or
mistake of fact or law not
constituting fraud,
an invitation
for
investigation
and
private
respondent had literally laid his
cards on the table.
PNOC V. CA, APRIL 26, 2005
C. OVERVIEW
205)
OF
REMEDIES
(SECTION
27
BARCOM2008-09
Delinquent accounts
Cases under administrative protest
Cases disputed before the courts
Cases for collection already filed in courts
Criminal violations except those already
filed, and those involving fraud.
28
BARCOM2008-09
Amount
Involved
In excess of
P1,000,000.00
P1,000,000.00
or less
29
BARCOM2008-09
c. Possession
pending
redemption:
owner not deprived of possession
d. Price: Amount of taxes, penalties and
interest thereon from date of delinquency
to the date of sale together with interest
on said purchase price at 15% per annum
from date of purchase to date of
redemption.
NOTE:
1. Bank accounts may be distrained without
violating the confidential nature of bank
accounts for no inquiry is made.
BIR
simply seizes so much of the deposit with
out having to know how much the deposits
are or where the money or any part of it
came from.
2. If at any time prior to the consummation
of the sale, all proper charges are paid to
the officer conducting the same, the goods
distrained shall be restored to the owner.
3. When the amount of the bid for the
property under distraint is not equal to the
amount of the tax or is very much less
than the actual market value of articles,
the CIR or his deputy may purchase the
distrained property on behalf of the
national government.
B. LEVY OF REAL PROPERTY - an act of
seizure of real property in order to enforce the
payment of taxes. The property may be sold at
public sale, if after seizure the taxes are not
voluntarily paid.
NOTE: The requisites are the same as that
of distraint.
Procedure:
1. International Revenue officer shall prepare
a duly authenticated certificate showing
a. Name of taxpayer
b. Amount of tax and
c. Penalty due.
- enforceable throughout the Philippines
2. Officer shall write upon the certificate a
description of the property upon which
levy is made.
3. Service of written notice to:
a. The taxpayer, and
b. RD where property is located.
4. Advertisement of the time and place of
sale.
5. Sale at public auction to the highest
bidder.
6. Disposition of proceeds of sale.
NOTE: The excess shall be turned over to owner.
Redemption of property sold or forfeited
a. Person entitled: Taxpayer or anyone for
him
b. Time to redeem: one year from date of
sale or forfeiture
- Begins from registration of the deed of
sale or declaration of forfeiture.
- Cannot be extended by the courts.
30
BARCOM2008-09
Where to File
1) Court of Tax Appeals- where the principal
amount of taxes and fees exclusive of charges
and penalties claimed is one million pesos and
above
2) RTC, Mun. TC, Metro TC- where the principal
amount of taxes and fees, exclusive of charges
and penalties claimed is less thanP1,000,000.00
(Sec 7[c], RA 9282)
The approval of the CIR is essential
in civil cases (Sec. 220). However
under Sec. 7 of
NIRC, the Commissioner may
delegate suchpower to a Regional Director.
When:
NOTE:
When should it commence: The five (5)
year prescriptive period shall begin to run
from the
a. If known, day of the commission of the
violation.
b. If not known, from the time of
discovery and the institution of judicial
proceeding for its investigation and
punishment.
When is it interrupted:
a. When a proceeding is instituted
against the guilty person
b. When the offender is absent from the
Philippines.
Where to file
1) Court of Tax Appeals- on criminal offenses
arising from violations of the NIRC or TCC and
other laws administered by the BIR and the BOC,
where the principal amount of taxes and fees,
exclusive of charges and penalties claimed is
P1,000,000.00 and above.
2) RTC, Mun. TC, Metro TC- on criminal offenses
arising from violations of the NIRC or TCC and
other laws administered by the BIR and the BOC,
where the principal amount of taxes and fess
exclusive of charges and penalties claimed is less
than P1,000,000.00 or where there is no specified
amount claimed (Sec 7[b], RA 9282)
CASES:
REPUBLIC V. HIZON, DEC. 13, 1999 (re: approval
of filing of civil and criminal actions)
Revenue Adm. Order No. 10-95 specifically
authorizes the Litigation and Prosecution
section of the Legal Division of regional
district offices to institute the necessary
civil and criminal actions for tax collection.
As the complaint filed in this case was
signed by the BIRs Chief of Legal Division
for Region 4 and verified by the Regional
Director, there was, therefore, compliance
with the law.
Sec. 7 of NIRC, authorizes the BIR
Commissioner to delegate the powers
vested in him under the pertinent
provision of the Code to any subordinate
official with the rank equivalent to a
division chief or higher.
31
BARCOM2008-09
32
BARCOM2008-09
LOCAL TAXATION
A. Local Taxation: General Concepts
1. Nature of Local Taxing Power
a. Constitutional
Article X)
Provision
(Section
5,
Laguna,
33
BARCOM2008-09
xxx
34
BARCOM2008-09
Taxation
of
the
National
Government, including its agencies
and instrumentalities as we as local
government units;
Those
enjoying
privileges
as
granted
by
the
Board
of
Investments (Investments Priorities
Plan);
- Both pioneer and nonpioneer enterprises enjoy
such kind of privileges
under
the
Omnibus
Investments Code.
c. Palma
Development
Corp.
vs.
Municipality of Malangas, October 16,
2003 (Sec. 133e)
By express language of Sections 153
and 155 of RA No. 7160, local
government
units,
through
their
Sanggunian, may prescribe the terms
and conditions for the imposition of toll
fees or charges for the use of any
public road, pier or wharf funded and
constructed by them. A service fee
imposed on vehicles using municipal
roads leading to the wharf is thus
valid. However, Section 133(e) of RA
No. 7160 prohibits the imposition, in
the guise of wharfage, of fees -- as well
as all other taxes or charges in any
form whatsoever -- on goods or
merchandise. It is therefore irrelevant
if the fees imposed are actually for
police surveillance on the goods,
because any other form of imposition
on
goods
passing
through
the
territorial
jurisdiction
of
the
municipality is clearly prohibited by
Section 133(e).
d. Batangas Power Corp. vs. Batangas
City, April 28, 2004 (Section 133g)
Sec. 133 (g) of the LGC, which
proscribes local government units
(LGUs) from levying taxes on BOIcertified pioneer enterprises for a
period of six years from the date of
registration, applies specifically to
taxes
imposed
by
the
local
government, like the business tax
imposed by Batangas City on BPC in
the case at bar. Reliance of BPC on the
provision of Executive Order No. 226,
[18] specifically Section 1, Article 39,
Title III, is clearly misplaced as the sixyear tax holiday provided therein
which commences from the date of
commercial operation refers to income
taxes imposed by the national
government on BOI-registered pioneer
firms. Clearly, it is the provision of the
Local Government Code that should
apply to the tax claim of Batangas City
against the BPC.
The 6-year tax
exemption
of
BPC
should
thus
35
BARCOM2008-09
by
Lien
the
(Sec
Local
Disposition of proceeds
Contents of assessment:
1. Meralco vs. Barlis (Feb. 1, 2002) - A
notice of assessment as provided for in
the Real Property Tax Code should
effectively inform the taxpayer of the
value of a specific property, or
proportion thereof subject to tax,
including
the
discovery,
listing,
classification,
and
appraisal
of
properties.
The petitioner is also
correct in pointing out that the last
paragraph of the said notices that
inform the taxpayer that in case
payment has already been made, the
notices may be disregarded is an
indication that it is in fact a notice of
collection. It could only qualify as a
notice of collection if there is an
unmistakable demand for payment of
back taxes.
36
BARCOM2008-09
Except:
Except:
37
BARCOM2008-09
municipal
assessor
in
the
assessment of his property; Within
60 days from receipt of the written
notice of assessment; Appeal to
the BAA of the province or city by
filing a petition under oath and
copies of the tax declarations and
affidavits or documents in support
of appeal.
-
With the
treasurer
Appeal
to
the
Board
of
Assessment Appeals (Secs.
226 and 252, LGC)
-
provincial
or
city
38
BARCOM2008-09
b. JUDICIAL
Questioning Tax Sale
REAL PROPERTY TAXATION
Real Property Tax, defined
A direct tax on ownership of lands and
buildings or other improvements thereon
Payable regardless of whether the
property is used or not,
although the value may
vary in accordance with such factor.
A.
Governing Law
Historical Background:
1.
Commonwealth Act No. 470 Old
Assessment Law
- since 1920
2.
Real Property
Tax Code (Presidential Decree No.
464, as amended)
- June 1, 1974
3. Local Government Code (Republic Act
No. 7160)
- January 1, 1992
- The changes however were only
on the tax rate ceilings and assessment
levels.
The Local Government Code covers
administration, appraisal, assessment,
levy and collection of Real Property Tax,
i.e. tax on land and building and other
structures and improvements on it,
including machineries. (Subject to the definition
given by Art. 415 of the New Civil Code)
the
271,
LGC),
[Page
479,
Tax
Law
and
Jurisprudence, 2000 Edition by Justice Vitug and
Judge Acosta].
CHARACTERISTIC OF REAL PROPERTY TAX:
1. Direct tax on the ownership of real
property
2. Ad Valorem tax. The value is based on
the tax base
3. Proportion - the tax is calculated on the
basis of a certain percentage of the value
assessed
4. Indivisible single obligation
5. Local Tax
C. Fundamental
Principles
Governing
Appraisal and Assessment of Real
Property (Section 198, LGC)
1.
Real property shall be appraised at
its current and fair market value.
2.
Real property shall be classified for
assessment purposes on the basis of
its actual use.
3.
Real property shall be assessed on
the basis of a uniform standard within
each
local government unit.
4.
The appraisal, assessment, and
collection of real property tax shall not
be let to any private person; and
5.
The appraisal and assessment of
real property shall be equitable.
D. Properties Covered (Sec. 232, LGC)
1.
Land,
2.
Buildings
3.
Machinery and
4.
Other improvements not otherwise
exempted under said code (Sec 232, LGC)
Machinery
embraces
machines,
equipment,
mechanical
contrivances,
instruments, appliances or apparatus
which may or may not be attached,
permanently or temporarily, to the real
property. It includes the physical facilities
for production, the installations and
appurtenant service facilities, those which
are mobile, selfpowered or self-propelled,
and those not permanently attached to
the real property which are actually,
directly, and exclusively used to meet the
needs of the particular industry, business
or activity and which by their very nature
and purpose are designed for, or
necessary to its manufacturing, mining,
logging,
commercial,
industrial
or
agricultural purposes.
(Sec. 199 [o],
LGC)
Machinery which are of general purpose
use including but not limited to office
equipment,
typewriters,
telephone
equipment, breakable or easily damaged
containers
(glass
or
cartons),
microcomputers, facsimile machines, telex
machine, cash dispensers, furnitures and
fixtures, freezers, refrigerators, display
cases or racks, fruit juice or beverage
automatic dispensing machines which
are not directly and exclusively used
to meet the needs of a particular
industry, business or activity shall not be
considered within the definition of
machinery. (Sec. 290 [o], IRR of RA
7160)
39
BARCOM2008-09
Improvements
include
valuable
additions made to a property or an
amelioration in its condition, amounting to
more than a mere repair or replacement of
parts involving capital expenditures and
labor, which is intended to enhance its
value, beauty or utility or to adopt it for
new or further purposes.
Note: Although the term real property
has not been expressly defined in the LGC, early
decisions of the Supreme Court in
Mindanao Bus Co. v City Assessor of Cagayan de
Oro, 6 SCRA `97; Board of Assessment
Appeals v Meralco, 119 PHIL 328; Manila
Electric Co. v Board of Assessment
Appeals,10 SCRA 68) seem to suggest that Art.
415
of the Civil Code could also be controlling,
to wit:.
Art. 415. The following are immovable
property:
(1)
Land,
buildings,
roads
and
constructions of all kinds adhered to the
soil;
(2) Trees, plants, and growing fruits, while
they are attached to the land or form an
integral part of an immovable;
(3) Everything attached to an immovable
in a fixed manner, in such a way that it
cannot be separated therefrom without
breaking the material or deterioration of
the object;
(4) Statues, reliefs, paintings or other
objects for use or ornamentation, placed
in buildings or on lands by the owner of
the immovable in such a manner that it
reveals the intention to attach them
permanently to the tenements;
(5) Machinery, receptacles, instruments or
implements intended by the owner of the
tenement for an industry or works which
may be carried on in a building or on a
piece of land, and which tend directly to
meet the needs of the said industry or
works;
(6)
Animal
houses,
pigeon-houses,
beehives, fish ponds or breeding places of
similar nature, in case their owner has
placed them or preserves them with the
intention to have them permanently
attached to the land, and forming a
permanent part of it; the animals in these
places are included;
(7) Fertilizer actually used on a piece of
land;
(8) Mines, quarries, and slag dumps, while
the matter thereof forms part of the bed,
and waters either running or stagnant;
(9) 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;
40
BARCOM2008-09
3. Constitutional Exemptions
- actually, directly, exclusively used
for religious, educational and
charitable purposes are exempt
from real property tax
Case:
School - not subject to Real
Property
Tax
if
directly
used
for
educational purposes.
A. Has a mansion near the school
where the president of the school
resides and where guests may be
accommodated - incidental, president
has to live near school
Note:
Incidental
exemptions
promulgated prior to 1987 Constitution
meant,
primarily used for the
purposes even if not solely.
CASES:
1.
In MIAA v. Paranaque, July
20, 2006, the Court declared the
41
BARCOM2008-09
42
BARCOM2008-09
c. incidental exemption no
longer recognized
d. taxed on orchidarium,
canteen, private clinics
Query: are the older cases now not
applicable so that they are
now taxable?
- not clear as to the
extent
of
Lung
Center case as to
areas which used to
be considered as real
property
tax
exempted
as
incidental
- If city decides to tax
SLU on its hospital,
parking lot, etc., use
as ground that they
should be exempt
due to necessity, do
not use the word
incidental
3. In LRTA vs. CBAA, October 12,
2000, though the creation of the
LRTA was impelled by public
service
to
provide
mass
transportation in MM- its operations
undeniably partakes of ordinary
business. . . Given that it is engage
in a service-oriented commercial
endeavour, its carriage ways and
terminal stations are patrimonial
property
subject
to
tax,
notwithstanding its claim of being a
GOCC.
Under its charter, LRT is not
exempt from real property tax.
Taxation is the rule and exemption
is the exception.
4. In DIGITEL vs. Province of
Pangasinan, February 23, 2007, the
Court ruled that in view of the
unequivocal intent of Congress to
exempt from real property tax
those real properties actually,
directly and exclusively used by
petitioner DIGITEL in the pursuit of
its franchise, respondent Province
of Pangasinan can only levy real
property tax on the remaining real
properties of the grantee located
within its territorial jurisdiction not
part
of
the
above-stated
classification.
Said exemption,
however, merely applies from the
time of the effectivity of petitioner
DIGITELs legislative franchise and
not a moment sooner.
5.
In
Philippine
Fisheries
Development Authority vs. Court of
Appeals, July 31, 2007, the Court
reversed the Court of Appeals
decision which held that petitioner
Philippine Fisheries Development
Authority is liable to pay real
property taxes on the land and
buildings of the Iloilo Fishing Port
Complex which are owned by the
Republic of the Philippines but
43
BARCOM2008-09
operated and
Authority.
governed by the
H.
44
BARCOM2008-09
a.
Owner or Administrator (Secs.
202-203, LGC)
When:
once every 3 years
during the period from January 1 to June 30
What:
file a sworn declaration
with the assessor with description of the
property
IF newly acquired property a. files with assessor within 60
DAYS from date of transfer a
b. SWORN statement containing
FMV and description of property
IF
required
evidence
is
not
submittedwithin 30 days, the property will be
listed as taxable in the roll
IF proven to be tax-exempt, property
will be dropped from the roll
NOTE: IF PROPERTY DECLARED FOR
THE FIRST TIME (Sec. 222)
If declared for 1st time, real property shall
be assessed for back taxes
a) for not more than ten (10) years
prior to the date of initial assessment
b) taxes shall be computed on the
basis of applicable schedule of values
in
force during the corresponding periods
*Assessor will compare the entry on file
with the Registry of Deeds and the assessment
roll in his office.
c. building officials
Prior to construction of building, as
required in procuring building permit.
Permit transmitted by building officials to
Registry of Deeds.
d. Geodetic engineers - For lands
surveyed
e. Notaries Public - For document
notarization, must furnish the assessors a copy
2. Valuation by Assessors
Assessment
- the act or process of determining the value of a
property, or proportion thereof subject to tax,
including the discovery, listing, classification, and
appraisal of properties.
Appraisal
- the act or process of determining the value of
property as of a specific date for a specific
purpose.
LISTING OF REAL PROPERTY IN THE
ASSESSMENT ROLLS
(Secs. 205, 207)
Listing of all Real Property whether taxable or
exempt within the jurisdiction of LGU in the
assessment roll.
o Undivided real property in the name of the
estate or heirs or devisees
o Corporation, partnership and association
same as individuals
45
BARCOM2008-09
ASSESSED
VALUE
(Sec.
218)
Procedure
1. take the schedule of FMV (Fair Market Value)
2. Assessed value = FMV x Assessment level
3. Real Property Tax = Assessed value x Allowable
Real Property Tax rate
4.Enactment of a Real Property Tax Ordinance
Barangays cannot impose realty taxes.
Municipalities cannot fix real estate tax rates.
Procedure:
a.hearing and modification of prepared
schedule
b.publication
c.adoption of the schedule
d.adoption of real property ordinance with
assessment levels
Coverage / Types of Real Property Tax:
1. Basic real property tax / Annual Ad Valorem Tax
For real property not specifically exempted
a.Provinces not more than 1% of
assessed value;
b.Cities, Municipalities in MM not more
than 2% of assessed value
2. Special levies:
a. Special Education Fund (SEF)
- 1% additional real estate tax to finance
the SEF (Sec.236) within MM area only
b. Additional Ad Valorem on the Lands
not exceeding 5% of the assessed value
of the property (Sec. 236, LGC)
46
BARCOM2008-09
city,
municipal
or
barangay
47