Ch. 17 - Intro to Taxation

• Local government units (LGUs) derive their revenues from local and external sources.
• Local sources of revenue for LGUs include tax revenues from the real property tax and the business tax, and non-tax revenues from fees and charges, receipts from government business operations and proceeds from sale of assets.
• External sources of revenue for LGUs include the Internal Revenue Allotment (IRA) and other shares from special laws, grants and aids and borrowings.
• The real property tax (RPT) is an ad valorem tax on real properties such as lands, buildings, and other improvements, and machineries imposed by provinces, cities and municipalities within the Metropolitan Manila Area (MMA), at the following rates:
• Provinces are allowed to impose a real property tax not exceeding 1% of the assessed value of the real property.
• Cities or municipalities within the MMA are allowed to impose a real property tax not exceeding 2% of the assessed value of the real property.
• The real property tax is based on the assessed value which is a certain percentage of the market value of the real property.
• The assessed value is arrived at upon application of the assessment levels to the market value of the property.
• The assessment levels are fixed by ordinance of the local Sanggunian depending on the actual use of the property, at rates not exceeding the following:
• For lands, the assessment levels are 20% for residential, 40% for agricultural, 50% for commercial, industrial and mineral, and 20% for timberland.
• New taxes, fees or charges, or changes in the rates thereof, shall accrue on the first (1 st ) day of the quarter next following the effectivity of the ordinance imposing such new levies or rates.
• For the issuance of a barangay clearance for any business or activity located or conducted within the territorial jurisdiction of the barangay before the city or municipality may issue a license or permit to said business or activity.
• Fees and charges on business and occupation and, except as reserved to the province in Section 139 of the LGC, on the practice of any profession or calling, commensurate with the cost of regulation, inspection and licensing at rates to be prescribed by the Sangguniang Bayan.
• On commercial breeding of fighting cocks, cockfights and cockpits.
• On billboards, signboards, neon signs, and outdoor advertisement.
• The payments may be made in quarterly installments.
• Fees and charges imposed by the province or municipality.
• On places of recreation which charge admission fees.
• All local taxes, fees and charges shall be paid within the first twenty (20) days of January or of each subsequent quarter, as the case may be.
• Fees and charges: (a) For services rendered in connection with the regulation or the use of barangay-owned properties or service facilities.
• All local taxes, fees and charges shall accrue on the first day of January of each year.
• For buildings and other structures, the rate progresses directly with the fair market value (FMV) as follows: 0% for residential, 25% for agricultural, 30% for commercial/industrial, and 45% for timberland.
• Special classes of real properties are also subject to different assessment levels.
• Diplomatic and consular representatives and transient visitors when their stay in the Philippines does not exceed three (3) months are exempt from the community tax.
• Any business, not otherwise specified in the preceding paragraph, is subject to a tax to be determined by the local government.
• The annual tax on peddlers engaged in the sale of any merchandise or article of commerce is PhP50.00 per peddler.
• The city and municipal government may impose a community tax at the following rates: PhP5.00 for individuals and PhP500.00 for corporations.
• The barangay may impose a tax on stores or retailers with fixed business establishments with annual gross sales or receipts of PhP50,000.00 or less in the case of cities; and PhP30,000.00 or less, in the case of municipalities, at a rate not exceeding 1% of gross sales or receipts.
• The rates of taxes may exceed the maximum rates allowed for the province or municipality by not more than 50% except the rates of professional and amusement taxes which are already fixed.
• LGUs may fix the rates for the operation of public utilities owned, operated and maintained by them within their jurisdiction.
• LGUs may impose and collect such reasonable fees and charges.
• LGUs may prescribe the terms and conditions and fix the rates for the imposition of toll fees or charges for the use of any public road, pier or wharf, waterway, bridge, ferry or telecommunication system funded and constructed by the LGU concerned.
• Barangays have the power to levy taxes on gross sales or receipts of P50,000 or less in the case of cities, and P30,000 or less, in the case of municipalities.
• The city government may impose and collect any of the taxes, fees and charges imposed by the province or municipality.
• Business Taxes There are three (3) kinds of business taxes imposed by municipalities: (a) a combination of a graduated-fixed and percentage business taxes; (b) percentage tax; and (c) annual tax.
• Amusement tax payable by proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses, boxing stadia, and other places of amusement at a rate of not more than 10% of the gross receipts from admission fees.
• The following are subject to a combination of a graduated-fixed and percentage business taxes: (1) Manufacturers, assemblers, repackers, processors, brewers, distillers, rectifiers, and compounders of liquors, distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or nature at rates ranging from PhP165.00 for gross receipts of less than PhP10,000.00 to PhP24,375.00 for gross receipts of PhP5 million to PhP6,499,999.00.
• Professional tax on each person engaged in the exercise or practice of his/her profession requiring government examination at a rate not exceeding PhP300.00.
• Percentage taxes are imposed on the following: (1) Retailers, at rates of 2% for gross receipts of PhP400,000.00 or less and 1% for gross receipts over PhP400,000.00.
• Tax on sand, gravel and other quarry resources at a rate not exceeding 10% of the fair market value in the locality per cubic meter of ordinary stones, sand, gravel, earth, and other quarry resources, as defined under the National Internal Revenue Code (NIRC), as amended, extracted from public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public waters within its territorial jurisdiction.