LOCAL TREASURY OPERATIONS

MANUAL

DETAILED PROCEDURES, REPORTS

AND
FORMS ON REAL PROPERTY TAX,
BUSINESS TAX, FEES AND CHARGES
AND
OTHER FUND SOURCES

BOOK FIVE
Chapter 1. REAL PROPERTY TAXATION
Section 165. Power to Levy Real Property Tax. - A province or city or a municipality within
the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as
land, buildings, machinery, and other improvements not specifically exempted under the
law. (Sec. 232, LGC)

The power to levy the ad valorem tax on real property is exercised through the sanggunian of
the local government unit concerned by way of an ordinance. (Art. 323, IRR, implementing
Sec. 232, LGC)

Section 166. Definition of Terms:

a) Acquisition Cost for newly acquired machinery not yet depreciated and appraised within
the year of its purchase, refers to the actual cost of the machinery to its present owner, plus
the cost of transportation, handling, and installation at the present site. (Sec. 199 (a), LGC)

b) Actual use refers to the principal purpose for which the property is principally or

predominantly utilized by the person in possession thereof. (Sec. 199 (b), LGC)

c) Ad Valorem Tax is a levy on real property determined on the basis of a fixed proportion
of the value of the real property. (Sec. 199 (c), LGC)

d) Agricultural Land is land devoted principally to the planting of trees, raising of crops,
livestock and poultry, dairying, salt making, inland fishing and similar aqua cultural activities,
and other agricultural activities, and is not classified as mineral, timber, residential,
commercial or industrial land. (Sec. 199 (d), LGC)

e) Appraisal is the act or process of determining the value of property as of a specific date fr
a specific purpose. (Sec. 199 (e), LGC

f) Assessment is 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. (Sec.
199 (, LGC)

g) Assessment Level is the percentage applied to the fair market value to determine the
taxable
value of the property. (Sec. 199 (g), LGC)

h) Assessed Value184 is the fair market value of the real property multiplied by the
assessment
level. It is synonymous to taxable value. (Sec. 199 (h), LGC)

i) Commercial Land is land devoted principally for the object of profit and is not classified
as agricultural, industrial, mineral, timber, or residential land. (Sec. 199 (i), LGC)
 j) Depreciated Value is the value remaining after deducting depreciation from the
acquisition cost. (Sec. 199 0), LGC)

k) Economic Life is the estimated period over which it is anticipated that a piece of
machinery
or equipment may be profitably utilized. (Sec. 199 (), LGC)

l) Fair Market Value185 is the price at which a property may be sold by a seller who is not
compelled to sell and bought by a buyer who is not compelled to buy. (Sec. 199 (/), LGC)

Market value is the highest price estimated in terms of money which a property will bring if
exposed for sale in the open market allowing a reasonable time to find a purchaser who buys
with knowledge of all the uses to which it is adapted and for which it is capable of being
used.

m) Idle Lands for purposes of real property taxation shall include the following:

1) Agricultural lands, more than one (1) hectare in area, suitable fr cultivation,
dairying, inland fishery, and other agricultural uses, one-half (1/2) of which remains
uncultivated or unimproved by the owner of the property or person having legal
interest therein.

Agricultural lands planted to permanent or perennial crops, with at least fifty (50) trees to
a hectare shall not be considered idle lands. Lands actually used for grazing purposes shall
likewise not be considered idle lands.

2) Lands, other than agricultural, located in a city or municipality, more than one
thousand (1,000) square meters in area, one-half (1/2) of which remains unutilized or
unimproved by the owner of the property or person having legal interest therein.

3) Residential lots in subdivisions duly approved by proper authorities, regardless of

land area, the ownership of which has been transferred to individual owners, who
shall be liable for the additional tax: Provided, however, That individual lots of such
subdivisions, the ownership of which has not been transferred to the buyer shall be
considered as part of the subdivision, and shall be subject to the additional tax
payable by subdivision owner or operator. (Sec. 237, LGC)

n) Improvement is a valuable addition 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 adapt it for new or
further purposes. (Sec. 199 (m), LGC)

Illustrative Case:

1) The anti-pollution tailing dam structure of the Benguet Corporation-Dizon Copper Gold
Operations is an improvement used in the operation of the corporation and, therefre,
1ss
taxable under the provisions of the Local Government Code of 1991. The subject dam
falls within the definition of an improvement because it is permanent in character and it
enhances both the value and utility of the mine. (DOF Opinion, February 3, 1994)

Industrial Land is land devoted principally to industrial activity as capital investment and is
not classified as agricultural, commercial, timber, mineral, or residential land. (Sec. 199 (n),
LGC)

p) 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 physical facilities fr production, the installations and
appurtenant service facilities, those which are mobile, self-powered, 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)

Illustrative Cases:

1) Thus, underground tanks, elevated tanks, elevated water tanks, gasoline and
computing
pumps, car washers, car and tire hoists, air compressors and tireflatros in gasoline
stations are considered as machinery or improvement. (G. R. No. L-50466, May 31, 1982)

2) On the other hand, gas turbine barges owned by the National Power Corporation,
although these are mobile, self-powered and self-propelled, for practical reasons, could
not be considered as real property in the same manner that other mobile
machineries/equipment such as trucks, buses, ships, airlines, and the like, which require
registration with the proper agency of government, could not be considered as real
property subject to real property tax. (BLGF 1'1 lndorsement, May 20, 1996)

3) 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), micro computers, facsimile machines, telex machines, cash dispensers,
furniture 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 under this rule.

Residential machinery shall include machines, equipment, appliances, or apparatus

permanently attached to residential land and improvements or those immovable by
destination.

When machineries are no longer used for its purpose by reason of closure or cessation of
production, the same should be transferred from the taxable roll to the exempt roll and
not subject to the payment of real property taxes during the period of non-use. (BLGF 91h
Indorsement, May 26, 1999)
I

I
q) Mineral Lands are lands in which minerals, metallic or non metallic, exist in sufficient
quantity or grade to justify the necessary expenditures to extract and utilized such materials.
(Sec. 199 (), LGC)

r) Re-assessment is the assigning of new assessed values to property, particularly real estate, as
the result of general, partial, or individual reappraisal of the property. (Sec. 199 (q), LGC)

s) Remaining Economic Lif is the period of time expressed in years from the date of
appraisal to the date when the machinery becomes valueless. (Sec. 199 (r), LGC)

t) Remaining Value the value corresponding to the remaining useful life of the machinery.
(Sec. 199 (s), LGC)

u) Replacement or Reproduction Cost is the cost that would be incurred on the basis of
current prices, in acquiring an equally desirable substitute property, or the cost of
reproducing a new replica of the property on the basis of current prices with the same or
closely similar material. (Sec. 199 (t), LGC)

v) Residential Land is land principally devoted to habitation. (Sec. 199 (u), LGC)

w) Special Classes of Real Property are lands, buildings, and other improvements thereon
actually, directly, and exclusively used fr hospitals, cultural, or scientific purposes, and
those owned and used by local water districts and government-owned or controlled
corporations rendering essential public services in the supply and distribution of water and/or
generation and transmission of electric power. (. 9, Manual on Real Propert Appraisal and
Assessment Operations, BLGF)

Section 167. Fundamental Principles. - The appraisal, assessment, levy and collection of real
property tax shall be guided by the following fundamental principles:

l) Real property shall be appraised at its current and fir market value. (Sec. 198 (a), LGC)

All real property, whether taxable or exempt, shall be appraised at the current and fair market
value prevailing in the locality where the property is situated. The Department of Finance
shall promulgate the necessary rules and regulations fr the classification, appraisal, and
assessment of real property pursuant to the provisions of R. A. No. 7160 or the Local
Government Code of 1991. (Sec. 201, LGC)

2) Real prope1iy shall be classified for assessment purposes on the basis of its actual use. (Sec.
198 (b), LGC)

3) Real property shall be assessed on the basis of a uniform classification within each
local
government unit. (Sec. 198 (c), LGC)
To this end, Provincial, City, and the Municipal Assessors of the municipalities within
Metropolitan Manila Area shall prepare a Schedule of Fair Market Values 186 for the
different classes of real property situated within their respective local government units for
enactment of ordinance of the sanggunian concerned. (Sec 212, LGC)

4) The appraisal, assessment, levy and collection of real property tax shall not be let to
any private person. (Sec. 198 (d), LGC

5) The appraisal and assessment of real property shall be equitable. (Sec. 198 (e), LGC)

Section 168. Administration of the Real Property Tax. - The provinces and cities,
including the municipalities within the Metropolitan Manila Area, shall be primarily
responsible fr the proper, efficient and effective administration of the real property tax,
subject to the rules and regulations governing the classification, appraisal and assessment
of real property issued by the Department of Finance.

Accordingly, the Department of Finance and the provincial governments shall exercise
the authority to review and examine on a continuing basis, property assessment and real
property tax records to ensure the proper implementation hereof and determine compliance
with existing laws and regulations (Art. 291, IRR, implementing Sec. 200, LGC

Illustrative Case:

1) Municipalities outside Metro Manila Area have no power to enact an ordinance levying
real property tax, as suc power and authority is vested only upon their respective
provinces.
(BLGF Opinion, May 5, 1994)

Section 169. Rates of Levy. - (a) A province or city or municipality within

Metropolitan Manila Area shall fix a uniform rate of basic real prope1ty tax applicable
to their respective jurisdiction as follows:

1) For provinces - not exceeding one percent (I%) of the Assessed Value.

2) For cities, or municipalities of Metropolitan Manila Area - not exceeding two percent
(2%) of the Assessed Value.

(b) No public hearing shall be required before the enactment of a local tax ordinance
levying the basic real property tax. (Art. 324, IRR, implementing Sec. 233, LGC))

Section 170. Special Levies. - Provinces, cities and the municipalities within the
Metropolitan Manila Area may also levy and collect the following special levies on real
properties within their jurisdiction:

ts6
SM
 A.

A province or city, or a municipality within Metropolitan Manila Area, may levy and collect
an annual tax of one percent (1%) on the assessed value of real property which shall be in
addition to the basic real property tax. The proceeds thereof shall exclusively accrue to the
Special Education Fund. (Sec. 235, LGC)

Illustrative Cases:

1) The total three percent (3%) rate (2% basic and 1% SEF) of real property taxes
imposed by Calbayog City is in accordance with the provisions of R. A. No. 7160. (BLGF
Letter, May 22, 1998 to the National Food Authority)

2) Further, on the authority of local government units to impose the Special Education
Fund, a province or city, or a municipality within Metropolitan Manila Area may levy
and collect an annual tax of one percent (1 %) on the assessed value of the real
property for the Special Education Fund in addition to the basic real property tax.

However, the following rules apply to a municipality not located within the
Metropolitan Manila Area:

1. It is the province and not the municipality, that has the authority to impose
the additional SEF tax;

11. The rate of the SEF tax shall not exceed one percent (1%) of the assessed
value of the subject property; and

iii. While the SEF tax is imposed by the province, Municipal Treasurers are
authorized to collect the said tax. (BLGF F1 lndorsement, March 18, 1996)

B. Additional Ad Valorem Tax on Idle Lands. - A province or city, or a municipality

within the Metropolitan Manila Area, may levy an annual tax on idle lands at the rate not
exceeding five percent (5%) of the assessed value of the property which shall be in
addition to the basic real property tax. (Sec. 236, LGC

For this additional tax on idle lands, the following should be observed:

1) Listing of Idle Lands by the Assessor. - The Provincial, City or Municipal

Assessor shall make and keep an updated record of all idle lands located within
his area of jurisdiction. For purposes of collection, the Provincial, City or
Municipal Assessor shall furnish a copy thereof to the Provincial or City
Treasurer who shall notify, on the basis of such record, the owner of the property
or person having legal interest therein of the imposition of the additional tax. (Sec.
239, LGC); and
is1
SEF
 2) In the case of subdivision lots:

1. Individual buyers shall be liable for the additional tax if the ownership
of the property has been transferred to them.

11. Subdivision owners or operators shall be liable for the additional tax
on lots whose ownership has not been transferred to individual buyers,
these lots being considered still part of the subdivision. (Sec. 237,
LGC)
iii. A province or city or a municipality within the Metropolitan Manila
Area may exempt idle lands from additional levy by reason of force
majeure, civil disturbance, natural calamity or any cause or
circumstance which physically or legally prevents the owner of the
property or person having legal interest therein from improving,
utilizing or cultivating the same. (Sec. 238, LGC)

C. Special Levy by Local Government Units - A province, city or municipality may

impose a special levy on the lands comprised within its tentorial jurisdiction specially
benefited by public works projects or improvements funded by the local government
unit concerned.

The following provisions apply in the case of this special levy:

1) The special levy shall not exceed sixty percent (60%) of the actual cost of such
projects and improvements, including the costs of acquiring land and such other
property in connection therewith.

2) The special levy shall not apply to lands exempt from basic real property tax and
the remainder of land portions of which have been donated to the local
government unit concerned for the construction of such projects and
improvements. (Sec. 240, LGC)

3) The tax ordinance imposing the special levy shall:

1. describe with reasonable accuracy the nature, extent, and location of the
public works projects or improvements to be undertaken;

I
11. state the estimated cost of the public works projects or improvements;

iii. specif the metes and bounds by monuments and lines; and

I
1v. Specify the number of annual installments for the payment of the special levy which in
no case shall be less than five (5) years nor more than ten (10) years
.
4) The sanggunian concerned shall not be obliged, in the apportionment and
computation of the special levy, to establish a uniform percentage of all lands
subject to the payment of the tax for the entire district, but it may fix different
rates for different parts or sections thereof, depending on whether such land is
more or less benefited by the proposed work. (Sec. 241, LGC)

5) Prior to the enactment of an ordinance imposing a special levy, the sanggunian

concerned shalI:

i. conduct a public hearing thereon; and

ii. notify in writing the owners of the real property to be affected

or the persons having legal interest therein as to the date and place
thereof and afford the latter the opportunity to express their
positions or objections relative to the proposed ordinance. (Sec 242,
LGC)

6) The special levy shall accrue on the first ( I 51) day of the quarter next following the
effectivity of the ordinance imposing such levy. (Sec. 245, LGC)

Section 171. Exemption from Real Property Tax. - The following are exempted from
payment of the real property tax:

a) Real property owned by the Republic of the Philippines or any of its political subdivisions
except when the beneficial use thereof has been granted, fr consideration or otherwise, to a
taxable person. (Sec. 234 (a), LGC)

Political subdivisions of the Republic of the Philippines are the autonomous regions,
provinces, sub-provinces, cities, municipalities and barangays (Sec. 4, Book 1, E. 0. No.
292). Government-Owned or Controlled Corporations 188 are not considered political
subdivisions.

I 11ustrative Cases:

I) An installment purchaser of land and building within a housing project of the GSIS is
liable to pay real estate taxes from the time possession of such property was transferred to
him, although pending full payment of the purchase price, the seller GSIS retains
ownership and title over the property (G.R. No. L-29772. September 18, 1980).
Moreover, the exemption of the GSIS fom the payment of all taxes, assessments, fees,
charges and duties of all kinds under Section 33 of its Charter has not been superseded by the
Local Government Code of 1991.(DOJ Letter, December 18, 1994 to GSIS)

2) ECOZONE operators are exempt from real property tax by virtue of Section 24 of
R.A. No. 7916, otherwise known as the Special Economic Zone Act of 1995, creating
the EPZA, later renamed as PEZA, which states: " no taxes, local and national, shall be
imposed on business establishments operating within the ECOZONE. In lieu of paying
taxes, five percent (5%) of the gross income earned by all businesses and enterprises
within the ECOZONE shall be remitted to the National Government." This exemption
only applies to enterprises under PEZA. Thus, with the enactment of R.A. No. 7160, or
the Local Government Code of 1991, it is believed that PEZA is no longer exempt from
payment of realty taxes.(DOJ Letter, September 6, 1999 to PEZA, Pasay Cit)

b) Charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques,

non profit or religions cemeteries and all lands, buildings, and improvements actually,
directly and exclusively used fr religious, charitable or educational purposes.(Sec. 234 (b),
LGC)

Charitable institutions are those whose principal aim is to give of its material substance or
time to benefit those who are in need of such assistance, or will be benefited by such gift or
expenditure in some other way than simply by an improvement of morals. Generally,
the exemption of charitable institutions is expressly or impliedly limited to property
devoted to charitable purposes and does not include property belonging to such institutions
not used for secular or non-charitable purposes, such as property used to create
revenue. (DOF Assessment Regulations No. 3-75, February 10, 1975)

Illustrative Cases:

1) Real properties actually, directly, and exclusively used for educational purposes
are exempt fom payment of real property taxes. (BLGF 5'" lndorsement, January 23,
/997 to the Provincial Assessor ofRomblon)

2) Lands, buildings and improvements owned by the Development Academy of

the Philippines (OAP) in Tagaytay City which are actually, directly and exclusively used fr

educational purposes are exempt from real property taxes. However, said exemption does
not include machineries owned by OAP even if these are actually, directly and
exclusively used fr educational purposes.(BLGF 2nd Indorsement, July 30, 1998 to the
Cit Treasurer ofTagaytay Cit)

3) Further, the tax exemption granted to OAP properties in Tagaytay City cannot be applied

to OAP properties in Pasig City for the reason that, as submitted by the City Assessor, the
properties are not actually, directly, and exclusively used for educational purposes.
(BLGF 3rd Indorsement, February 9, 1999 to the Cit Assessor of Pasig City)
c) All machineries and equipment that are actually, directly and exclusively used by local
water districts and government-owned or controlled corporations engaged in the supply and
distribution of water and/or generation and transmission of electric power. (Sec. 234 (c),
LGC)

Illustrative Case:
1) Compression/Compressor House, Sub-Station Building, and Sub-Station Switchboard
and Steel Tower owned by the National Power Corporation (NAPOCOR) may be
considered exempt from the payment of real property taxes, provided the same are
actually, directly and exclusively used in the generation and supply of electric power.
(BLGF 3 Indorsement, February 25, 1997 to the Provincial Assessor ofBatanes)
rd

2) Machineries declared in the name of the Bauang Private Power Corporation (BPPC) are
subject to real property tax, although engaged in the generation of electric power, as the

company is a private corporation and does not fall under the category of a government
owned and controlled corporation. (BLGF th Indorsement, July 16, J998 to the
Provincial Assessor ofLa Union)

d) All real properties owned by duly registered cooperatives as provided under R. A.

No.
6938189. (Sec. 234 (d). LGC)

Illustrative Case:

1) All real properties owned by cooperatives duly registered with the Cooperatives
Development Authority (CDA), with minimum accumulated reserves and undivided net

savings of Ten Million Pesos (P 10,000,000.00) are exempt from payment of real
property taxes in view of the specific provisions of R. A. No. 6938, known as the
Cooperative Code of the Philippines. Also covered by this exemption are electric
cooperatives which are duly registered with the CDA pursuant to R. A. No. 6938. (BLGF

Letter dated February 26, 1993 to the Municipal Secretary ofPagudpud !locos Norte)

e) Machinery and equipment used fr pollution control and environmental protection. (Sec.
234(e), LGC)

Illustrative Case:

The claim for exemption of DTGITEL from payment of real property taxes on properties
which are used in the operation of its business under its fanchise is meritorious. (BLGF 2"d
Indorsement, January 4, 1999 to the Provincial Assessor ofBatangas)

f.) Except as 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
R. A. No. 7160 or the Local Government Code of 1991. (Sec. 234 (last par.), LGC)

189
Cooperative Code ofthe Philippines
The foregoing enumeration of exemptions fom real property tax is clearly exclusive
considering the provisions of the immediately preceding paragraph. (. 322, The Local
Goverment Code Annotated by Nolledo)

Section 172. Withdrawal of Exemptions from Payment of Real Property Taxes. - Unless
otherwise provided in R. A. No. 7160 or the Local Government Code of 1991, tax
exemptions or incentives granted to, or presently enjoyed by all persons, whether natural or
juridical, including goverment owned or controlled corporations, except local water
districts, cooperatives duly registered under R.A. No. 6938, non-stock and non-profit
hospitals and educational institutions, are withdrawn upon the effectivity of R. A. No. 7160.
(.'ec. 193, LGC)

Illustrative Cases:
l) The phrase, "Unless otherwise provided in R. A. No. 7160 or the Local Government
Code of 1991" refers to Section 133 of the same code which exempts, among others,
national government instrumentalities from the taxing powers of local government units.
(DOJ Letter, May 13, 1993 to Dut Free Philippine)

Instrumentality refers to any agency of National Government, not integrated within the
department framework, vested with special functions or jurisdiction by law, endowed with
some if not all corporate powers, administering special funds, and enjoying autonomy,
usually through a charter. The term includes regulatory agencies, chartered institutions and

government owned or controlled corporations. (Sec. 2 ( 0), Introductory Provisions,

Administrative Code of1987)

2) Local governments do not have the authority to grant exemptions fom real property
taxes to those which are not expressly exempted by the Local Government Code of 1991,
otherwise, they will be exercising the power of amending laws or acts enacted by Congress.
(BLGF 3rd lndorsement, May 27, 1998)

3) McArthur Park and Beach Resort, although a subsidiary of the Philippine Tourism
Authority, a government-owned or controlled corporation, is subject to the payment of real
property and other local taxes. (BLGF 3rd lndorsement, April 11, 1997 to the Provincial
Assessor of Tacloban City)

4) Section 234 of the Local Goverment Code of 1991, evidently withdrew the tax
exemption privileges granted to GOCCs like the Land Bank of the Philippines (LBP)
and the Government Service Insurance System (GSIS). Accordingly, the subject properties
of the LBP and the GSIS are liable fr the payment of real property tax effective January l ,
1
1992. (BLGF 211d lndorsement, Februa,y 22, 1993; BLGF r lndorsement, April 26, 1994;
s
and BLGF l , Jndorsement, October. 5, 1998)
5) Real properties of Philippine Telegraph and Telephone Corporation (PT&T) shall be
liable
for the payment of real property taxes beginning January 1, 1992. However,
commencing
January 1, 1993, the year after the franchise of SMART took effect, real properties of PT&T
which are directly used in the operation of its franchise are exempt fom payment of real
property taxes in view of the equality of treatment clause fund in Section 14 of its franchise.
R. A. Nos. 7294190, 7692191 and 7678192 granted SMART, Bell
Telecommunications Philippines, Inc, and DIGITEL the privilege to enjoy real prope1y tax
exemptions on their real properties used in connection with the operation of their franchises.
All other properties of these companies shall remain taxable. (BLGF t'' Indorsement,
Februmy 14, 1995; and BLGF 2 Indorsement, Januar 4, 1999)
nd

6) The withdrawal of exemptions by the Local Goverment Code of 1991 did not, however,
affect the status of real property owned by embassies, consulates, and other diplomatic
offices. These are deemed part of the territory of the country they represent and, therefre,
are exempt from any national or local taxes based on the generally accepted principle that the
tax laws of one country are not applicable in another. (BLGF 2 Indorsement, February 10,
nd

1993 to the Municipal Treasurer ofMakati)

Section 173. Date of Accrual of Real Property Tax. - The real property tax fr any year shall
accrue on the first (1st) day of January and from that date it shall constitute a lien on the
property which shall be superior to any other lien, mortgage, or encumbrance of any kind
whatsoever, and shall be extinguished only upon the payment of the delinquent tax. (Sec. 246,
LGC)

Section 174. Collection of Real Property Tax:

a) Responsibility of Local Treasurers to Collect. - The collection of the real property tax
with interest thereon and related expenses, and the enforcement of the remedies provided for
in Title l193, Book lI of R. A. No. 7160 or the Local Government Code of 1991, or any
applicable rules and regulations shall be the responsibility of the City or Municipal Treasurer
concered. (Sec. 247 (t1 par.), LGC)

Illustrative Case:

1) There is no need for the Sangguniang Bayan to enact a resolution for the purpose (411,
lndorsement, June 2, 1994), and Municipal Treasurers of municipalities outside Metro
Manila Area, but within a province are delegated the authority to collect realty tax
pursuant to Section 247 of the Local Goverment Code of 1991 (DOF Opinion, July 28,
199R).

190
An Act Granting Smart Information Technologies, Inc. (SMRT, a Franchise to Establish, Install, Maintain,
lease, and Operate Integrated Telecommunications/Computer/Electronic Services.
191
An Act Granting to Bell Telecommunications Philippines, Inc., a Franchise to Install, Operate and Maintain
Telecommunications Systems Throughout the Philippines andfor other Purposes.
192
An Act Granting the Digitel Telecommunications Philippines, Inc., a Franchise to Install, Operate and
Maintain Telecommunications Systems Throughout the Philippines andfor Other Purposes.
193
Real Property Taxation
b) Deputization of Barangay Treasurers. -The City or Municipal Treasurer may deputize the
Barangay Treasurer to collect all taxes on real property located in the barangay: Provided,
That the Barangay Treasurer is properly bonded for the purpose. Provided, further, That the
premium on the bond shall be paid by the city or municipal goverment concered. 194 (Sec. 247
(rdpar.), LGC)

c) Assessor to Furnish Local Treasurer with Assessment Roll. -The Provincial, City or

Municipal Assessor shall prepare and submit to the Treasurer of the local goverment unit,

on or befre the thirty-first (31st) day of December of each year, an assessment roll
containing a list of all persons whose real properties have been newly assessed or re-
assessed and the values of such properties. (Sec. 248, LGC)

Section 175. Procedures for Collection of Real Property Tax. - The City and
Municipal Treasurers shall adopt the following procedures in the collection of real property
taxes:

A. Posting of Collection Notices -

1) For Current Year: Notice of Tme for Collection of Tax. -The City or Municipal
Treasurer shall, on or befre the thirty first (31 sr) day of January each year, in the case
of the basic real property tax and the additional tax for the SEF or on any other date
to be prescribed by the sanggunian concered in the case of any other tax levied
under Title 2, Book II of R. A. No. 7160 or the Local Government Code of 1991, post
the notice of the dates when the tax may be paid without interest at a conspicuous and
publicly accessible place at the city or municipal hall. Said notice shall likewise be
published in a newspaper of general circulation in the locality once a week for two (2)
consecutive weeks. (Sec. 249, LGC)

2) For Previous Year: Notice of Delinquency in Payment of Real Propert Tax. -

When the real property tax or any other tax imposed under Title 2, Book TI of R. A.
No. 7160 or the Local Government Code of 1991, becomes delinquent, the
Provincial, City or Municipal Treasurer shall immediately cause a notice of the
delinquency to be posted at the main entrance of the provincial capitol, or city or
municipal hall, and in a publicly accessible and conspicuous place in each barangay
of the local goverment unit concered. The notice of delinquency shall also be
published once a week fr two (2) consecutive weeks, in a newspaper of general
circulation in the province, city or municipality. 195 (Sec. 254 (a), LGC)

B. Issuance of Notice to the Taxpayer or the Real Property Tax Bill. -The Local Treasurer

concerned shall reflect in the Real Property Tax Bill 196 to be sent to the taxpayer the real
 The appropriate mechanisms and safeguards regarding collections, remittances and other accountabilities
194

of
deputized Barangay Treasurers are discussed in full in Chapter 2, Book II of this Manual, consistent with the

provisions of the Systems and Procedures Manual on the Management of Barangay Funds and Propert issued
by
the Commission on Audit.
195
See Sec. 184, this Manual 196 RPTB, LTO Form 89
 property tax due fr his property fr the current year and the delinquent taxes due fr the
previous year or years.

C. Where Real Property Taxes May Be Paid. - Real property taxes shall be paid to the Office

of the City or Municipal Treasurer of the city or municipality where the real property is
located. Property owners, however, at their option or convenience, may pay their real
property taxes to the Office of the Provincial Treasurer of the province to which the
municipality where the property is located, belongs. (Art. 338, IRR, implementing Sec. 247,
LGC)

Real property taxes for properties located in a city or a municipality within the Metropolitan
Manila Area, shall be paid with the Office of the City or Municipal Treasurer concered.

Real property taxes may also be paid to the Barangay Treasurer deputized to collect the same
fr properties located within the barangay concered in accordance with Section 247 of R.
A. No. 7160 or the Local Goverment Code of 1991. 197

Section 176. Payment of Real Property Taxes in Installments. - (a) The owner of the real
property or the person having legal interest therein may pay the basic real property tax and
the additional tax for Special Education Fund (SEF) due thereon, without interest, in fur (4)
equal installments, to be due and payable as follows:

1st Installment on or befre the thirty-first (31st) ofMarch

2"d Installment on or befre the thirtieth (30th) of June

3rd Installment on or befre the thirtieth (30th) of September

4th Installment on or before the thirty-first (31st) ofDecember

(b) In the implementation of the installment scheme in the collection of real property taxes,
the following shall be observed:

1 Payments of real property taxes shall first be applied to prior years'

.
delinquencies, interests and penalties, if any and only after said
delinquencies are settled may tax payments be credited for the current year.

The date for the payment without interest of any other tax imposed under
1
1. Title 2, Book II of R. A. No. 7160 or the Local Goverment Code of 1991
shall be prescribed by the sanggunian concered.

iii. Excluded fom the above schedule of payments is the special levy on properties
benefited by development, the payments of which shall be govered by the schedule

197
See Section 174 (), this Manual
 specified in the enabling ordinance enacted by the sanggunian concerned. (Sec.
250, LGC)

Illustrative Case:

1) The payment of quarterly installments having been fixed by law, cannot be extended
by way of a local ordinance. (BLGF rd lndorsement, June 14, 1994 to the Treasurer
ofJoilo City)

Section 177. Tax Discount fr Advanced Prompt Payment. - (a) If the basic real
property tax and the additional tax accruing to the SEF are paid on time or in advance in
accordance with the prescribed schedule of payment as provided in Section 250 of R. A.
No. 7160 or the Local Government Code of 1991, 198 the sanggunian concered may
grant a discount not exceeding twenty percent (20%) of the annual tax due.

(b) For purposes of this section, prompt payments may be given a discount of ten
percent (10%), while advanced payments may be entitled to the maximum discount of
twenty percent (20%). (Art. 342, IRR, implemenhng Sec. 251, LGC]

(c) The tax discount rates shall be specified in an appropriate ordinance enacted
by the sanggunian of the local government unit concerned. ln the absence of an
appropriate ordinance, the discounts shall not be granted.

(d) Advanced Payment as distinguished fom Prompt Payment. - To be entitled to tax

discount, the basic real property tax and additional SEF tax must be paid on or
before the deadlines provided under Section 250 of R. A. No. 7160 or the Local
Government Code of 1991. Under Section 246 of the same code, the real property tax for
any year accrues on the first (1 51) day of January, although the tax due for that year may
be paid without interest or penalty on or before March 31si, or in four (4) quarterly
installments starting from the said date. This situation is not a case of "advanced
payment" but simply prompt payment". Technically, advanced payment of taxes
refer to those made before the accrual of the tax where the collections therefrom are
required under existing COA regulations to be taken up in the books of accounts of local
goverments as Real Property Tax Receivable and Defrred Real Property Tax; whereas
taxes collected after they have accrued but made on or befre the statutory installment
deadlines are to be taken up as Real Property Tax Income. (Notes on Section 25 !, LGC.
Local Government Taxation, Ursa!)

Illustrative Cases:

l) The grant of discounts should be effected only if the same are provided for in a duly
enacted ordinance of the Sangguniang Pan!ungsod. (BLGF 1st Jndorsement, January 26,
1994 to the Cify Treasurer ofAnge/es City)

198
See Sec. 176, this Manual
2) In granting discounts, the basic real property tax and the SEF tax should be treated
separately and independent of each other. (BLGF 3rd Indorsement, August 12, 1997 to the
Municipal Treasurer of Valenzuela, Metro Manila)

Section 178. Payment Under Protest:

a) No protest shall be entertained unless the taxpayer first pays the tax. There shall be
annotated
on the tax receipt the words, "paid under protest".

b) The protest shall be in writing and must be filed within thirty (30) days fom payment of
the tax to the Provincial, City Treasurer, or Municipal Treasurer in the case of a municipality
within Metropolitan Manila Area, who shall decide the protest within sixty (60) days from
receipt. (Sec. 252 (a), LGC)

c) The tax or a portion thereof paid under protest shall be held in trust by the Local Treasurer
concerned (Sec. 252 (b), LGC). However, fifty percent (50%) of the tax paid under protest
shall be distributed in accordance with Sec. 271 of R. A. No. 7160 or the Local Government
Code of 1991, on the distribution of proceeds. (Art. 343 (b), IRR, implementing Sec. 252 (b),
LGC)

d) In the event that the protest is finally decided in favor of the taxpayer, the amount or portion
of the tax protested shall be refunded to the protestant, or applied as tax credit against his
existing or fture tax liability (Sec. 252 (c), LGC). A cash refund is applicable only if the
taxpayer has no tax liability on the subject property.

e) In the event that the protest is denied or upon the lapse of the sixty (60)-day period
prescribed in sub-paragraph (a) of Section 252 of R. A. No. 7160 or the Local Government
Code of 1991199, the taxpayer may avail of the remedies as provided fr in Chapter 3, Title 2,
Book Il of the same code. (Sec. 252, LGC)

Illustrative Case:

l) Concerned parties entered into a Memorandum of Agreement (MOA) covering the

conditional and partial payment of Mirant amounting to ¥ 400M, pending resolution of
its appeal with the Court of Tax Appeals.

Under the aforementioned MOA, the amount of ¥ 400M was considered as partial
payment under protest which as per the provisions of pars. (b) and (c) of Section 252 of
R. A. No. 7160, otherwise known as the Local Goverment Code of 1991 200, should be
accounted for in the Trust Fund, so that,. in the event that the protest is resolved with finality
in favor of Mirant, the same shall be ready for refund or fr application as tax credit against
any existing or future tax liability thereof.
199
See Sec. 178 (), this Manual
200
See Sec. 178 (c) and (d), this Manual
 Applying the provisions of Article 343, IRR of the Local Government Code of 1991, to
the query at hand, 50% of the realty taxes paid under protest shall be held in trust and the
remaining 50% shall be distributed in accordance with the sharing or distribution of
proceeds of real property taxes specified under Section 271 201 of the same code as
1
r
implemented by par. (a), Art. 362 of the same IRR. (BLGF lndorsement, Februar 13, 2006
to the Municipal Treasurer ofPagbilao, Quezon)

Section 179. Repayment of Excessive Collections. - (a) When an assessment of the basic
real property tax, or any other tax levied under the Title 2, Book II of R. A. No. 7160 or
the Local Government Code of 1991, is found to be illegal or erroneous and the tax is
accordingly reduced or adjusted, the taxpayer may file a written claim fr refund or credit for
taxes and interests with the Provincial or City Treasurer within two (2) years from the
date the taxpayer is entitled to such reduction or adjustment.

(b) The Provincial or City Treasurer, shall decide the claim for tax refund or credit within
sixty (60) days from receipt thereof. In case the claim for tax refund or credit is denied, the
taxpayer may avail of the remedies as provided in Chapter 3, Title 2, Book II of R. A.
No. 7160 or the Local Government Code of 1991. (Sec. 253, LGC)

(c) In case of tax credit, a Certificate of Tax Credit202 shall be issued to the property owner
or to the person having legal interest therein.

Illustrative Case:

1) In one instance, there was merit in the request of the Asian Terminals, Inc., for the
re computation of its real property tax and any excess payment should be treated as tax
credit against the future real property tax liabilities of the said company. (BLGF Letter,
February 24, 1997 to the Cit Treasurer ofManila)

Section 180. Interest on Delinquent Real Property Tax. - In case of failure to pay the
basic real property tax or any other tax levied under Title 2, Book II of R. A. No. 7160 or
the Local Government Code of 1991, upon the expiration of the periods as provided in
Section 250 of the same code203, or when due, as the case may be, shall subject the
taxpayer to the payment of interest at the rate of two percent (2%) per month on the
unpaid amount or a fraction thereof, until the delinquent tax shall have been fully paid:
Provided however, That in no case shall the total interest on the unpaid tax or portion thereof
exceed thirty six (36) months. (Sec. 255, LGC)

Section 181. Guiding Principles in Determining Delinquency:

201
See Sec. 193, this Manual
202
LTO Form 101
203
See Sec. 176, this Manual
l) The accrual of the tax means that it has become due and payable. The words, "due and
demandable" can merely denote the existence of a simple indebtedness without reference to
the time of payment; they do not necessarily have to refer to the time limit or the date on
which taxes must be paid. (Commissioner of Interal Revenue v. Visayan Electric Co., May
27, 1968)

2) A taxpayer is delinquent if he fails to pay his taxes within the period fixed by statute or
executive order. (US. v. Estavillo, 19 Phil. 478)

3) Tax delinquencies incurred before the effectivity ofR. A. No. 7160 or the Local Government

Code of 1991, shall be governed by the provisions of applicable laws then in force; the
computation of penalties for delinquent real property taxes for CYs 1992 to 1994 should be
based on the provisions of Section 255 of the Local Government Code of 1991, providing for
a 2% interest rate per month on the unpaid amount but in no case to exceed thirty-six (36)
months. (BLGF 211d Indorsement, October 30, 1995 to the Provincial Treasurer of South
Cotabato)

Section 182. Procedures in Computing Taxes, Interest and Discounts. - The formulas to be
used in computing the payments due for taxes are as follows:

A. Computation of the Basic Tax and SEF. - In computing the basic real property tax and the
tax accruing to the Special Education Fund, the following basic components should be
noted:

1. The Assessed Value of the real property shall be taken from the Assessment Roll
submitted by the Local Assessor concerned.

11. The applicable Tax Rate shall be the rate fixed fr the subject property by the
approved tax ordinance ofthe local goverment unit concerned.

Following are the formulas for the Basic Tax and SEF:

1) For the Basic Tax:

TAXDUE = (Assessed Value) x (Applicable Tax Rate)

2) For the Special Education Fund Tax:

SEFDUE = (Assessed Value) x (Applicable Tax Rate)

B. Computation of the TaxDiscount fr Advanced and Prompt Payment. - The fo1mula for
the tax discount is as fllows:

TAXDISCOUNT = (TaxDue) x (Applicable TaxDiscount Rate/s)

C. Computation of the Interests Due on Unpaid Taxes. - The following formula shall guide
-+the computation of interests to be paid on delinquent real property taxes:

1) For Real Property Taxes Delinquent fr Any Period Up to Thirty-Six (36) Months:

INTEREST PAYMENT DUE FOR EACH MONTH OF DELINQUENCY =

(Tax Due) x (Interest Rate) x (Number of Months Delinquent)
2) For Real Property Taxes Delinquent fr Any Period up to More than Thirty-Six (36)
Months:

INTEREST = (Tax or Taxes Due) x (2%) x (36 Months)

3) For Annual Interest Payment Due:

ANNUAL INTEREST PAYMENT DUE = Sum oflnterest

Payments Due fr
Months Delinquent
During the Year

4) For Total Real Property Taxes and Interest to be Paid:

TOTAL TAX AND INTEREST JUE = (Total of Unpaid Taxes

Due) + (Interest on
Unpaid Taxes Due)

Section 183. Acceptance of Real Property Tax Through Over-the-Counter Payment in

Accredited Banks

A. R. A. No. 8792. - With the effectivity of R. A. No. 8792204 (E-Commerce Law),

the government has recognized the use of electronic data messages or documents in
facilitating and effecting its commercial and non-commercial transactions. Ever since the
goverment institutionalized the present system of collecting internal revenue taxes and
customs duties through the banking facilities of authorized agent banks, it is expected that
local government units, in the acceptance of local tax payments by selected depository banks,
would eventually follow the same system.205

B. Guidelines in the Acceptance of Real Property Tax Payments Through Accredited

Banks:

204
An Act Providing.for the Recognition and Use ofElectronic Commercial and Non-Commercial Transactions,
Penalties.for Unlawtl Use there< t: and Other P111poses.
205
Quezon City has pioneered the system of acceptance ofReal Propert Tax through the Over-the-Counter
payment in accredited banks.
a) Enactment of Ordinance. - The sanggunian shall enact the appropriate local
ordinance, authorizing the Local Treasurer to accept, as an alterate mode of tax
collection, over-the-counter payments by taxpayers in accredited goverment
depository banks of local government units.

b) Accreditation of Authorized Agent Bank. - The banking institution shall seek

accreditation from the local government unit to deliver the required services provided
in the local ordinance. The local government unit shall consider the stability and
soundness of the bank, as well as its efficiency in the collection of taxes and
promptness in the remittance of collections to the local government unit. Only
authorized goverment depository banks or banks authorized by the Monetary Board
of the Bangko Sentral ng Pilipinas shall be allowed to participate in the collection
scheme.

c) Memorandum of Agreement. - The local government unit shall enter into a

Memorandum of Agreement with the accredited bank which will be selected based on
the terms and conditions that would be most advantageous to the latter. The
Memorandum of Agreement shall set forth in detail the responsibilities of the bank in
the receipt of tax payments, custody of the fnds and the prompt and proper turnover
and remittance of tax collections to the local goverment unit. The Memorandum of
Agreement shall also provide a holding-period or the number of days that the
collected funds shall remain with the bank before its remittance to the local
government unit, and the related costs and charges, if any.

C. Procedures in the Acceptance of Real Property Taxes Through Over-the-Counter

Payments in Accredited Banks Which are Referred to as the Acceptee Bank:

I) Only real property taxes for the current year shall be eligible for Over-the-Counter
Payment206 in the Acceptee Bank. All delinquent accounts shall continue to be paid
directly to the cashiers/tellers of the Local Goverment Unit.

2) The Local Government Unit shall send the Real Property Tax Bill to the taxpayer either

through the mail or courier, or through personal delivery, which shall be the basis for
the Over-the-Counter Payment to the Acceptee Bank. The Real Property Tax Bill may
be obtained by the taxpayer or his duly authorized representative directly from the
Local Government Unit.

3) The Bills Payment Slip207 issued by the Acceptee Bank shall be duly accomplished by
the taxpayer for all payments to be made. The Bills Payment Slip shall indicate
the taxpayer's name, the specific tax to be paid, the taxable year and the amount of tax.
The Bills Payment Slip shall also contain the bank account number of the Local
Goverment Unit to which all tax payments shall be credited.
4) The taxpayer shall pay the real property tax to the teller of the Acceptee Bank, supported
by the Real Property Tax Bill and the duly accomplished Bills Payment Slip.

5) The teler of the Acceptee Bank shall accept the tax payment and shall validate the Real
Property Tax Bill and the Bills Payment Slip. The validated Real Property Tax Bill and
the Bills Payment Slip shall be returned to the taxpayer.

6) The following banking day, the Acceptee Bank shall generate and send to the Local
Government Unit an Abstract of Collection Report 208 of the day's transactions via e-mail
or FTP.

7) The Local Goverment Unit may then view and/or print the Abstract of Collection
Report.

8) The Local Government Unit may also be provided by the Acceptee Bank with an on-line
banking facility which can be used to view and download the Local Government Unit's
Statement of Account209 to enable the Local Goverment Unit to have real-time data on
all Real Prope1ty Tax collections made by the Acceptee Bank.

Section 184. Remedies for the Collection of Real Property Tax:

A. Administrative· and Judicial Remedies. - For the collection of the basic real property tax
and any other tax levied under Title 2, Book 11 of R. A. No. 7160 or the Local Government
Code of 1991, the local government unit concerned may avail of the remedies by
administrative action through levy on real property or by judicial action. (Sec. 256, LGC)

B. Local Government's Lien. - The basic real property tax and any other tax levied under Title
2, Book 11 of R. A. No. 7160 or the Local Government Code of 1991, constitutes a lien on
the property subject to tax, superior to all liens, charges or encumbrances in fvor of any
person, irrespective of the owner or possessor thereof, enfrceable by administrative or
judicial action, and may only be extinguished upon payment of the tax and the related
interests and expenses. (Sec. 257, LGC)

C. Certification of Delinquencies Remaining Uncollected. - The Provincial, City or

Municipal Treasurer or their deputies shall prepare a Certified List of All Real Property
Tax Delinquencies 210 which remained uncollected or unpaid for at least one (I) year in his
jurisdiction, and a statement of the reason or reasons for such non-collection or non-payment,
and shall submit the same to the sanggunian concered on or before the thirty-first (31st) of
December of the year immediately succeeding the year in which the delinquencies were
incurred, with a request for assistance in the enfrcement of the remedies for collection
provided herein. (Sec. 269, LGC)

20s
ACR
209
SOA
210
LTO Form 90
D. Availment of Remedies. - When the real property tax and any other tax levied under Title 2,
Book II ofR. A. No. 7160 or the Local Goverment Code of 1991, becomes delinquent upon
the expiration of the one (I) year period from the time the tax becomes due and payable, the
local government unit concerned, through the Office of the Provincial or City Treasurer, or
the Municipal Treasurer of a municipality within Metropolitan Manila Area, may avail of
remedies by administrative or judicial action.

1) The AdministrativeRemedies which are summary in nature are:

i. Levy onReal Property; and

ii. Sale ofReal Property at Public Auction

2) The judicial remedy is availed of in the court of appropriate jurisdiction.

The fregoing remedies are cumulative, simultaneous and unconditional, that is, any or all of
them or a combination thereof may be resorted to and the use of one remedy shall not be a bar
against the institution of the other. Formal demand for the payment of the delinquent taxes
and penalties due is not a prerequisite to such remedies. The Notice of Delinquency required
under Section 254 ofR. A. No. 7160 or the Local Government Code of 1991 211 shalJ be sufficient
fr the purpose. (Art. 347, IRR, implementing Sec. 256, LGC)

E. Periods Within Which to Collect Real Property Taxes. - The basic real prope11y tax and
any other tax levied under Title 2, Book II ofR. A. No. 7160 or the Local Goverment Code
of 1991, shall be collected within five (5) years from the date they become due. No action for
the collection of the tax, whether administrative or judicial· shall be instituted after the
expiration of such period. In case of faud or intent to evade payment of the tax, such action
may be instituted for the collection of the same within ten (10) years from the discovery of
such faud or intent to evade payment.

The period of prescription within which to collect shall be suspended for the time during
which:

1) The Local Treasurer is legally prevented fom collecting the tax;

2) The owner of the property or the person having legal interest therein requests for re
investigation and executes a waiver in writing befre the expiration of the period
within which to collect; and

3) The owner of the property or the person having legal interest therein is out of the
country or otherwise cannot be located. (Sec. 270, LGC)

Illustrative Cases:
211
See Sec. 186 (), this Manual
l) Providing a prescriptive period is beneficial to the taxing authority since Local Treasurers
are compelled to collect taxes promptly. However, the Local Goverment Code of 1991
does not clearly provide as to when the Local Treasurer can perfonn his/her function in
order to say that he/she collects promptly. 212

2) If the Local Treasurer sends notice of delinquency and/or demand letter for the payment
of the delinquent taxes in observance of due process preparatory to the application of the
administrative remedies in the collection of delinquent taxes provided in the law, the
prescriptive period of five (5) years fr the collection of taxes shall not start to run. It is
only when the Local Treasurer concerned neglected to perform his mandated duties that
he shall be faulted, giving rise to said prescriptive period under the law. Otherwise,
taxpayers may circumvent the law by not paying their taxes until the collection of the
same prescribes. (BLGF 211d Indorsement, October 16, 1997 to the Provincial Treasurer
of Bataan)

3) BLGF has clarified and stressed in several opinions that the five-year prescriptive period

was provided only to enforce the collection of real property taxes within a specific period
of time. Thus, Local Treasurers cannot execute administrative or judicial remedies after
the lapse of the five-year period, but it does not mean that Local Treasurers can no longer
collect delinquent taxes accruing fr the period. (BLGF F' lndorsement, March 12, 1996
to the Provincial Treasurer ofZamboanga def Sur,· and BLGF 3 Indorsement, Januar
rd

26, 1998 to the Treasurer of Cebu City)

4) Delinquent real property taxes prior to the effectivity of R. A. No. 7160 or the Local
Government Code of 1991 were imprescriptible because Section 270 thereof is
prospective in application. Hence, the collection of real property taxes that accrued prior
to the effectivity on Janua1y 1, 1992 of the Local Government Code of 1991, shall be
govered by the Real Property Tax Code or P. D. No. 464, as amended. (BLGF 4'h
Indorsement, June 2, 1994 to the Provincial Treasurer of Pampanga)

5.) It is clear, explicit and mandatory from the provisions of Section 270 that real property
tax shall be collected within five (5) years from the date they become due. No action fr the
collection of the tax, that is, administrative action and/or civil action shall be
instituted after the expiration of such period. Accordingly, failure to collect the real
property tax within 5 years from the date it becomes due will bar the collection thereof
even by administrative or judicial means, unless the 5-year prescriptive period was
suspended under the circumstances specified.

In the event of fraud or intent to evade payment of real property tax, however, the 3r d

sentence of Section 270 provides that the action for the collection of the tax may be
instituted within ten (10) years f rom the date of the discove1y of such fraud or intent to

212
p. 6, Implications ofSection 270 of the Local Goverment Code (LGC) Re: Periods within which to Collect
Real Propert Taxes, March IO. 2005, study by the National Tax Research Center (TRC), DOF.
 evade payment, unless the period is suspended also under the circumstances specified.
The action fr the collection of the tax refrs to administrative and civil actions. Tersely
stated, if fraud or intent to evade payment exists, the real property tax may be collected
within the 10-year period by means of administrative action and/or civil action. Please
take into account that fraud is a question of fact that must be alleged and proved. It is a
serious charge and, to be sustained, it must be supported by clear and convincing proof.
(BLGF Letter, May 22, 2007 to the T1:easurer ofQuezon City)

F. Cost of Collection. - The Local Treasurer may, by ordinance duly approved, advance an
amount sufficient to defray the costs of collection through the remedies provided in Title 2,
Book II of R. A. No. 7160 of the Local Government Code of 1991 213, including the expenses
of advertisement and sale. (Sec. 260, LGC)

The cost of collections, however, shall be recovered by the local government unit from the
proceeds of the sale or auction of the properties levied.214

Section 185. Condonation or Reduction of Real Property Tax and Interest. - In case of a
general failure of crops or substantial decrease in the price of agricultural or agri-based products,
or calamity in any province, city, or municipality, the sanggunian concerned, by ordinance
passed prior to the first day of Jnuary of any year and upon recommendation of the Local
Disaster Coordinating Council, may condone or reduce, wholly or partially, the taxes and interest
thereon for the succeeding year or years in the city or municipality affcted by the calamity.
(Sec. 276, LGC)

Section 186. Pre-Auction Sale Notice of the Delinquency. - When the real property tax or
any other tax under Title 2, Book I I of R. A. No. 7160 or the Local Goverment Code of 1991,
becomes delinquent, the Provincial, City or Municipal Treasurer shall:

I) Notice ofDelinquency. - Immediately cause a Notice of Realty Tax Delinquency, 215

specifying as follows:

1. Description, location, and owner of the real property subject to delinquent

tax;

11. Date upon which the tax became delinquent;

iii. That personal property may be distrained to effect payment of the

delinquent tax;

1v. That anytime before the distraint of personal property, payment of the
delinquent tax with surcharges, interests and penalties may be made in

213
See Sec. 187 and Sec. 188, this Manual
214
Expenses ofsale are included in the determination of the auction price and the redemption price.
215
LTO Form 93
accordance with Section 255 ofR. A. No. 7160 or the Local Goverment Code of 1991;216and

v. That unless the tax, surcharges and penalties are paid befre the expiration
of the year for which the tax is due the delinquent real property will be
sold at public auction, except when the notice of assessment or special
levy is contested administratively or judicially pursuant to the provisions
of Chapter 3, Title 2, Book II ofR. A. No. 7160 or the Local Goverment
Code of 1991; and the title to the property will be vested in the purchaser,
subject, however, to the right of the delinquent owner of the property or
any person having legal interest therein to redeem the property within one

(]) year from the date of sale.

2) Posting of the Notice of Realt Tax Delinquency. - Post the Notice ofRealty Tax
Delinquency at the main entrance of the provincial capitol, city or municipal hall and
in a publicly accessible and conspicuous place in each barangay of the local
goverment unit concered.

3) Publication ofthe Notice ofRealt Tax Delinquency. - Publish the Notice ofRealty
Tax Delinquency once a week for two (2) consecutive weeks, in a newspaper of
general circulation in the province, city, or municipality within Metropolitan Manila
Area. (Sec. 254, LGC

4) Service of the Notice ofRealt Tax Delinquency. - A copy of the Notice ofRealty
Tax Delinquency shall be mailed to or served personally to the delinquent real
property owner-taxpayer or any person having legal interest therein.

5) The Local Treasurer may continue to communicate with the delinquen real property
owner-taxpayer on the possibility of a compromise agreement by virtue of an
ordinance duly enacted fr the purpose.217

Section 187. Administrative Remedy:

A. Levy on Real Property. - (a) After the expiration of the time required to pay the basic
real property tax or any other tax levied under Title 2, Book II ofR. A. No. 7160 or the
Local Government Code of 1991, real property subject to such tax may be levied upon
through the issuance of a warrant on or before, or simultaneously with, the institution of the
civil action for the collection of the delinquent tax.

(b) Levy on real property shall be made in the manner herein set forth:

216
See Sec. 180, this Manual
217
Judicial and Administrative Remedies in the Collection ofDelinquent Real Property Tax Pursuant to R. A. No.
7160 or the Local Goverment Code of1991, Renee Tan Empaces, Assistant Regional Director and ICO
Regional Director, BLGF Regional Office No. VII, Cebu Cit.
Warrant of Levy. - The Provincial or City Treasurer, or Treasurer of a municipality within the
Metropolitan Manila Area when issuing a Warrant of Levy 218 shall prepare the duly
authenticated certificate showing:

i. The name of the delinquent property owner or person having legal

interest therein;

ii. The description of the real property; and

iii. The amount of the tax due and the interest thereon.

6) Service of Warrant ofLevy. - The Warrant of Levy shall be mailed to or served upon
the delinquent real property owner or person having legal interest therein, or in case
he is out of the country or cannot be located, to the administrator or occupant of the
property.

7) Notice ofLevy to the Local Assessor and the Registrar ofDeeds. - At the same time,
written Notice of Levy219 with the attached copy of the Warrant of Levy shall be
mailed to or served upon the Local Assessor and the Registrar of Deeds of the
province, city or a municipality within the Metropolitan Manila Area where the
property is located, who shall annotate the levy on the Tax Declaration and the
r'
Certificate of Title to the property, respectively. (Sec. 258 par., LGC)

8) Report on the Levy to the Sanggunian. - The levying officer shall submit a report on
the levy to the sanggunian concered within ten ( 10) days afer the receipt of the
Warrant of Levy by the owner of the property or person having legal interest therein.
(Sec. 258 2nd, LGC)

B. Advertisement of Sale. - Within thirty (30) days after service of the Warrant of Levy, the
Local Treasurer shall proceed to publicly advertise for sale or auction the property or a
usable portion thereof as may be necessary to satisfy the tax delinquency and expenses of
sale which shall be effected by the issuance of a Notice of Sale and the posting and
publication thereof.

6) Notice of Sale. - The Notice of Sale shall be issued by the Local Treasurer,
specifying therein the following:

1. amount of the delinquent tax and interest due thereon;

11. expenses of sale;

218
LTO Form 92
219
LTO Form 93
 date and place of sale;
111.

1v. name of the owner of the delinquent real property tax or any person
having legal interest therein; and

v. description of the property to be sold.

9) Posting ofNotice ofSale. - The Notice of Sale shall be posted at the main entrance of
the provincial capitol, city or municipal hall, and in a publicly accessible and
conspicuous place in the barangay where the real property is located; and

10)Publication of Notice of Sale. - The Notice of Sale shall be published once a week
for two (2) weeks in a newspaper of general circulation in the province, city or
municipality where the property is located.

11) Notice ofPublication and Sale. - A Notice of Publication and Auction Sale 220 shall
be issued to the delinquent real property owner/taxpayer concered, informing him
which newspaper of general circulation the Notice of Sale was published; the dates of
such publication; and the time, date and place where the public auction will be
conducted.

I2)Proof of Service. - The officer serving the Warrant of Levy, Notice of Levy, and
Notice of Publication and Sale shall accomplish a Proof of Service221 thereon and
submit the same to the Local Treasurer concerned.

13) Certicate of Release. - At any time before the date fixed for the sale, the owner of
the real property or person having legal interest therein may stay the proceedings by
paying the delinquent tax, the interest due thereon and the expenses of sale (Sec. 260
(F' par.), LGC). A Certificate of Release shall be issued thereby by the Local
Treasurer concerned, together with the official receipt and tax clearance which shall
in effect extinguish the tax lien on the property.222

C. Sale. -

I4)Auction Sale. - If no payment is made, the delinquent property shall be auctioned at

the appointed date, time and place. The property shall be sold to the highest cash bidder
whose bid is sufficient to pay the delinquent real property tax, the accrued interest, and the
I
I
cost of the sale, the total of which shall be the floor price for accepting any bid.

220
LTO Form 94
221
LTO Form 95
222
Judicial and Administrative Remedies in the Collection ofDelinquent Real Propert Tax Pursuant to R. A. No.
7160 or the Local Goverment Code of 1991, Renee Tan Empaces, Assistant Regional Director and lCO
Regional Director, BLGF Regional Ofice No. VII, Cebu Cit.
The sale shall be conducted in accordance with the fllowing details specified in the Notice of
Sale:

a) Date of Sale. - The sale by auction shall be held after the Warrant of Levy
shall have been served to the delinquent owner of the real property or any
person having legal interest therein or to the administrator or occupant
thereof; and after the advertisement of the sale shall have been complied with.

b) Place of Sale. - The sale shall be held either at the main entrance of the provincial
capitol, city or municipal hall, or on the property to be sold, or at
any other place as specified in the Notice of Sale. (Sec. 260 (I' ' par.), LGC)

15) Report of the Sale to the Sanggunian. - Within thirty (30) days after the sale, the
Local Treasurer or his deputy shall make a report of the sale to the sanggunian
concered, which shall form part of his records. (Sec. 260 (2nd par.), LGC)

16) Certificate of Sale. - The Local Treasurer shall likewise prepare and deliver to the
purchaser a Certificate of Sale of Delinquent Property223 which shall contain the
name of the purchaser, a description of the property sold, the amount of the
delinquent tax, the interest due thereon, the expenses of sale and a brief description of
the proceedings. (Sec. 260 (2'"1 par.), LGC)

17) Remittance ofnxcess Payment. - Proceeds of the sale in excess of the delinquent tax,
the interest due, and the expenses of sale shall be remitted to the owner of the real
property or person having legal interest therein. (Sec. 260 (211d par.), LGC)

D. Redemption of Property Sold. -

18) Certicate of Redemption. - Within one (1) year from date of sale, the owner of the
delinquent property or person having legal interest therein, or his representative, shall
have the right to redeem the property upon payment to the Local Treasurer of the
amount of the delinquent tax, including the interest due thereon and the expenses of
the sale from the date of delinquency to the date of sale, plus interest of not more than
two percent (2%) per month on the purchase price from the date of sale to the date of
redemption. Such payment shall invalidate the Certificate of Sale issued to the
purchaser and the owner of the delinquent real property or person having legal
interest therein shall be entitled to a Certificate of Redemption224 which shall be
issued by the Local Treasurer or his deputy.

From the date of sale until the expiration of the period of redemption, the delinquent
real property shall remain in the possession of the owner or person having legal

223
LTO Form 96
224
LTO Form 97 ! -
interest therein, who shall be entitled to the income and other fruits thereof. (Sec. 261 F' and
211d pars., LGC)

19) Notice of Redemption. - Upon redemption of the delinquent real property by the
owner or person having legal interest therein, the Local Treasurer or his deputy shall
issue to the purchaser the Notice of Redemption 225 to infrm him of such redemption
and request him to retur the Certificate of Sale that had been issued.

The Local Treasurer or his deputy, upon receipt from the purchaser of the Certificate
of Sale, shall forthwith retur to the latter the entire amount paid by him plus interest
of not more than two percent (2%) per month. Thereafter, the property shall be free
fom the lien of such delinquent tax, interest due, and expenses of sale. (Sec. 261 3r d

par., LGC)

E. Final Deed to Purchaser. -

20) Final Deed ofSale. - In case the owner or person having legal interest therein fails to
redeem the delinquent property, the Local Treasurer shall execute a Final Deed of
Sale,226 conveying to the purchaser said property, free fom lien of the delinquent tax,
interest due thereon and expenses of sale. The deed shall briefly state the proceedings

upon which the validity of the sale rests. (Sec. 262, LGC)

The steps in executing the deed of conveyance of the property shall be as fllows:

I) The Local Treasurer concered shall request the owner of the auctioned property
to surrender the delinquent property and the owner's duplicate copy of Title and
the Tax Declaration.

2) The owner's duplicate copy of Title and the Tax Declaration shall be attached to
the Final Deed of Sale

3) The above documents shall be submitted to the Registrar of Deeds for the
consolidation of the title, afer which the Local Assessor shall issue a new Tax
Declaration in the name of the new owner.

F. Purchase of Property by the Local Government Units for Want of Bidder. - (a) In case
there is no bidder for the real property advertised fr sale as provided herein, or where the
highest bid is for an amount insufficient to pay the real property tax and the related
interest
and costs of sale, the Local Treasurer conducting the sale shall purchase the property in
behalf of the local government unit concered to satisfy the claim and within two (2) days

thereafter shall make a report of his proceedings which shall be reflected upon the records
of
his office.
225
LTO Form 98
226
LTO Form 99

I
(b) It shall be the duty of the Registrar of Deeds concered, upon registration with his office
of any such declaration of frfiture to transfer the title of the forfited property to the local
government unit concerned without the necessity of an order from a competent court. (Sec.
263 ] par., LGC)
st

(c) Within one (1) year from the date of such forfeiture, the taxpayer or any of his
representative, may redeem the property by paying to the Local Treasurer the full amount of the
real property tax and the related interest and costs of the sale.

If the property is not redeemed as provided herein, the ownership shall be flly vested on the
local goverment unit concered. (Sec. 263 2ndpar., LGC

G. Resale of Real Estate Taken for Taxes, Fees or Charges. -The sanggunian concerned
may, by ordinance duly approved, and upon notice of not less than twenty (20) days, sell
and
dispose of the real property acquired under Section 263 of R. A. No. 7160 or the Local
Goverment Code of 1991227at public auction. The proceeds of the sale shall accrue to the
General Fund of the local goverment unit concerned. (Sec. 264, LGC)

H. Further Distraint or Levy. -Levy may be repeated if necessa1y until the full amount due,
including all expenses, is collected. (Sec. 265, LGC)

I. Effect ofWarrant of Levy. -The Warrant of Levy issued in accordance with Section 258 of
R. A. No. 7160 or the Local Goverment Code of 1991, 228 shall operate with the frce of a legal
execution throughout the province, city or municipality within the Metropolitan Manila Area.
(Sec. 258, F1 par., LGC)

Section 188. Collection of Real Property Tax Through the Courts. - (a) The local
government unit concerned may enforce the collection of the basic real property tax or any other
tax levied under Title 2, Book II of R. A. No. 7160 or the Local Goverment Code of 1991, by
civil action in any court of competent jurisdiction. The civil action shall be filed by the Local
Treasurer within the period prescribed in Section 270 of the same Code.229 (Sec. 266, LGC)

(b) The delinquent basic real property tax or any other tax levied under Title 2, Book II of R. A.
No. 7160 or the Local Goverment Code of 1991, shall constitute indebtedness of the taxpayer to
the LGU, hence, collection of such indebtedness can be enforced through civil action in any
court of competent jurisdiction, observing the fllowing:

l) The Provincial or City Treasurer, or Municipal Treasurer of a municipality of

Metropolitan Manila shall furish the Provincial Attorney or City or Municipal Legal
Officer a certified statement of delinquency who, within fifteen (15) days after receipt,

227
See Sec. 187 (F), this Manual
228
See Sec. 187 (A) () (1), this Manual 229 See Sec. 184 (E), this Manual
 shall file the civil action in the name of the province, city or municipality in the proper
court of competent jurisdiction. The jurisdiction of the court is detennined by the amount
sought to be recovered exclusive of interests and costs.

2) The Provincial or City Treasurer, or Municipal Treasurer of a municipality of

Metropolitan Manila Area shall furish the Provincial Attorey or the City or Municipal
Legal Officer concerned the complete address of the defendant where he may be served
with summons. (Art. 357, IRR implementing Sec. 266, LGC)

Section 189. Action Assailing Validity of Tax Sale. - No court shall entertain any
action assailing the validity of any sale at public auction of real property or rights therein
under Title 2, Book II of R. A. No. 7160 or the Local Government Code of 1991, until the
taxpayer shall have deposited with the court the amount for which the real property was
sold, together with interest of two percent (2%) per month from the date of sale to the
time of the institution of the action. The amount so deposited shall be paid to the purchaser
at the auction sale if the deed is declared invalid but it shall be retured to the depositor if the
action fails.

Neither shall any court declare a sale at public auction invalid by reason of
irregularities or informalities in the proceedings unless the substantive rights of the
delinquent owner of the real property or the person having legal interest therein have been
impaired. (Sec. 267, LGC)

Section 190. Payment of Delinquent Taxes on Property Subject of Controversy. - In

any action involving the ownership or possession of, or succession to, real property, the
court may, motu propio or upon representation of the Provincial, City or Municipal
Treasurer or his deputy, award such ownership, possession, or succession to any party to
the action upon payment to the court of the taxes with interest due on the property and all
other costs that may have accrued, subject to the final outcome of the action. (Sec. 268,
LGC)

Section 191. Compromise Agreement. - In case the Local Treasurer finds that a
Compromise Agreement230 on the collection of the delinquent real property tax is
warranted, representations may be made to the sanggunian for the purpose of issuing a
resolution or enacting an ordinance, authorizing the Local Treasurer to enter into such
agreement.

Section 192. Sanctions:

1) Failure to Dispose of Delinquent Real Property at Public Auction. - The Local

Treasurer concerned who fails to dispose of delinquent real property at public auction in
compliance with the pertinent provisions of R. A. No. 7160 or the Local Government
Code of 199l , and any other local goverment official whose acts hinder the prompt
disposition of delinquent real property at public auction shall, upon conviction, be subject
to a fine of not less than One Thousand Pesos (P 1,000.00) nor more than Five Thousand
Pesos (I 5,000.00), or imprisonment of not less than one (I) month nor more than six (6)
23
° CA, LTO Form JOO
months, or both such fine and imprisonment, at the discretion of the court. (Sec. 519,
LGC)

2) Penalty for Failure to Issue and Execute Warrant - Without prejudice to criminal
prosecution under the Revised Penal Code and other applicable .Jaws, any Local Treasurer
or his deputy who fails to issue or execute the Warrant of Levy within one ( l) year from
the time the tax becomes delinquent or within thirty (30) days fom the date of issuance
thereof, or who is found guilty of abusing the exercise thereof in an administrative or
judicial proceeding shall be dismissed from the service. (Sec. 259, LGC)

Section 193. Distribution of Proceeds. -

A. The proceeds of the basic real property tax, including interest thereon, and proceeds from the

use, lease or disposition, sale or redemption of property acquired by public auction, in

accordance with the provisions of Title 2, Book II of R. A. No. 7160 or the Local
Government Code of 1991, by the province or city or a municipality within the
Metropolitan
Manila Area shall be distributed as follows:

a) In the case of Provinces -

1) Province: Thirty-five percent (35%) shall accrue to the General Fund of the province;

2) Municipality: Forty percent (40%) shall accrue to the General Fund of the municipality
where the property is located; and

3) Barangay:Twenty-five percent (25%) shall accrue to the barangay where the property
is located.

b) In the case of Cities -

I) City: Seventy percent (70%) shall accrue to the General Fund of the city; and

2) Barangay: Thirty percent (30%) shall be distributed among the component

barangays of the cities where the property is located in the following manner:

i)Fify percent (50%) shall accrue to the barangay where the property is located;

ii) Fifty percent (50%) shall accrue equally to all component barangays of the city.

c) In the case of Municipality within the Metropolitan Manila Area -

1) Metropolitan Manila Authority: Thirty-five percent (35%) shall accrue to the General
Fund of the Authority;

2) Municipality: Thirty-five percent (35%) shall accrue to the General Fund of the
municipality where the property is located;

3) Barangay: Thirty percent (30%) shall be distributed among the component barangays
of the municipality where the property is located in the fllowing manner:

i) Fifty percent (50%) shall accrue to the barangay where the property is located; and

ii) Fify percent (50%) shall accrue equally to all component barangays of the
municipality. (Sec. 271, LGC)

B. Release of Barangay Share. - The share of each barangay shall be released, without
need of any further action, directly to the Barangay Treasurer on a quarterly basis within
five (5) days after the end of each quarter and shall not be subject to any lien or
holdback fr whatever purpose (Sec. 271 (d), LGC) and to such rules as may be
prescribed by the Commission on Audit fr this purpose (Art. 362, IRR implementing Sec.
271 (d), LGC).

Illustrative Case:

1) The sharing or distribution of proceeds of real property taxes should be applied in

accord with the provisions of Section 235 (Additional Levy on Real Property Tax for
SEF) and Section 272 (Application of Proceeds of the Additional 1% SEF Tax) of the
Local Goverment Code of 1991, as implemented under Article 326 and Article 363,
IRR.

Correspondingly, the P400M partially paid under protest by Mirant shall be recorded and
distributed, as follows:

For the first 50% of P400M or P200M ------------- to the Trust Fund of the Province of
Quezon

For the remaining 50% of P400M or P200M ------ it shall be accounted fr, viz:

P200M
Divide:
- - -2 (represents the 1 % basic tax plus 1 % SEF tax) P lOOM
 Thus:
P200M
Less:
P IOOM ------ to the SEF which shall be divided equally
between the Provincial and Municipal
School Boards of Quezon and Pagbilao,
Respectively.

P lOOM ------- to the General Fund of the concered LGUs

in the following percentage distribution:

35% of P lOOM or P 35M ------ to the Province of Quezon

40% of P 1OOM or P 40M ------ to the Municipality of
Pagbilao
25% of P lOOM or P25M ------ to Barangay Ibabang Polo
(BLGF 1st lndorsement, Februar 13, 2006 to the Municipal
Treasurer ofPagbilao, Quezon)

C. Application of Proceeds of the Additional One Percent SEF Tax. - The proceeds fom the
additional one percent (1%) tax on real propert accruing to the SEF shall be automatically
released to the local school boards; Provided, That in case of provinces, the proceeds shall be
divided equally between the provincial and municipal school boards, Provided, however,
That the proceeds shall be allocated for the fllowing as determined and approved by the
local school board:

1) operation and maintenance of public schools;

2) construction and repair of school buildings, fcilities and equipment;

3) educational research;

4) purchase of books and periodicals; and

5) sports development. 231 (Sec. 272, LGC)

D. Proceeds of the Tax on Idle Lands. - The proceeds of the additional real property tax on
idle lands shall accrue to the respective General Fund of the province or city where the land

is located. In the case of a municipality within the Metropolitan Manila Area, the proceeds
shall accrue equally to the Metropolitan Manila Authority and the municipality where the
land is located. (Sec. 273, LGC)

Accordingly, the proceeds of this tax shall be treated in the income account as revenue from
taxation. (Art. 364, IR implementing Sec. 273, LGC)

231
See illustrative case under Sec. 193 (B), this Manual.
E. Proceeds of the Special Levy. - The proceeds of the special levy on lands benefited by
public works, project and other improvements shall accrue to the General Fund of the
local
government unit which financed such public works, projects or other improvements. (Sec.
274, LGC)

Accordingly, all income derived from this special levy shall be treated in the income account as
revenue from taxation. (Art. 365, IRR implementing Sec. 274, LGC)

Section 194. General Assessment Revision, Expenses Incident Thereto. - The sanggunian
of provinces, cities and municipalities within the Metro Manila Area shall provide the necessary

appropriations to defray the expenses incident to the general revision of real prope1iy
assessment.

All expenses incident to a general revision of real property assessments shall, by ordinance of the
sangguniang panlalawigan, be apportioned between the province and the municipality on the
basis of the taxable area of the municipality concerned. (Sec. 275, LGC)

The barangays may be required by the sanggunian of the city or municipality to share in the
expenses to be incurred for the conduct of a general revision of real prope1iy assessment.
(Art. 366 (c), IRR implementing Sec. 275, LGC)

Section 195. Condonation or Reduction of Real Property Tax and Interest. - In case of a
general failure of crops or substantial decrease in the price of agricultural or agri-based
products,
or calamity in any province, city, or municipality, the sanggunian concered, by ordinance
passed prior to the first (1 st) day of January of any year and upon recommendation of the
Local
Disaster Coordinating Council, may condone or reduce, wholly or partially, the taxes and interest

thereon fr the succeeding year or years in the city or municipality affected by the calamity.
(Sec. 276, LGC)

Section 196. Condonation or Reduction of Tax by the President of the Philippines. - The President of
the Philippines may, when public interest so requires, condone or reduce the real property tax
and interest fr any year in any province or city or municipality within the Metropolitan
Manila Area. (Sec. 277. LGC)

Section 197. Fees in Court Actions. - All comi actions, criminal or civil, instituted at the
instance of the Provincial, City or Municipality Treasurer or Assessor under the provisions of R.
A. No. 7160 or the Local Government Code of 1991, shall be exempt from the payment of court
and sheriffs fes. (Sec. 280, LGC)

Section 198. Fees in Registration of Papers or Documents on Sale of Delinquent Real

Property to Province, City or Municipality. - All certificates, documents, and papers covering
the sale of delinquent prope1iy to the province, city or municipality, if registered in the Registry

of Property, shall be exempt from the documentary stamp tax and registration fees. (Sec. 281,
LGC)
CHAPTER 2. BUSINESS AND OTHER LOCAL TAXES

Section 199. Nature. - Business taxes232 are those imposed by a local goverment unit on the
privilege of engaging in business, occupation and other activities within its territorial
jurisdiction. 233 The proceeds of these taxes accrue exclusively to the local goverment unit that
imposes them, or when provided by law, may be shared with other local goverment units.

Section 200. Definition of Terms. - The fllowing terms as used in this Manual shall mean:
a) Agricultural Product - includes the yield of the soil, such as com, rice, wheat, rye, hay,
coconuts, sugarcane, tobacco, root crops, vegetables, fruits, flowers and their by-products;
ordinary salt; all kinds of fish; poultry; and livestock and animal products, whether in their
original form or not.

The phrase "whether in their original frm or not" refers to the transformation of said
products by the farmer, fisherman, producer or owner through the application of processes to
preserve or otherwise to prepare the said products for the market such as freezing, drying,
salting, smoking, or stripping for purposes of preserving or otherwise preparing the said
products for the market. (Sec. 131 (a), LGC)

To be considered an agricultural product whether in its original frm or not, its

transformation must have been undertaken by the farmer, fisherman, producer or owner.

Agricultural products as defined include those that have undergone not only simple but even
sophisticated processes employing advanced technological means in packaging like dressed
chicken or ground coffee in plastic bags or styropor or other packaging materials intended to
process and prepare the products for the market.

The term "by-products" shall mean those materials which in the cultivation or processing of
an article remain over, and which are still of value and marketable, like copra cake from
copra or molasses from sugar cane. (Art. 220 (a), !RR, implementing Sec. 131 (a), LGC)

b) Amusement - a pleasurable diversion and entertainment. It is synonymous to relaxation,

avocation, pastime, or fun. (Sec. 131 (b), LGC)

c) Amusement Places - include theaters, cinemas, concert halls, circuses and other places of
amusement where one seeks admission to entertain oneself by seeing or viewing the show
or
perfrmance. (Sec. 131 (c), LGC)

d) Business - mean trade or commercial activity regularly engaged in as a means of livelihood

or with a view to profit. (Sec. 131 (d), LGC

232
Pertains to other local taxes imposed by LGUs other than real propert and business taxes as uthorized by law.
233
See Sec. 3 7 3rd par., this Manual
e) Banks and other financial institutions - include non-bank financial intermediaries, lending
investors, finance and investment companies, pawnshops, money shops, insurance
companies, stock markets, stock brokers and dealers in securities and foreign exchange, as
defined under applicable law, or rules and regulations thereunder. (Sec. 131 (e), LGC)

Illustrative Case:
1) Credit card companies fll within the purview of banks and other financial
institutions as contemplated under Section 143 (t) of R. A. No. 7160 or the Local
Goverment Code of 1991. (BLG Letter, March 15, 1999 to Picazo Buyco Tan Fider
& Santos Law Offices)

t Capital Investment - is the capital which a person employs in any undertaking, or which he
contributes to the capital of a partnership, corporation, or any other juridical entity or
association in a particular taxing jurisdiction. (Sec. 131 (, LGC)

g) Charges - refr to pecuniary liability, as rents or fees against persons or property. (Sec. 131
(, LGC)
h) Contractor - includes persons, natural or juridical, not subject to profssional tax under
Section 139 of R. A. No. 7160 or the Local Goverment Code of 1991 234, whose activity
consists essentially of the sale of all kinds of services for a fee, regardless of whether or
not
the performance of the service calls fr the exercise or use of the physical or mental fculties
of the contractor or his employees.

As used herein, the term "contractor" shall include the following:

1) general engineering; general building and specialty contractors as defined under

applicable laws;

2) filling demolition and salvage works contractors;

3) proprietors or operators of mine drilling apparatus;

4) proprietors or operators of dockyards;

5) persons engaged in the installation of water system, gas or electric light, heat, or
power;

6) proprietors or operators of smelting plants;

7) engraving, plating, and plastic lamination; establishments;

234
See Sec. 205, this Manual
8) proprietors or operators of establishments fr repamng, repainting, upholstering,
washing or greasing of vehicles, and heavy equipment, vulcanizing, recapping and
battery charging;

9) proprietors or operators of furiture shops and establishments fr planning or

surfcing and re-cutting of lumber, and sawmills under contract to saw or cut logs
belonging to others;

10) proprietors or operators of dry-cleaning or dyeing establishments, steam laundries,

and laundries using washing machines;

11) proprietors or owners of shops for the repair of any kind of mechanical and electrical
devices, instruments, apparatus, or furiture and shoe repairing by machine or any
mechanical contrivance;

12) proprietors or operators of establishments or lots for parking purposes;

13) proprietors or operators of tailor shops, dress shops, milliners, and hatters, beauty
parlors, barbershops, massage clinics, sauna, Turkish and Swedish baths, slenderizing
and body-building saloons and similar establishments;

14) photographic studios;

15) fneral parlors;

16) proprietors or operators of hotels, motels, and lodging houses;

17) proprietors or operators of arrastre and stevedoring warehousing, or frwarding

establishments, master plumbers, smiths, and house or sign painters;

18) printers, bookbinders, lithographers;

19) publishers except those engaged in the publication or printing of any newspaper,
magazine, review or bulletin which appears at regular intervals with fixed prices for
subscription and sale and which is not devoted principally to the publication of
advertisements;

20) business agents, private detective or watchman agencies, commercial and

immigration brokers, cinematographic film owners, lessors and distributors. (Sec. 131
(h), LGC)

i) Corporation - includes partnerships, no matter how created or organized, joint-stock

companies, joint accounts (cuentas en participacion), associations or insurance
companies,
but does not include the following:
 1) general professional partnerships which are partnerships frmed by persons for the
sole purpose of exercising their common profssion, no part of the income of which
is
derived fom engaging in any trade or business; and

2) a joint venture or consortium formed for the purpose of undertaking construction

projects or engaging in petroleum, coal, geothermal, and other energy operations or
consortium agreement under a service contract with the goverment.

The term "resident foreign" when applied to a corporation means a freign corporation
not otherwise organized under the laws of the Philippines but engaged in trade or business
within the Philippines. (Sec. 131 (i), LGC)

j) Countryside and Barangay Business Enterprise - refers to any business

entity,association, or cooperative registered under the provisions of R.A. No. 6810,
otherwise known as "Magna Carta fr Countryside and Barangay Business Enterprises
(Kalakalan 20)". (Sec. 131 0), LGC)

k) Dealer - means one whose business is to buy and sell merchandise, goods, and chattels as
a merchant. He stands immediately between the producer or manufacturer and the consumer
and depends fr his profit not upon the labor he bestows upon his commodities but upon the
skill and foresight with which he watches the market. (Sec. 131 (k), LGC)

1) Fee - means a charge fixed by law or ordinance for the regulation or inspection of a
business
or activity (Sec. 131 (!), LGC). It shall also includes charges fixed by law or agency fr the
services of a public officer in the discharge of his official duties (Art. 220 (!), IRR,
implementing Sec. 131 (!), LGC)

m) Franchise - is a right or privilege, affected with public interest which is confrred upon
private persons or corporations, under such terms and conditions as the government and its
political subdivisions may impose in the interest of public welfare, security, and safety. (Sec.
131 (m), LGC)

n) Gross Sales or Receipts - included the total amount of money or its equivalent
representing
the contract price, compensation or service fee, including the amount charged or materials
supplied with the services and the deposits or advance payments actually or constructively
received during the taxable quarter fr the services performed or to be performed for another
person, excluding discounts if determinable at the time of sale, sales return, excise tax, and
\he value-added tax (VAT). Sec. 131 (n), LGC)

Illustrative Case:

1) In consonance with the above provision of the IRR, it was further clarified that the
term "gross receipts" as applied to contractors, is the total amount of service fees,
including the advance payments or deposits actually or constructively received during
the taxable year. The tax base should exclude payments or deposits which were not
actually or constructively received by the contractor during the taxable year and
materials or equipment that do not form part of the things to be constructed - even if they were
supplied during the said year. (BLGF 151 Indorsement, March 4, 1994;and BLGF 151
Indorsement, August 10, 1998)

o) Manufacturer - includes the following:

1) every person who, by physical or chemical process, alters the exterior texture or form or
inner substance of any raw material or manufctured or partially manufactured product in
such manner as to prepare it for special use or uses to which it could not have been put in
its original condition,

1) or who by any such process, alters the quality of any such raw material or
manufactured or partially manufctured products so as to reduce it to marketable shape
or prepare it for any of the use of industry,

2) or who by any such process, combines any such raw material or manufctured or partially
manufactured products with other materials or products of the same or of different kinds and
in such manner that the finished products of such process or manufacture can be put to a
special use or uses to which such raw material or manufactured or partially manufctured in
their original condition could not have been put, and

3) who, in addition, alters such raw material or manufctured or partially manufctured

products, or combines the same to produce such finished products for the purpose of their
sale or distribution to others and not for his own use or consumption. (Art. 220 (o), IRR,
implementing Sec. 131 (o), LGC)

p) Marginal Farmer or Fisherman - refers to an individual engaged in subsistence frming or

fishing which shall be limited to the sale, barter or exchange of agricultural or marine
products produced by himself and his immediate fmily (Sec. 131 (p),LGC), and whose
annual net income fom such farming or fishing does not exceed Fifty Thousand Pesos
( 50,0000.00) or the poverty line established by NEDA for the particular region or locality,
whichever is higher. (Art. 220 (p), IRR, implementing Sec. 131 (), LGC)

q) Motor Vehicle - means any vehicle propelled by any power other than muscular power
using the public roads, but excluding road rollers, trolley cars, street sweepers, sprinklers,
lawn mowers, bulldozers, graders, forklifs, amphibian trucks, and cranes if not used on
public roads, vehicles which run only on rails or tracks, and tractors, trailers, and traction
engines of all kinds used exclusively for agricultural purposes. (Sec. 131 (q), LGC)

r) Municipal Waters - include not only streams, lakes and tidal waters within the
municipality, not being the subject of private ownership and not comprised within the
national parks, public forest, timber lands, frest reserves or fishery reserves, but also marine
waters included between two lines drawn perendicularly to the general coastline fom points
where the boundary lines of the municipality or city touch the sea at low tide and a third line
parallel with the general coastline and fifteen ( 15) kilometers from it. Where two (2)
municipalities are so situated on the opposite shores that there is less than fifteen (15)
kilometers of marine waters between them, the third line shall be equally distant fom
opposite shores of the respective municipalities. (Sec. 131 (r), LGC)

s) Operator - includes the owner, manager, administrator, or any other person who operates or
is responsible for the operation of a business establishment or undertaking. (Sec. 131 (s),
LGC)

t) Peddler - means any person who, either fr himself or on commission, travels from place to
place and sells his goods or offers to sell and deliver the same. Whether a peddler is a

wholesale peddler or a retail peddler of a particular commodity shdl be determined fom

the
definition of wholesale dealer or retail dealer as provided in Title 1, Book 2 of R. A. No.
7160 or the Local Goverment Code of 1991. (Sec. 131 (t), LGC)

u) Persons - every natural or juridical being, susceptible of rights and obligations or of being
the subject of legal relations. (Sec. 131 (u), LGC)

v) Residents - refer to natural persons who have their habitual residence in the province, city,

or municipality where they exercise their civil rights and fulfill their civil obligations, and
to
juridical persons for which the law or any other provisions creating or recognizing them
fixes
their residence in a particular province, city or municipality. In the absence of such law,
juridical persons are residents of the province, city, or municipality where they have their
legal residence or principal place of business or where they conduct their principal
business
or occupation. (Sec. 131 (v), LGC)

w) Retail - means a sale where the purchaser buys the commodity for his own consumption
irrespective of the quantity of the commodity sold. (Sec. 131 (w), LGC)

x) Vessel - includes every type of boat, craft, or other artificial contrivance used, or capable of

being used, as a means of transportation on water. (Sec. 131 (x), LGC)

y) Wharfage - means a fee assessed against the cargo of a vessel engaged in foreign or
domestic trade based on quantity, weight, or measure received and/or discharged by
vessel. (Sec. 131 (y), LGC) and

z) Wholesale - means a sale where the purchaser buys or imports the commodities for resale to

persons other than the end user regardless of the quantity of the transaction. (Sec. 131 (z),

LGC
A. TAXING POWERS OF PROVINCES

Section 201. Tax on Transfer of Real Property Ownership. - (a) The province may impose
a tax on the sale, donation, barter, or on any other mode of transferring ownership or title of real

property at the rate of not be more than fifty percent (50%) of one percent (1%) of the total
consideration involved in the acquisition of the property, or of the fir market value in case the
monetary consideration involved in the transfr is not substantial, whichever is higher. (Sec.
135
(a), LGC)
(b) The fir market value as used herein shall be that reflected in the prevailing schedule of fair

market values enacted by the sanggunian concered. (Art. 224 (a), !RR, implementing Sec. 135
(a), LGC)

(c) For this purpose, the Register of Deeds of the province concered shall, befre registering
any deed, require the presentation of the evidence of payment of this tax. The Provincial
Assessor shall likewise make the same requirement before canceling an old tax declaration and

issuing a new one in place thereof. Notaries Public shall frish the Provincial Treasurer with a
copy of any deed transfrring ownership or title to any real property within thirty (30) days from
the date of notarization.

(d) It shall be the duty of the seller, donor, transfror, executor or administrator to pay the tax
herein imposed within sixty (60) days fom the fate of the execution of the deed or from the date
of the decedent's death. (Sec. 135 (b), LGC

(e) The sale, transfr or other disposition of real property pursuant to R.A. No. 665? 235 shall be
exempt fom this tax (Sec. 135 (a), LGC. However, transfer of ownership over a land pending
issuance of a fee patent under Commonwealth Act No. 141 236, as amended by the Bureau of
Lands is subject to this tax.

Private sector entities and individuals engaged in developing socialized housing projects under
R. A. No. 7279,237 fr the benefit of the underprivileged and homeless are exempted fom
payment of transfer tax fr both raw and completed projects. (Sec. 20, RA 7279)

Section 202. Tax on Business of Printing and Publication. - The province may impose a tax
on the business of persons engaged in the printing and/or publication of books, cards, posters,
leaflets, handbills, certificates, receipts, pamphlets, and others of similar nature, at a rate not
exceeding fifty percent (50%) of one percent (1%) of the gross annual receipts for the preceding

calendar year.

In the case of a newly started business, the tax shall not exceed one-twentieth (1/20) of one
percent (1%) of the capital investment. In the succeeding calendar year, regardless of when the
business started to operate, the tax shall be based on the gross receipts for the preceding calendar
year, or any faction thereof, as provided herein.

The receipts from the printing and/or publishing of books or other reading materials prescribed
by the Department of Education, Culture and Sports as school texts or refrences shall be exempt
fom the tax herein imposed. (Sec. 136, LGC)

Illustrative Case:

235
An Act Instituting a Comprehensive Agrarian Reform Program to Promote Social Justice and Industrialization
Providing the Mechanismfor its Implementation and for Other Purposes.
236
Public Land Act
237
Socialized Housing Act
1) The business of printing newspapers and magazines is included in 1the clause "and others of
similar nature" and therefore subject to this local tax. (BLGF r Indorsement, Februar
19,1996)

Section 203. Franchise Tax. 238 - Notwithstanding any exemption granted by any law or other
special law, the province may impose a tax on businesses enjoying a franchise. (Sec. 137, LGC)

The administration and collection of franchise tax shall be govered by the following:
a) Tax Rate and Base of Franchise Tax. - The rate of franchise tax shall not exceed fify
percent (50%) of one percent (1%) of the gross annual receipts which shall include both
cash
sales and sales on account realized during the preceding calendar year within its territorial
jurisdiction, excluding the territorial limits of any city located within the province. (Art.
226
(, IRR, implementing Sec. 137, LGC)

b) Limitation of the Province to Impose Franchise Tax. - The province, however, shall not
impose the tax on businesses enjoying franchise operating within the territorial jurisdiction
of
any highly-urbanized or component city located within the province. (Art. 226 (), IRR,

implementing Sec. 137, LGC)

c) Exemption of Public Utility Vehicle Operators with Certification of Public

Convenience. - The term "businesses enjoying franchise" shall not include holders of
certificates of public convenience fr the operation of public utility vehicles fr reason that
such certificates are not considered as franchise. (Art. 226 (c), IRR, implementing Sec.
137,
LGC)

d) Tax Rate and Base of Franchise Tax fr Newly Started Business. - In the case of a newly
started business, the tax shall not exceed one-twentieth (1/20) of one percent (1%) of the
capital investment. In the succeeding calendar year, regardless of when the business
started
to operate, the tax shall be based on the gross receipts fr the preceding calendar year, or
any
fraction thereof. (Art. 226 (d), IRR, implementing Sec. 137, LGC)

Capital Investment as Basis of the Franchise Tax of a Newly Started Business. - The capital
investment to be used as basis of the tax of a newly started business as herein provided
shall be determined in the following manner:

1) In the locality where the principal office of the business is located, the paid-up capital
stated in the Articles of Incorporation, in case of corporations, or in any similar
document in case of other types of business organizations or enterprises, shall be
considered as the capital investment.
2) Where there is a branch or sales office which commences business operations during
the same year as the principal office but which is located in another province or in a
city outside the province, the paid-up capital referred to above shall be reduced by the
238
Actual and specific applications ofauthorit to ta franchises are illustrated in Secs. 227 and 228, this
Manual.
amount of the capital investment made fr the said branch of sales office which shall be
taxable instead by the province or city where it is located.

3) Where the newly-started business is a branch or sales office commencing business

operations at a year later than that of the principal office, the capital investment shall
mean the total fnds invested in the branch or sales office. (Art. 226 (d), IRR,
implementing Sec. 13 7, LGC)

Section 204. Tax on Sand, Gravel and Other Quarry Resources. - (a) The province may
levy and collect not more than ten percent (10%) of fair market value in the locality per cubic
meter of ordinary stones, sand, gravel, earth, and other quarry resources, such as but not
limited to marl, marble, granite, volcanic cinders, basalt, tuff and rock phosphate, extracted
fom public lands or from the beds of seas, lakes, rivers, streams, creeks, and other public
waters within its territorial jurisdiction. (Art. 227 (, IRR, implementing Sec. 138, LGC)

(b) The following shall gover the administration and collection of this tax:

1) Authority to Grant Permit to Extract. - The permit to extract sand, gravel and other
quarry resources shall be issued exclusively by the provincial goveror, pursuant to the
ordinance of the sangguniang panlalawigan. (Art. 227 (b), IRR, implementing Sec. 138,
LGC)

2) Distribution of Proceeds of the Tax. - the proceeds of the tax on sand, gravel and other
quarry resources shall be distributed as follows:

1. Province -Thirty percent (30%);

11. Component City or Municipality where the sand, gravel and other quarry
resources are extracted -Thirty percent (30%); and

iii. Barangay where the sand, gravel and other quarry resources are
extracted - Forty percent (40%). (Art. 227 (c), IRR, implementing Sec.
138, LGC)

3) Non-taxability of Quarry Resources Extracted from Private Lands. - Only quarry

resources extracted from public lands are subject to local taxes. Quarry resources
extracted fom private lands are not within the taxing power of the local goverment.

Illustrative Case:

l) The fir market value shall be the market value of the minerals as extracted in site and
not when delivered to the end users. The assessment of the tax is done on or before
extraction of said materials and not upon the sale thereof to end users. (BLGF F1
Indorsement, March 24, 1993)
Section 205. Professional Tax. - (a) The province may levy an annual professional tax on
each person engaged in the exercise or practice of his profession requiring goverment
examination at such amount and reasonable classification as the sangguniang panlalawigan
may
determine but shall in no case exceed Three Hundred Pesos (P 300.00). (Sec. 139 (a), LGC

(b) The collection and administration of the professional tax shall be guided by the following:

1) Persons Liable to Pay Professional Tax. - The professionals subject to tax herein imposed
are only those who have passed the bar examinations, or any board or other
examinationsconducted by the Professional Regulation Commission (PRC). (Art.228
(,!RRimplementing Sec. 139, LGC)

2) Place of Payment of Professional Tax. - Every person legally authorized to practice his
profession shall pay the profssional tax to the province where he practices his profession or
where he maintains his principal office in case he practices his profession in several places:
Provided, however, That such person who has paid the corresponding professional tax shall
be entitled to practice his profssion in any part of the Philippines without being subjected to
any other national or local tax, license, or fee for the practice of such profession. (Sec. 139(b),
LGC)

3) Time of Payment of Profession Tax. - The profssional tax shall be payable annually, on or
before the thirty-first (31st) day of January. Any person first beginning to practice a
profssion after the month of January must, however, pay the fll tax before engaging
therein. (Sec. 139 (d), LGC)

4) Responsibility of Employers in Ensuring Payment of Professional Tax. - Any individual

or corporation employing a person subject to professional tax shall require payment by that
person of the tax on his profession before employment and annually thereafter. (Sec 139 (c),
LGC)

5) Tax is Due for Each Profession Practiced - A line of profssion does not become exempt
even if conducted with some other profssion for which the tax has been paid. (Sec. 139 (d),
LGC). For example, a lawyer who is also a Certified Public Accountant (CPA) must pay the
profssional tax imposed on lawyers and that fixed fr CPAs, if he is to practice both
professions. (Art. 228 (, IRR implementing Sec. 139, LGC)

6) Exemption of Professional Exclusively Employed in the Government - Professional

exclusively employed in the goverment shall be exempt fom the payment of this tax. (Sec.
139 (d), LGC)

7) Documentation Requirements:

a) Upon Payment of Tax. - For purposes of collecting the tax, the Provincial Treasurer or
his duly authorized representative shall require fom such profssionals their current
annual registration cards issued by the competent authority before accepting payment of
their professional tax for the current year. The PRC shall likewise require the
professionals' presentation of proof of payment before registration of professionals or
renewal of their licenses. (Art. 228 (, IRR implementing Sec. 139, LGC)

b) On Transaction Documents of Practicing Professionals. - Any person subject to the

professional tax shall write in deeds, receipts, prescriptions, reports, books of accounts,
plans and designs, surveys and maps, as the case may be, the number of the official
receipts issued to him. (Sec 139 (e), LGC)

Section 206. Amusement Tax. - The province may levy an amusement tax to be collected
from the proprietors, lessees, or operators of theaters, cinemas, concert halls, circuses,
boxing stadia, and other places of amusement. (Sec. 140 (a), LGC)

The collection and administration of the amusement tax shall be guided by the fllowing:

1) Rate and Base of Amusement Tax. - The rate of amusement tax shall not be more than
thirty percent (30%) of the gross receipts fom admission fees. (Sec. 140 (a), LGC)

2) Procedure for Determining Amusement Tax Payable by Proprietors, Lessees, or

Operators and Distributors of Cinematographic Films. - In the case of theaters or cinemas,
the tax shall first be deducted and withheld by their proprietors, lessees, or
operators and paid to the Provincial Treasurer befre the gross receipts are divided between
said proprietors, lessees, or operators and the distributors of the cinematographic films. (Sec.
140 (b), LGC)

3) Exemption fom Payment of Amusement Tax. - The holding of operas, concerts, dramas,
recitals, paintings, and art exhibitions, flowers shows, musical programs, literary and
oratorical presentations, except pop, rock or similar concerts shall be exempt from the
payment of the amusement tax, subject to guidelines issued by the DOF. (Art. 229 (c), IRR
implementing Sec. 140 (c), LGC)

4) Procedures in Payment of Amusement Tax. - The sangguniang panlalawigan may

prescribe the time, manner, terms and conditions for the payment of tax including the
issuance by the proprietor, lessee, or operator of the theater or amusement place of admission
tickets. In case of fraud or filure to pay the tax, the sangguniang panlalawigan may impose
such surcharges, interests, and penalties as it may deem appropriate. (Art. 229 (d), IRR
implementing Sec. 140 (d), LGC)

5) Distribution of Proceeds of Amusement Tax. - The proceeds of the amusement tax shall be
shared equally by the province and the municipality where such amusement places are
located. (Sec. 140 (e), LGC)

6) "Other Places of Amusement" Construed. - Not only theaters and cinema houses, but all
"places of amusement" such as night clubs, cockpits, and the like, are subject to the
amusement tax on admission if any amount is charged as entrance fe to the patrons. (. 77,
Philippine Law on Local Government Taxation, Annotated. 2000 edition, Ursa!)
7) For the Effective Administration of the Amusement Tax, an Administrative Provision
may be Provided in the Tax Ordinance, Requiring Proprietors, Lessees or Operators
Liable to the Amusement Tax on Admission to:

1. Number the admission tickets consecutively and serially;

11. Reflect in the admission tickets the name of the amusement place and the fe
charged for admission;

111. Register ticket rolls or booklets with the Provincial/City Treasurer of the
locality where the amusement place is located before issuing the tickets;

1v. Tear admission tickets into halves, once issued, the first half to be given by
the gatekeepers to the customer or patron and the other half to be deposited in
a ticket box to be made available fr inspection by the Local Treasurer or his
deputy; and

v. Provide a strong and saf ticket box to contain the admission ticket halves,
which boxes will be secured with a separate padlock, the only key to which shall be deposited
with the Local Treasurer concered.

Illustrative Case:
1) Amusement tax is not collectible fom business establishments that operate token and coin
operated video and similar machines that do not charge admission fees. The purchase of

token is for the purpose of playing games on or operating the machines installed in the
amusement place, not to gain admission to the premises, and therefore does not constitute
the
payment of admission fees on which an amusement tax may be levied and collected. A
person may enter the place without paying anything and leave without operating any
machine, in which case, he does not even have to purchase tokens.

However, the operator of the said business establishment shall be taxable under Sec. 143 (h) of
the Local Goverment Code of 1991, on the basis of the gross receipts fom the sale of tokens.
(BLGF 151 Indorsement, Februar 27, 1996 to the Cit Treasurer ofManila.)

Section 207. Annual Fixed Tax for Every Delivery Truck or Van of Manufacturers,
Producers Wholesalers of, Dealers and Retailers in, Certain Products. - The province may
levy an annual fixed tax fr every truck, van or any vehicle used by manufacturers, producers,
wholesalers, dealers or retailers in the delivery or distribution of distilled spirits, fermented
liquors, sof drinks, cigars and cigarettes, and other products as may be determined by the
sangguniang panlalawigan, to sales outlets, or consumers, whether directly or indirectly,
within the province in an amount not exceeding Five Hundred Pesos (P 500.00).

The manufacturers, producers, wholesalers, dealers, and retailers refrred to in the immediately
foregoing paragraph shall be
iddlers
exempt fom tax on f
referred to in Section 143 (g) of R
39
No. 7160 or the Local Goverment Code of 1991. (Sec. 141, LGC)
239
See Sec. 216, this Manual
The annual fixed tax is applicable per province. If the same truck is used to deliver goods in
several provinces, the owner of the truck is liable to pay the said tax to each province where
he/she delivers goods. Provided That the province concerned has enacted the ordinance
necessary to impose the tax.

B. TAXING POWERS OF MUNICIPALITIES

Section 208. Scope of Taxing Powers of Municipalities. - Except as otherwise provided in R.

A. No. 7160 or the Local Goverment Code of 1991, municipalities may levy taxes, fes, and
charges not otherwise levied by the provinces. (Sec. 142, LGC)

Section 209. Tax on Business. - The municipality may impose the taxes on the fllowing
businesses operating within its jurisdiction:

1) Manufcturers, 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 (Sec. 143 (a), LGC);

2) Wholesalers, distributors, or dealers in any article of commerce of whatever kind or nature

(Sec. 143 (b), LGC);

3) Exporters, and on manufcturers, millers, producers, wholesalers, distributors, dealers, or

retailers of essential commodities. (Sec. 143 (c), LGC);

4) Retailers (Sec. 143 (d), LGC);

5) Contractors and other independent contractors (Sec. 143 (e), LGC);

6) Banks and other financial institutions (Sec.143, LGC);

7) Peddlers engaged in the sale of any merchandise or article of commerce (Sec. 143 (g), LGC);

8) Any business not otherwise specified in the above enumeration (Sec. 143 (h), LGC)
Section 210. Business Tax on Manufacturers, Assemblers, Repackers, Processors,
Brewers, Distillers, Rectifiers, and Compounders of Liquors, Distilled Spirits, and Wines or
Manufacturers of Any Article of Commerce of Whatever Kind or Nature - in accordance with
the fllowing schedule:

With Gross Sales or Receipts for the Preceding Amount of Tax,

Calendar Year in the Amount of (Pesos): Per Annum (Pesos):

Less than 10,000.00 165.00

10,000.00 or more but not less than 5,000.00 220.00
15,000.00 or more but not less than 20,000.00 302.00
20,000.00 or more but not less than 30,000.00 440.00
30,000.00 or more but not less than 40,000.00 660.00
40,000.00 or more but not less than 50,000.00 825.00
50,000.00 or more but not less than 75,000.00 1,320.00
75,000.00 or more but not less than 100,000.00 1,650.00
100,000.00 or more but not less than 150,000.00 2,200.00
150,000.00 or more but not less than 200,000.00 2,750.00
200,000.00 or more but not less than 300,000.00 3,850.00
300,000.00 or more but not less than 500,000.00 5,500.00
500,000.00 or more but not less than 750,000.00 8,000.00
750,000.00 or more but not less than 1,000,000.00 10,000.00
1,000,000.00 or more but not less than 2,000,000.00 13,750.00
2,000,000.00 or more but not less than 3,000,000.00 16,500.00
3,000,000.00 or more but not less than 4,000,000.00 19,800.00
4,000,000.00 or more but not less than 5,000,000.00 23,100.00
5,000,000.00 or more but not less than 6,500,000.00 24,375.00
6,500,000.00 or more at a rate not exceeding thirty seven and a half (37 ½ of the one 1 percent

the preceding rates shall apply only to amount of domestic sales of manufacturers,
assemblers repackers, processors, brewers, distillers, rectifers, and compounders of liquors,
distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or
nature other than those enumerated in Section 143 (a) of R. A. No. 7160 or the Local
Goverment Code of 1991.(Art. 232 (a, IRR implementing Sec. 143 (a), LGC)

the preceding rates shall apply only to amount of domestic sales of manufacturers,
assemblers repackers, processors, brewers, distillers, rectifers, and compounders of liquors,
distilled spirits, and wines or manufacturers of any article of commerce of whatever kind or
nature other than those enumerated in Section 143 (a) of R. A. No. 7160 or the Local
Goverment Code of 1991.(Art. 232 (a, IRR implementing Sec. 143 (a), LGC)
Section 211. Business Tax on Wholesalers, Distributors, or Dealers in Any Article of
Commerce of Whatever Kind or Nature - in accordance with the fllowing schedule:

With Gross Sales or Receipts fr the Preceding Amount of Tax

Calendar Year in the Amount of (Pesos) Per Annum (Pesos)

Less than 1,000.00 18.00

1,000.00 or more but not less than 2,000.00 33.00
2,000.00 or more but not less than 3,000.00 50.00
3,000.00 or more but not less than 4,000.00 72.00
4,000.00 or more but not less than 5,000.00 100.00
5,000.00 or more but not less than 6,000.00 121.00
6,000.00 or more but not less than 7,000.00 143.00
7,000.00 or more but not less than 8,000.00 165.00
8,000.00 or more but not less than 10,000.00 187.00
10,000.00 or more but not less than 15,000.00 220.00
15,000.00 or more but not less than 20,000.00 275.00
20,000.00 or more but not less than 30,000.00 330.00
30,000.00 or more but not less than 40,000.00 440.00
40,000.00 or more but not less than 50,000.00 660.00
50,000.00 or more but not less than 75,000.00 990.00
75,000.00 or more but not less than 100,000.00 1,320.00
100,000.00 or more but not less than 150,000.00 1,870.00
150,000.00 or more but not less than 200,000.00 2,420.00
200,000.00 or more but not less than 300,000.00 3,300.00
300,000.00 or more but not less than 500,000.00 4,400.00
500,000.00 or more but not less than 750,000.00 6,600.00
750,000.00 or more but not less than 1,000,000.00 8,800.00
1,000,000.00 or more but not less than 2,000,000.00 10,000.00
2,000,000.00 or more at a rate not exceeding fifty percent (50%) of one percent (1%). (Sec.
143 (b), LGC

The business enumerated in Section 143 (a) ofR. A. No. 7160 or the Local Goverment Code of
1991240 shall no longer be subject to the tax on wholesalers, distributors, or dealers herein
provided for. (Art. 232 (b), IRR implementing Sec. 143 (b), LGC)
 )

The business enumerated in Section 143 (a) ofR. A. No. 7160 or the Local Goverment Code
of 1991240 shall no longer be subject to the tax on wholesalers, distributors, or dealers
herein provided for. (Art. 232 (b), IRR implementing Sec. 143 (b), LGC)

Section 212. Business Tax on Exporters, and on Manufacturers, Millers, Producers,

Wholesalers, Distributors, Dealers, or Retailers of Essential Commodities enumerated
hereunder at a rate not exceeding one-half (1/2) of the rates prescribed under Section 143
(a),
(b) and (d) ofR. A. No. 7160 or the Local Goverment Code of 1991 241:

1) Rice and corn;

2) Wheat or cassava flour, meat, dairy products, locally manufctured, processed or

preserved food, sugar, salt and other agricultural, marine and fesh water products, whether
in their riginal state or not;

3) Cooking oil and cooking gas;

4) Laundry soap, detergents and medicine;

5) Agricultural implements, equipment and post-harvest facilities, fertilizers,

pesticides,
insecticides, herbicides and other farm inputs;

6) Poultry feeds and other animal feeds;

7) School supplies; and

8) Cement. (Sec. 143 (c), LGC)

For purposes of this provision, the term "exporters" shall refr to those who are
principally
engaged in the business of exporting goods and merchandise, as well as manufacturers
and

240
See Sec. 210, this Manual
241
See Sec. 2JO,Sec. 211and Sec. 213, this Manual
 producers whose goods or products are both sold domestically and abroad. (Art. 232 (c), IRR
implementing Sec. 143 (c), LGC)

Exporters shall be subject to the business tax as follows:

1. 1. The gross sales or receipts on goods or products sold domestically shall

be subject to the business tax at rates prescribed under Section 143 (a)
(b) (d), LGC;
2. Taxable export sales shall be subject to the business tax at a rate
i not exceeding one half (Y) of the rates of domestic sales; and
m. The amount of export sales shall be excluded and declared separately fom the
total sales and shall be subject to the rates prescribed in Section 143 eflected
in Section 205 of this Chapter. Failure to make this separate declaration of
export sales shall subject the total sales to the rates prescribed in Section 204
under this Chapter. (Local Finance Circular 4-93, Department of Finance)

Illustrative Case:

1) For the purpose of imposing the business tax, the gross receipts of rice and com millers shall

be the total fes paid to the miller by the owners of palay or com without deducting the cost

of labor and other maintenance and operating expenses.

Mill operators who also buy palay or com grains and then sell these after milling, are also
subject to the tax fr engaging in other business such as dealers. The gross receipts shall be
the actual sale of rice or com without deducting the cost of palay, labor and other
maintenance and operating expenses. The gross sales or receipts fr each business shall be
separately reported for purposes of computing the business taxes due from each business.
(BLGF 1st lndorsement, March 24, 1995 to the Municipal Treasurer of Cabacan, North
Cotabato)

Section 213. Business Tax on Retailers. - The following guidelines shall gover
the administration and collection of the business tax on retailers:

1) Rate of Tax. - Except fr the taxes to be imposed exclusively by barangays as provided in

subsection (2) hereinbelow, the taxes to be imposed on retailers by municipalities shall be
as follows:

a) The rate of two percent (2%) per annum shall be imposed on sales not exceeding Four
Hundred Thousand Pesos (P 400,000.00); and

b) The rate of one percent ( 1%) per annum shall be imposed on sales in excess of the
first Four Hundred Thousand Pesos (P 400,000.00).
2) Imposition by Barangay of Business Tax on Retailers - Barangays shall have the

exclusive power to levy taxes, as provided under Section 152 of R. A. No. 7160 or the Local
Goverment Code of 1991242, on gross sales or receipts of the preceding calendar year of
Fifty Thousand Pesos (P 50,000.00) or less in the case of cities, and Thirty Thousand Pesos
(P 30,000.00) or less in the case of municipalities. (Art. 232 (d), !R implementing Sec. 143
(, LGC)

The barangays shall impose such taxes based on the fllowing guidelines:
a) Stores or retailers with fixed business establishments in a barangay within a city
whose gross sales or receipts fr the preceding year do not exceed P 50,000.00
shall be taxable exclusively by the barangay. Those whose gross sales or receipts
exceed P 50,000.00 shall be taxable by the city.

b) Stores or retailers with fixed business establishments in a barangay within a

municipality whose gross sales or receipts fr the preceding year do not exceed
P 30,000.00 shall be taxable exclusively by the barangay. Those whose gross
sales or receipts exceed P 30,000.00 shall be taxable by the municipality.

c) The barangay shall have the power to collect the business tax on retailers only if
it had levied the tax pursuant to an ordinance duly enacted by its sanggunian.
Otherwise, the tax shall be collected by the municipality or city where the
barangay is located, provided they have enacted the required ordinance levying
the tax.

3) Determination of Business Tax of Retailer Selling both Essential and Non-Essential

Commodities. - The following rules shall apply to a retailer of both essential and non
essential commodities:

a) A retailer who sells essential and non-essential commodities shall segregate his
sales accordingly;

b) The gross sales from essential commodities of the preceding year shall be subject
to the tax provided under Section 143 (c) of R. A. No. 7160 or the Local
Goverment Code of 1991243;
c) The gross sales on non-essential commodities of the preceding year shall be
subject to the retailer's tax provided under Section 143 (d) of R. A. No. 7160 or
the Local Government Code of 1991 244. (Philippine Law on Local Goverment
Taxation, Annotated, 2000 edition, Ursa!)

4) Determination of Taxes Payable by a Retailer Who is Also a Wholesaler, Dealing Both

in Essential and Non-Essential Commodities. - The fllowing rules shall apply in the case

242
See Sec. 222, this Manual
243
See Sec. 212, this Manual
244
See Sec. 213, this Manual
of a retailer who is also a wholesaler dealing both m essential and non-
essential commodities:

a) A wholesaler who is at the same time a retailer and who deals in both essential
commodities and non-essential commodities shall segregate his sales accordingly;

b) The gross sales from essential commodities shall be subject to the tax reflected in Section 143
(c) ofR. A. No. 7160 or the Local Goverment Code ofl 991; and

c) If the wholesaler who is at the same time a retailer fails to keep a separate account
fr the different sales or receipts, he/she shall be liable as a wholesaler at the rates
reflected under Section 143 (b)245 and (d) of R. A. No. 7160 or the Local
Goverment Code of 1991, as a wholesaler and retailer, respectively. (Philippine
Law on Local Goverment Tation, Annotated 2000 edition, Ursa!

Section 214. Business Tax on Contractors and Other Independent Contractors - m

accordance with the fllowing schedule:

A. Graduated Schedule of Tax -

With Gross Sales or Receipts for the Preceding

Calendar Year in the Amount of (Pesos)

Less than 5,000.00

5,000.00 or more but not less than 10,000.00
10,000.00 or more but not less than 15,000.00
15,000.00 or more but not less than 20,000.00
20,000.00 or more but not less than 30,000.00
30,000.00 or more but not less than 40,000.00
40,000.00 or more but not less than 50,000.00
50,000.00 or more but not less than 75,000.00
75,000.00 or more but not less than 100,000.00
100,000.00 or more but not less than 150,000.00
150,000.00 or more but not less than 200,000.00
200,000.00 or more but not less than 250,000.00
250,000.00 or more but not less than 300,000.00
300,000.00 or more but not less than 400,000.00
400,000.00 or more but not less than 500,000.00
500,000.00 or more but not less than 750,000.00
750,000.00 or more but not less than 1,000,000.00
1,000,000.00 or more but not less than 2,000,000.00

2,000,000.00 or more

245
See Sec. 211, this Manual
 1,980.00
Amount of Tax 2,640.00
Per Annum (Pesos) 3,630.00
4,620.00
27.50 6,160.00
61.60 8,250.00
104.50 9,250.00
165.00 10,250.00
275.00 11,500.00
385.00 at a rate not exceeding fifty
550.00 percent (50%) of one percent
880.00 (1%). (Sec. 143 (e), LGC)
1,320.00
B. Taxable Gross Receipts of Construction Contractors -

a) The taxable gross receipts shall be the amounts received by the principal
contractor as the total contract price less the amount paid to sub-contractors
under sub-contract arrangements, if there are any. (The gross receipts of sub
contractors are in turn subject to the same business tax as construction
contractors.)

b) The taxable gross sales or receipts include the total amount of money or its
equivalent actually or constructively received during the taxable quarter for
the services perfrmed or to be performed, consisting of the following:

1. The contract price;

2. The compensation or service fee, including the amount

charged fr materials installed or used in conjunction with the
services, and

3. Deposits or advance payments

c) Taxable gross receipts exclude discounts that can be determined at the time of sales,
sales returs, and the excise taxes and value added tax (VAT) paid by the contractor. (Local
Finance Circular No. 3-95, Department ofFinance)

Illustrative Case:
1) Local goverments may impose business tax on contractors and independent contractors
(BLGF P1 lndorsement, August 10, 1998). However, subcontractors shall not be liable fr
business tax if the total contract price for the project is embodied in the contract between
the primary contractor and the client. On the other hand, if the cost of the portion of the
project that is sub-contracted is paid directly by the client to the sub-contractor, the sub
contractor becomes an independent contractor subject to the same business tax. (BLGF J51
Indorsement, July 13, 1993).

C. Situs or Place of Payment of Business Tax on Construction Contractors. - For the

purpose of collection of the business tax on construction contractors, the following rules shall
apply:

1) On Domestic Construction Projects -. For projects bidded out and implemented

within the territorial jurisdiction of the Philippines:

a) All gross receipts realized fom domestic projects or contracts undertaken by the branch
office shall be recorded in the said branch office and the tax thereon shall be payable to
the city or municipality where the said branch is located;
 b) In cases where there is no branch office, the gross receipts from domestic
projects or contracts shall be recorded in the Head/Principal Office and the
same shall be allocated as fllows:

1. Thirty percent (30%) of the gross receipts shall be taxable by the city or
municipality where the principal office is located; and

11. Seventy percent (70%) of the gross receipts shall be taxable by the city
or municipality where the project office is located.

2) On Overseas Construction Projects. - For construction projects undertaken by a

Philippine-based construction contractor outside the territorial boundaries of the
Philippines, as well as construction contracts involving fbrication works with attendant
installation works outside the Philippines, which are paid fr in accepted freely
convertible freign currency:

a) In the case of overseas construction projects, the construction contractors shall

declare separately the gross receipts realized therefom, which shall not be
subject to the business tax.

b) In the case of pre-fbricated works which are paid for in accepted freely
convertible freign currency with attendant installation works outside the
Philippines, the gross receipts realized therefrom shall be subject to not more
than one half (1/2) of the rate prescribed in Sec. 143 (e) ofR. A. No. 7160 or
the Local Goverment Code of 1991.

c) In case there is transfer or relocation of the Head/Principal Office or of any

branch to another city or municipality, the construction contractor shall give
due notice of such transfer or relocation to the cities or municipalities
concered at least fifteen (15) days before such transfr or relocation is
effected. (Local Finance Circular No. 3-95, Department ofFinance)

Section 215. Business Tax on Banks and Other Financial Institutions. –

A. Rate and Base of Tax - Banks and other financial institutions are subject to a business tax at
a rate not exceeding fifty percent (50%) of one percent (1%) on the gross receipts of the

preceding calendar year derived fom interests, commissions and discounts fom lending

activities, income from financial leasing, dividends, rentals on property and profit from

exchange or sale of property, insurance premium (Sec. 143 (, LGC). All other income and
receipts of banks and financial institutions not otherwise enumerated above shall be
excluded
from the computation of this tax. (Art. 232 (, 1RR implementing Sec. 143 (, LGC)

The taxes imposed on banks, insurance companies, and financing companies accruing the
local goverment units shall be paid within the first twenty (20) days of January or of each
subsequent quarter, as the case may be, unless otherwise fixed in the corresponding local tax
ordinance. (Local Finance Circular Nos. 1-93; 2-93; and 3-93, Department ofFinance)
B. Guidelines Applicable to Banks -

1) Gross Receipts of Banks Subject to Tax. - For the purpose of imposing the tax on
gross receipts of banks, the term " goss receipts" shall only include the fllowing:

a) Interest fom loans and discounts - represents interest eared and actually
collected on loans and discounts such as:

1. Discounts eared and actually collected m advance on bills

discounted;

11. Interest eared and actually collected on demand loans;

111. Interest eared and actually collected on time loans, including the
eared portions of interest collected in advance;

1v. Interest eared and actually collected on mortgage contracts

receivables; and

v. Interest eared and actually collected on inter-bank loans.

b) Rental of property - represents the following rental income:

1. Eared portion of rental collected in advance from lessees of saf

deposit boxes; and

2. Rental eared and actually collected fom lessees of bank premises

and equipment.

c) Income eared and actually collected fom acquired assets.

d) Income from sale or exchange or assets and property.

e) Cash dividends eared and received on equity investments.

f) Bank commissions fom lending activities.

g) Income component of rentals fom financial leasing.

2) Income and Receipts of Banks Not Subject to Tax. - All other incomes and
receipts of banks and banking institutions not enumerated above shall be excluded
fom the t:.xing authority of local government units such as:

a) Interest eared under the expanded foreign currency deposit system;

b) Interest accumulated by lending institutions on mortgages insured under R. A. No. 580, as
amended, otherwise known as the Home Financing Act; and

c) Receipts from filing fees, service and other administrative charges. (Local Finance
Circular No. 1-93, Department ofFinance)

3) Situs or Place of Payment of Tax on Banks. - The situs of tax on banks shall be in
accordance with the following:

a) All transactions filed with or negotiated in a branch shall be recorded in the same
branch and the gross receipts derived from these transactions shall be applied to:

1. Transactions negotiated with and approved by the Branch Manager under his own
authority.

11. Transactions filed and negotiated in the branch, but being beyond the approving
authority of the Branch Manager are forwarded to the Head Office for final approval.

iii. The gross receipts derived fom transactions made by the Head Office, except gross
receipts recorded in the branches shall be taxable by the city or municipality where that
Head Office is located.

1v. In case of transfer or relocation of the Head Office or of any Branch to another city
or municipality, the bank shall give due notice of such transfr or relocation to the Local
Chief Executives of the cities or municipalities concered within fifteen (15) days afer
transfer or relocation is effected.

C. Guidelines Applicable to Insurance Companies -

l) Gross Receipts of Insurance Companies Subject to Tax. - For the purpose of imposing
the tax on gross receipts of insurance companies, the term "gross receipts"
shall include only the following:

a) Insurance premiums actually collected, except the following tax exempt premiums
which must be recorded and declared separately:

1. premiums collected befre the effectivity of the ordinance imposing the tax;

11. two percent (2%) of all premiums for the sale of fire, earthquake,
and explosion hazard insurance pursuant to the Fire Code of the Philippines (P.D. No.
1185);
 m. Premiums refnded within six (6) months afer payment of the
account;

1v. Premiums collected or received by any branch of a domestic

corporation, firm, or association doing business outside the
Philippines on account of a life insurance of the insured who is
non-resident;

v. Premiums collected or received on account of any re-insurance, if

the risk insured against covers property located outside the
Philippines, or the insured, in case of personal insurance, resides
outside the freign country where the original insurance has been
issued or perfected;

v1. Portions of the premiums collected or received by msurance

companies pertaining to variable contracts; and

vii. The excess of the amount necessary to insure the lives of variable
contracts.

b) Interest earings on loans and discounts actually collected.

c) Rentals actually collected fom property owned by insurance companies.

d) Income actually collected from acquired assets.

e) Cash dividends received on equity investments. (Local Finance Circular No. 2-

93, Department ofFinance)

2) Income and Receipts of Insurance Companies Not Subject to Tax. - All other
incomes and receipts of insurance premiums not enumerated in the preceding
paragraph shall be excluded from the taxing authority of local goverment units, such
as service fees received from fire, earthquake, and explosion pre-insurance
adjustment business directly to agents, pursuant to the Fire Code of the Phiippines
(P.D. No. 1185). (Local Finance Circular No. 2-93, Department ofFinance)

3) Situs or Place of Payment of Tax on Insurance Companies. - The situs of tax on

insurance companies shall be in accordance with the following:

a) Insurance contracts or policies shall be recorded in the issuing Head Office or

branch, However, the taxes shall be collected by the city or municipality
where the office or branch to which the premiums or gross receipts were
actually paid is located. This rule shall be applied irrespective of whether the
insurance contracts/policies were solicited or negotiated by insurance agents
or brokers who are not residents of the city or municipality where the branch
is located, or who are not affiliated with or assigned to such branch.
b) The offices of an insurance agent or broker shall not be considered a branch
and shall not be subject to the situs of taxation rule.

c) All insurance premiums and/or gross receipts from transactions not recorded
in the branches or the insurance companies shall be recorded in the Head Office and taxable
by the city or municipality where the said Head Office is located.

d) In case there is transfer or relocation of the Head Office or of any branch to another city or
municipality, the insurance company shall give due notice to the chief executives of the cities
or municipalities concered within 15 days after such transfer or relocation is effected. (Local
Finance Circular 2-93, Department ofFinance)

D. Guidelines Applicable to Financing Companies -

I) Definition of Financing Companies - The term "financing companies" shall refer to

corporations or partnerships, except those regulated by the Central Bank of the
Philippines, the Insurance Commission, and the Cooperatives Development
Authority, which are primarily organized for the purpose of extending credit facilities
to consumers and to industrial, commercial or agricultural enterprises, either by
discounting or factoring commercial papers or account receivables, or by buying and
selling contracts, leases, chattel mortgages, or other evidences of indebtedness, or by
leasing of motor vehicles, heavy equipment and industrial machinery, business and
office machines and equipment, appliances and other movable property.

2) Gross Receipts of Financing Companies Subject to Tax. - For the purpose of

imposing the tax on gross receipts of financing companies, the term gross receipts
shall include only the fllowing:

a) Interest from loans and discounts - represents interest eared and actually
collected on loans and discounts; viz:
.
1. discounts eared and actually collected m advance on bills
discounted;

2. interest earned and actually collected on demand loans;

3. interest earned and actually collected on time loans, including the

eared portions of interest collected in advance; and

4. interest eared and actually collected on mortgage contract

receivables.

b) Interest eared and actually collected on inter-bank loans.

c) Rental of property - represents the following rental income:

. 1) .eared portion of rental collected in advance from lessees

of safe deposit boxes; and

2). rental earned and actually collected from lessees of bank

premises and equipment.

d) Income eared and actually collected fom acquired assets.

e) Income from sale or exchange of assets and property.

f) Cash dividends eared and received on equity investments.

g) Income component of rentals from financial leasing

3) Income and Receipts of Financing Companies Not Subject to Tax. - All other income
and receipts of financing companies not enumerated in the preceding paragraph shall
be excluded from the taxing authority of local goverment units.

4) Situs or Place of Payment of Tax on Financing Companies - The situs of tax on

financing companies shall be in accordance with the following:

a) All transactions filed with or negotiated in the branch shall be recorded in said
branch and the gross receipts derived from said transactions shall be applied
to:

1. Transactions negotiated with and approved by the Branch

Manager under his own authority; or
2. Transactions filed and negotiated in the branch but being
beyond the approving authority of the Branch Manager,
are forwarded to the Head Office fr final approval.

b) The gross receipt derived from transactions made by the Head Office, except
gross receipts recorded in the branches, shall be taxable by the city or
municipality where said Head Office is located.

c) In case of transfer or relocation of the Head Office or of any branch to another

city or municipality, the insurance company shall give due notice to the Local
Chief Executives of the cities or municipalities concered within fifteen ( 15)
days after transfer or relocation is effected.

E. Guidelines Applicable to Credit Card Companies. -

Illustrative Case:
E. Guidelines Applicable to Credit Card Companies. -

Illustrative Case:
1) Credit card companies fall within the purview of banks and other financial
institutions contemplated under Section 143 (f) of R. A. No. 716 or the Local Goverment
Code of 1991, and therefore may be subject to business taxes at the rate of 50% of 1% on the
gross receipts upon enactment of the appropriate ordinance by the local goverment unit
concered. (ELG Letter, March 15, 1999 to Picazo Buyco Tan Fider & Santos Law Offices)

Section 216. Business Tax on Peddlers Engaged in the Sale of Any Merchandise or
Articles of Commerce. - Peddlers shall be taxed at a rate not exceeding Fifty Pesos (P 50.00) per
peddler annually (Sec. 143 (, LGC). Delivery trucks, vans or motor vehicles used by
manufacturers, producers, wholesalers, dealers or retailers enumerated in Section 141 of R. A.
No. 7160 or the Local Goverment Code of 1991 246, shall be exempt fom the peddler's tax
herein (Art. 232 (g), IRR implementing Sec. 143 (g), LGC).

Section 217. Business Tax on Any Business. - Municipalities may also impose taxes on any
business not otherwise specified in the preceding paragraphs which the sanggunian concered
may deem proper to tax (Sec. 143 (h), LGC), provided:

1) The rate of tax on any business subject to the excise, value added or percentage tax under
the National Interal Revenue Code, as amended, shall not exceed two percent (2%) of
gross sales or receipts of the preceding calendar year (Sec. 143 (h), LGC), and provided
further that in line with the 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 under this provision

(Art. 232 (h), IRR implementing Sec. 143, (h), LGC).

2) The sanggunian concered may prescribe a schedule of graduated tax rates but in no case
to exceed the rates prescribed under Section 143 (a), (b), (c), (d), (e), (f and (g) of R. A. No.
7160 or the Local Goverment Code of 1991. 247

Section 218. Taxing Powers of Municipalities within Metro Manila Area. - The
municipalities within the Metropolitan Manila Area may levy taxes on businesses enumerated
under Sections 210, 211, 212, 213, 214, 215, and 216 of this Manual at rates which shall not
exceed by fifty percent (50%) the maximum rates prescribed for said businesses. (Art. 236 (a),
IRR implementing Sec. 144, LGC)

Said municipalities within the Metro Manila Area, pursuant to Article 274 of the IRR of R. A.
No. 7160 or the Local Government Code of 1991, implementing Section 186 thereof, may levy
osed by the province under Sections 135, 136, 137, 138,
and collect the taxes which may be imp
139, 140, and 141 of the same Code 24 , implemented by Articles 224, 225, 226, 227, 228, 229,
and 230 of the same IRR, at rates not exceeding those prescribed therein. (Art. 236 (b), IRR
implementing Sec. 144, LGC)

246
See Sec. 207, this Manual
247
See Secs. 210, 211, 212, 213, 214, 215 and 216, this Manual
248
See Secs. 201, 202, 203, 204, 205, 206 and 207, this Manual
C. TAXING POWERS OF CITIES

Section 219. Scope of Taxing Powers of Cities. - Except as otherwise provided in this Code,
the city may levy the taxes, fees, and charges which the province or municipality may impose:
Provided, however, That the taxes, fes, and charges levied and collected by highly urbanized
and independent component cities shall accrue to them and distributed in accordance with the
provisions ofR. A. No. 7160 or the Local Goverment Code of 1991.

The rates oftaxes that the city may levy may exceed the maximum rates allowed fr the province

or municipality by not more than fify percent (50%) except the rates of profssional and
amusement tax.

The city may levy and collect a percentage tax on any business not otherwise specified under
paragraphs (a) to (g) of Section 143 ofR. A No. 7160 or the Local Goverment Code of1991, 249
at rates not exceeding three percent (3%) ofthe gross sales or receipts of the preceding calendar
year. (Art. 23 7, IRR implementing Sec. I 5 I, LGC)

Section 220. Professional and Amusement Tax Rates. - The rates of the following taxes
shall be uniform for the city and the province:

a) Professional Tax under Section 139 ofR. A. No. 7160 or the Local Goverment Code of
1991,250 shall not exceed Three Hundred Pesos (P 300.00); and

b) Amusement tax on paid admission under Section 140 of R. A. No. 7160 or the Local
Goverment Code of 1991, 251 shall not be more than thirty percent (30%) of the gross
receipts fom admission fees. (Art. 238, IRR, LGC)

Section 221. Sharing of Tax on Quarry Resources in Highly Urbanized Cities. - The
proceeds of the tax on sand, gravel, and other quarry in highly urbanized cities shall be
distributed as follows:

1) Highly Urbanized City Sixty percent (60%)

2) Barangay where the sand, gravel,

and other quarry resources are extracted - Forty percent (40%) (Art.
239, IRR, LGC)

D. TAXING POWERS OF BARANGAYS

Section 222. Scope of Taxing Powers of Barangays. - The barangays may levy taxes, fes,
and charges as provided in Article Four of R. A. No. 7160 or the Local Goverment Code of
1991,252 which shall accrue exclusively to them:

249
See Secs. 210, 211, 212, 213, 214, 215 and 216, this Manual 250 See Sec. 205, this Manual
251
See Sec. 206, this Manual
252
Taxing Powers ofBarangays
a) Taxes -on stores or retailers with fixed business establishments with gross sales or receipts
of the preceding calendar year of Fifty Thousand Pesos (P 50,000.00) or less, in the case of a
barangay within a city, and Thirty Thousand Pesos (P 30,000.00) or less, in the case of a
barangay within a municipality, at rates not exceeding one percent (1 %) on such gross sales or
receipts. (Arts. 232 (d) and 240, IRR implementing Secs. 143 (d) and 152,
LGC,respectively)

The fllowing guidelines shall be observed m the imposition by the barangays of the
business tax on retailers:

1) Stores or retailers with fixed business establishments in a barangay or a city whose

gross sales or receipts for the preceding year do not exceed Fifty Thousand Pesos
(P 50,000) shall be taxable exclusively by the barangay. Those whose gross sales or
receipts exceed Fifty Thousand Pesos (P 50,000.00) shall be taxable by the city.

2) Stores or retailers with fixed business establishments in a barangay or a municipality

whose gross sales or receipts for the preceding year do not exceed Thirty Thousand
Pesos (P 30,000.00) shall be taxable exclusively by the barangay. Those whose gross
sales or receipts exceed Thirty Thousand Pesos (P 30,000.00) shall be taxable by the
municipality.

3) The barangay shall have the power to collect the business tax on retailers only if it
had levied the tax pursuant to an ordinance duly enacted by its sanggunian.
Otherwise, the tax shall be collected by the municipality or city where the barangay
is located, provided that they have enacted the required ordinance levying the tax.

(Local Finance Circular No. 1-94, Department ofFinance)

b) Service Fees or Charges - barangays may collect reasonable fes or charges for services
rendered in connection with the regulation or use of barangay-owned properties or service
fcilities such as palay, copra, or tobacco dryers.

c) Barangay Clearance Fee - no city or municipality may issue any license or permit for any
business or activity unless a clearance is first obtained from the barangay where such

business or activity is located or conducted. The application fr clearance shall be acted

within seven (7) working days from the filing thereof. In the event that a clearance is not
issued or the application is denied within the said period, the city or municipality may
issue
the license or permit to the applicant.

d) Other Fees and Charges - the barangay may levy reasonable fes and charges on:

1) Commercial breeding fighting cocks. For purposes of imposing barangay fees and
charges on the commercial breeding of fighting cocks, commercial breeding shall
mean an annual sale of more than five (5) fighting cocks of a duly registered breeder;-
2) Cockfights and cockpits;
3) Places of recreation which charge admission fees. Places of recreation shall include
places of amusement where one seeks admission to entertain himself by seeing or
viewing the show or performance or those where one amuses himself by direct
participation;

4) Billboards, signboards, neon signs, and outdoor advertisements at rates not less than the
following

1. Billboards or signboards for advertisement of business, per square meter or faction

thereof:

aa. Single-Faced Ten Pesos (P 10.00)

bb. Double-Faced Twenty Pesos (P 20.00)

3. Billboards or signs for professionals, per square meter or fraction thereof

Eight Pesos (P 8.00).

4. Billboards, signs, or advertisements for business and professions painted on

any building or structures or otherwise separated or detached therefrom, per
square meter thereof: Nine Pesos (P 9.00).

5. Advertisement for business or profssions by means of slides in movies payable

by the advertisers: One Hundred Pesos (100)

6. Advertisement by means of vehicles, balloons, kites, etc.

• Per day or fraction thereof Forty Pesos (P 40.00)

• Per week or fraction thereof - Sixty Pesos (P 60.00)
• Per month or faction thereof - Eighty Pesos (P 80.00)

• For use of electric or neon lights in billboards under items (i) to

(iv) hereof, the amount of Ten Pesos (P 10.00) per square meter or faction thereof shall
be imposed in addition to the above prescribed rates.
7. Signs, signboards, billboards, advertisements including stick-outs, streamers,
lighted signs and other electronic media, posters, store signs, placards, price
strips, buntings, and the like, belonging to manufacturers or producers or
profssionals, but displayed at the place where a business or profession is conducted,
or displayed on delivery or other service and public utility vehicles, shall be exempt
fom such fes or charges provided in paragraphs (i) to (v) hereof and other
impositions that may be imposed by the barangay.
8. Privilege panels shall be subject to one half (1/2) of the rates herein
prescribed.

9. For purposes of this Section, the new rates to be adopted by the

barangays shall apply only to billboards, privilege panels, signs, and
outdoor advertisements which shall be constructed or installed after
the effectivity of the Code. (Art. 240, IRR implementing Sec. 152,
LGC)

E. GENERAL GUIDELINES ON THE APPLICATION OF BUSINESS AND

OTHER LOCAL TAXES

Section 223. Related or Combined Businesses. - (a) The taxes imposed under Section 143 of
R. A. No. 7160 or the Local Goverment Code of 1991, 253 shall be payable fr every separate or
distinct establishment or place where business subject to tax is conducted and one line of
business does not become exempt by being conducted with some other businesses for which
such tax has been paid. The tax on business must be paid by the person conducting the same
(Sec. 146, LGC). The conduct or operation of two or more related businesses by any one person,

natural or juridical, shall require the issuance of a separate permit or license to each business.
(Art. 242 (a), IRR implementing Sec. 146 (a), LGC)

(b) In cases where a person conducts or operates two (2) or more of the businesses mentioned in
Section 143 of the Local Goverment Code of 1991, which are subject to the same rate of
imposition, the tax shall be computed on the basis of the combined total gross sales or receipts
of the said two (2) or more related businesses. (Sec. 146 (b), LGC)

(c) In cases where a person conducts or operates two (2) or more businesses mentioned in
Section 143 of the Local Government Code of 1991, which are subject to different rates of
tax, the gross sales or receipts of each business shall be separately reported for the
purpose of computing the tax due fom each business. (Sec. 146 (c) LGC)

Section 224. Situs of the Tax. - For purposes of collection of taxes under Section 143 of R. A.
No. 7160 or the Local Government Code of 1991, manufacturers, assemblers, repackers,
brewers, distillers, rectifiers and compounders of liquor, distilled spirits and wines, millers
producers, exporters, wholesalers, distributors, dealers, contractors, banks and other financial
institutions, and other businesses, maintaining or operating branch or sales outlet elsewhere
shall record the sale in the branch or sales outlet making the sale or transaction, and the tax
thereon shall accrue and shall be paid to the municipality where such branch or sales outlet is
located. 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 shall be paid to such city or municipality. (Sec. 150, LGC)

A. Definition of Terms:

253
Secs. 210, 211, 212, 213, 214, 215 and 216, this Manual
Principal Office - the main or head office of the business appearing in the pertinent documents
submitted to the Securities and Exchange Commission, or the Department of Trade and Industry,
or other appropriate agencies as the case may be.

The city or municipality specifically mentioned in the Articles of Incorporation or official

registration papers as being the official address of said principal office shall be considered the
situs fr tax purposes.

In case there is a transfer or relocation of the principal office to another city or municipality, it

shall be the duty of the owner, operator or manager or the business to give due notice of such
transfer or relocation to the local chief executives of the cities or municipalities concered within

fifeen (15) days afer such transfer or relocation is effected.(Art. 243 (a) (), IRR implementing
Sec. 15 0, LGC

Branch or Sales Office - a fixed place in a locality which conducts the operations of the
business as an extension of the principal office. However, offices used only as display areas of
the products where no stocks or items are stored for sale, although orders fr the products may
be received thereat, are not branch or sales offices as herein contemplated. A warehouse which
accepts orders and/or issues sales invoices independent of a branch with sales office shall be
considered as a sales office. (Art. 243 (a) (2), IRR implementing Sec. 150, LGC)

Warehouse - a building utilized for the storage of products for sale and from which goods or
merchandise are withdrawn for delivery to customers or dealers, or by persons acting in behalf of
the business. A warehouse that does not accept orders and/or issue sales invoices as
aforementioned, shall not be considered a branch or sales office.

Illustrative Case:

I) A warehouse that does not accept orders, and/or does not issue sales invoices independently
of a branch or sales office, shall not be considered a branch or sales office.

Provincial depots where products are stored for sale are considered warehouses. (BLGF
Letter, August 26, 1993 to Republic-Asahi Glass Corp.)

Plantation - a tract of agricultural land planted to trees or seedlings, whether f rit bearing or
not, uniformly spaced or seeded by broadcast methods or normally arranged to allow highest
production. For this purpose, inland fishing grounds shall be considered as plantation. (Art. 243
(a) (4), IRR implementing Sec. 150, LGC)

Experimental Farms - agricultural lands utilized by a business or corporation to conduct

studies, test, researches or experiments involving agricultural, agri-business, marine or aquatic,
livestock, poultry, dairy and other similar products fr the purpose of improving the quality and
quantity of goods or products.
B. Sales Allocation. - The following sales allocation shall apply to manufcturers, assemblers,
contractors, producers, and exporters with fctories, project offices, plants, and plantations
in
the pursuit of their business: (Sec. 150 (b), LGC)

a) Recording of Sales in Branches or Sales Offices, Warehouses, Plantations, etc.:

1) All sales made in a locality where there is a branch or sales office or warehouse
shall be recorded in said branch or sales office or warehouse and the tax shall be
payable to the city or municipality where it is located. (Art. 243 (b) (]), IRR
implementing Sec. 150 (, LGC)

2) In cases where there is no such branch, sales office or warehouse in the locality
where the sale is made, the sale shall be recorded in the principal office along
with the sales made by said principal office and the tax shall accrue to the city or
municipality where said principal office is located. (Art. 243 (b) (2), IRR
implementing Sec. 150 (b), LGC)

3) In cases where there is a fctory, project office, plant or plantation in pursuit of

business:

1. Thirty percent (30%) of all sales recorded in the principal office

shall be taxable by the city or municipality where the principal
office is located,
2. Seventy percent (70%) of all sales recorded in the principal office
shall be taxable by the city or municipality where the factory,
project office, plant or plantation is located.
3. LGUs where only experimental frms are located shall not be
entitled to the sales allocation herein provided. (Art. 243 (b) (3),
IRR implementing Sec. 150 (b), LGC)

However, on-site sales of commercial quantity made in experimental farms shall be

similarly imposed the corresponding tax under Sec. 143 of R. A. No. 7160 or the Local
Government Code of 1991, and allocated as herein provided. (Art. 243 (a) (5), IRR
implementing Sec. 150, LGC)

The fregoing sales allocation shall be applied irrespective of whether or not sales are made in
the locality where the factory, project office, plant or plantation is located. (Art. 243 (b) (6),
IRR implementing Sec. 150 (e), LGC)

4) In the case of a plantation located in a locality other than that where the fctory is
located, said seventy percent (70%) sales allocation mentioned in item (ii) under
sub-paragraph (3) above shall be divided as follows:
.
1. Sixty percent (60%) to the city or municipality where the
fctory is located; and

2. Forty percent (40%) to the city or municipality

where the plantation is located. (Sec. 150 (c), LGC)

5) In cases where a manufacturer, assembler, producer, exporter or contractor has

two (2) or more fctories, project offices, plant, or plantations located in different
localities, the seventy percent (70%) the sales allocation mentioned in item (ii)
under sub-paragraph (3) above shall be pro-rated among the localities where the
factories, project offices, plants, and plantations are located in proportion to their
respective volumes of production during the period for which the tax is due. (Sec.
150 (d), LGC) In the case of project offices of service and other independent
contractors, the term "production" shall refer to the cost of projects actually
undertaken during the tax period. (Art. 243 (b) (5), IRR implementing Sec. 150 (d), LGC)

6) In the case of manufcturers or producers which engage the services of an

independent contractor to produce or manufacture some of their products, the
rules on situs of taxation shall apply as clarified under Article 243, IRR,
implementing Section 150 of R. A. No. 7160 or the Local Goverment Code of
1991, which are provided herein, except that the factory or plant and warehouse
of the contractor utilized for the production and storage of the manufacturers'
products shall be considered as the factory or plant and warehouse of the
manufacturer. (Art. 243 (b) (7), IRR implementing Sec. 150, LGC)

7) In the case of sales made by the factory, project office, plant or plantation, the
sale shall be covered by paragraphs (1) and (2) above. (Art. 243 (b) (6), IRR
implementing Sec. 150 (e), LGC)

C. Port of Loading - the city or municipality where the port of loading is located shall not
levy and collect tax imposable under Section 143 of R. A. No. 7160 or the Local
Goverment Code of 1991, unless the exporter maintains in said city or municipality its
principal office, a branch, sales office or warehouse, fctory, plant, or plantation in which
case the foregoing rules on the matter shall apply accordingly. ((Art. 243 (c), IRR
implementing Sec. 150, LGC)

D. Sales Made by Route Trucks, Vans or Vehicles - The following guidelines shall apply
to route sales:

1) For route sales made in the locality where a manufcturer, producer, wholesaler,
retailer or dealer has a branch or sales office or warehouse, the sales shall be recorded
in that branch, sales office or warehouse and the tax due paid to the LGU where such
branch, sales office or warehouse is located.

2) For route sales made in a locality where a manufacturer, producer, wholesaler, retailer
or dealer has no branch, sales office or warehouse, the sales shall be recorded in the
branch, sales office or warehouse from where the route trucks withdraw their products
for sale, and the tax due on such sales is paid to the LGU where such branch, sales office or
warehouse is located.

3) Based on the foregoing, LGUs where route trucks deliver merchandise cannot impose
any tax on said trucks except the annual fixed tax authorized to be imposed by the
province under Section 141 of R. A. No. 7160 or the Local Goverment Code of
1991254, which cities may likewise impose under Section 151 of the same Code,255 on
every delivery truck or van or any vehicles used by manufcturers, producers,
wholesalers, dealers or retailers in the delivery or distribution of distilled spirits,
frmented liquors, sofdrinks, cigars and cigarettes, and other products as may be
determined by the sangguniang panlalawigan.

4) In addition to this annual fixed tax, cities may also collect from same manufacturers,
producers, wholesalers, retailers, and dealers using route trucks a mayor's permit fee
which shall be imposed in a local tax ordinance pursuant to Section 147 in relation to
Section 151, both of R. A. No. 7160 or the Local Government Code of 1991. (Art.
243 (d), !RR implementing Sec. 150, LGC)

Section 225. Retirement of Business. - (a) A business subject to tax pursuant to the preceding
sections shall, upon termination thereof, submit a sworn statement of its gross sales or receipts
for the current year. If the tax paid during the year be less than the tax due on said gross sales or
receipts of the current year, the difference shall be paid befre the business is
considered officially retired. (Sec. 145, LGC)

(b) Termination of Business Construed. - For purposes hereof, termination shall mean that
business operations are stopped completely. Any change in ownership, management and/or name
of the business shall not constitute termination as herein contemplated. Unless stated otherwise,
the assumption of the business by any new owner or manager or re-registration of the same
business under a new name will be considered by the LGU concerned only fr record purposes
in the course of the renewal of the permit or license to operate the business.

Illustrative Case:
1) A transfer in ownership does not mean the retirement or termination of a business.
The
retirement of business, as contemplated by law, means a complete cessation or stoppage
of
business operations. In a change of ownership, the business continues under the
stewardship
of another set of owners. (BLGF Opinion, August 12, 1993)

(c) Confirmation of Retirement of Business and Taxation. - The Local Treasurer concered
shall see to it that the payment of taxes of a business is not avoided by simulating the termination
or retirement thereof. For this purpose, the following procedural guidelines shall be
strictly
followed:
254
See Sec. 207, this Manual
255
See Sec. 219, this Manual
 1) The Local Treasurer shall assign every application fr the termination or
retirement of business to an inspector in his office who shall go to the address of the
business on record to verif if it is really no longer operating. If the inspector finds
that the business is simply placed under a new name, manager and/or new owner, the
Local Treasurer shall recommend to the Mayor the disapproval of the application
for the termination or retirement of said business;

2) Accordingly, the business shall continue to be liable for the payment of all the taxes,
fees and charges imposed on it under existing local tax ordinances;

3) In addition, in the case of a new owner to whom the business was transfrred by sale
or other form of conveyance, said new owner shall be liable to pay the tax or fe fr
the transfer of the business to him if there is an existing ordinance prescribing such a
transfr tax.

(d) In case it is fund that the retirement or termination of the business is fund to be legitimate,
and the tax due fom therefrom be less than the tax due fr the current year based on the
gross sales or receipts, the difference in the amount of the tax shall be paid befre the
business is considered officially retired or terminated.

(e) The permit issued to a business retiring or terminating its operations shall be surrendered to

the Local Treasurer who shall frthwith cancel the same and record the cancellation in his
books.(Art. 241, IRR implementing Sec. 145, LGC)

F. THE COMMUNITY TAX

Section 226. Community Tax. - Cities or municipalities may levy a ommunity ta n lieu of
the frmer§ence tayevied and collected under Section 38 of P. No. 2 , as
amended. Accordingly, all cities and municipalities shall enact, fr the purpose, a local
tax ordinance to take effect January 1, 1992.

For purposes of enacting a local tax ordinance levying the community tax, the conduct of a
public hearing provided for under Section 186 of R. A. No. 7160 or the Local
Goverment Code of 1991, shall be dispensed with. (Art. 245, IRR implementing Sec.
156, LGC)

1) Imposition of Community Tax. - The levy or imposition of community tax by a

city or municipality shall be govered by the following rules and procedural guidelines:

a) Individuals liable fr the payment of the Community Tax:

1. Every inhabitant of the Philippines eighteen ( 18) years of age or over
who has been regularly employed on a wage or salary basis for at least
thirty(30) consecutive working days during any calendar year;

2. An individual who is engaged in business or occupation;

 3. An individual who owns real property with an aggregate assessed value of
One Thousand Pesos (P 1,000.00) or more; and

4. An individual who is required by law to file an income tax retur. (Art.

246 (a), /RR, implementing Sec. 157, LGC)

b) Rate of Community Tax Payable by Individuals:

1. The rate of the annual community tax that may be levied and collected fom said
individuals shall be Five Pesos (P 5.00) plus an annual additional tax of One Peso (P
1.00) for every One Thousand Pesos (P 1,000.00) of income regardless of whether from
business, exercise of profession, or from property but which in no case shall exceed
Five Thousand Pesos (P 5,000.00).

2. In case of husband and wife, each of them shall be liable to pay the basic annual
tax of Five Pesos (P 5.00), but the additional tax imposable on the husband and wife shall
be One Peso (P 1.00) for every One Thousand Pesos (P 1,000.00) of income fom the
total property owned by them and/or the total gross receipts or earings derived by them.
(Art. 246 (b), /RR implementing Sec. 157, LGC)

c) Juridical Persons Liable for the Payment of the Community Tax. - Every
corporation, no matter how created or organized, whether domestic or resident
foreign, engaged in or doing business in the Philippines shall pay an annual
community tax of Five Hundred Pesos (P 500.00) and an annual additional tax,
which, in no case, shall exceed Ten Thousand Pesos (P 10,000.00) in accordance with
the fllowing schedule:

1. For every Five Thousand Pesos (P 5,000.00) worth of real

property in the Philippines, owned by the juridical entity during the
preceding year, based on the assessed value used fr the payment of the
real property tax under existing laws -Two Pesos (P 2.00); and

2. For every Five Thousand Pesos (P 5,000.00) of gross receipts or

earings derived from the business in the Philippines during the
preceding year Two Pesos (P 2.00).

The dividends received by a corporation fom another corporation shall, for

the purpose of the additional tax, be considered as part of the gross receipts or
earnings of said corporation. (Art. 246 (c), /RR implementing Sec. 158, LGC)

2) Exemptions. -The following are exempt fom the community tax:

a) Diplomatic and consular representatives; and

b) Transient visitors when their stay in the Philippines does not exceed three (3) months.(Sec.
159, LGC)

3) Place of Payment. - The community tax shall be paid in the place of residence of the
individual, or in the place where the principal office of the juridical entity is located (Sec.
160, LGC).

The following are the guidelines for the place of payment of the community tax:

a) The community tax shall be paid in the city or municipality where the residence of
the individual is located, or in the city or municipality where the principal office of
the juridical entity is located (Art. 246 (e) (1), !RR implementing Sec. 160, LGC).
Thus, a sales office or branch office is not liable to pay community tax in the city of
municipality where it is located (Sec. 2, BLGF Memorandum Circular No. 153).

b) It shall be unlawful fr any City or Municipal Treasurer to collect the community tax
outside the territorial jurisdiction of the city or the municipality. (Art. 246 (e) (2), !RR
implementing Sec. 160, LGC)

c) In case of branch, sales office or warehouse where sales are made and recorded, the
corresponding community tax shall be paid to the LGU where such branch, sales
office or warehouse is located. (Art. 246 (e) (3), !RR implementing Sec. 160, LGC)

d) Any person, natural or juridical, who pays the annual community tax to a city or
municipality other than the city or municipality where his residence, or principal
office in the case of juridical persons, is located shall remain liable to pay the tax to
the city or municipality concerned. (Art. 246 (e) (4), !RR implementing Sec. 160,
LGC)

4) Time of Payment; Delinquency. -Guidelines as to when the community tax shall be paid:

a) The community tax shall accrue on the first (l st) day of January of each year and shall
be paid not later than the last day of February of each year.

b) If a person reaches the age of eighteen (18) years or otherwise loses the benefit of
exemption on or befre the last day of June, he shall be liable for the community tax
on the day he reaches such age or upon the day the exemption ends. However, if a
person reaches the age of eighteen (18) years or loses the benefit of exemption on or
befre the last day of March, he shall have twenty (20) days to pay the community tax
without becoming delinquent.

c) Persons who come to reside in the Philippines or reach the age of eighteen (18) years on or
after the first (1st) day of July of any year, or who cease to belong to an exempt
class on or afer the same date, shall not be subject to the community tax fr that year.

d) Corporations established and organized on or befre the last day of June shall be
liable fr the community tax for that year. But corporations established and organized
on or befre the last day of March shall have twenty (20) days within which to pay the
community tax without becoming delinquent. Corporations established and organized on
or after the first day of July shall not be subject to the community tax fr that year. (Sec. 161,
LGC)

5) Penalties for late payment. - If the tax is not paid within the time prescribed above, there
shall be added to the unpaid amount and interest of twenty-four percent (24%) per annum

from the due date until it is paid. (Sec. 161, LGC)

6) Issuance of Community Tax Certificate. - A community tax certificate shall be issued to

every person or corporation upon payment of the community tax. A community tax

certificate may also be issued to any person or corporation not subject to the community
tax
256
upon payment of One Peso (P 1.00) (Sec. 162, LGC)

7) Printing of Community Tax Certificate. - The Bureau of Interal Revenue (BIR) shall
cause the printing of community tax certificates and distribute the same to the cities and

municipalities through the City and Municipal Treasurers in accordance with prescribed

regulations. However, in order to fcilitate distribution, the BIR may send on consignment
to the Provincial Treasurers blank forms of the community tax certificates and the
Municipal
Treasurers of the province shall secure through the Provincial Treasurer, their respective
requirements. The City or Municipal Treasurer concered shall remit to the National

Treasurer, fr the account of the BIR, the cost of printing and distribution, within ten (10)
days after the end of each quarter. In cases where the certificates were secured or
requisitioned from the Provincial Treasurer, the Municipal Treasurer shall remit payments
to the Provincial Treasurer who shall, in tur, effect the remittance to the National Treasurer
as required. (Art. 249, IRR implementing Sec. 164 (a), LGC)

8) Collection of the Community Tax by Barangay Treasurers. - The tax ordinance levying
the community tax shall authorize the City or Municipal Treasurer to deputize the
Barangay
Treasurers to collect the community tax in their respective jurisdictions. Said deputation,

however, shall be limited to the community tax payable by individual taxpayers and shall
be extended only to Barangay Treasurers who are properly bonded in accordance with
existing laws. (Art. 250, IRR implementing Sec. 164 (b), LGC)

9) Allocation of Proceeds of the Community Tax. - The proceeds of the community tax
actually and directly collected by the City or Municipal Treasurer shall accrue entirely to
the
 General Fund of the city or municipality concered. However, proceeds of the community
tax collected through the Barangay Treasurers shall be apportioned as follows:

a) Fify percent (50%) shall accrue to the General Fund of the city or municipality
concered; and

b) Fify percent (50%) shall accrue to the barangay where the tax is collected. (Art. 251,
IRR implementing Sec. 164 (c), LGC)
256
See Sec. 226 (2), this Manual
G. SPECIFIC APPLICATIONS OF AUTHORITY TO TAX
FRANCHISES

Section 227. Instance When Corporation is Liable fr Franchise Tax Nothwithstanding

Exemption Granted Under its Charter.

The National Power Corporation (NPC), a government corporation, maintains that it does not fall

within the purview of business enjoying a franchise since its operation is not for profit but fr
public service, and frther, that it is exempt fom all forms of taxes under its Charter, P.D. No.
938.

Section 137 of R. A. No. 7160 or the Local Goverment Code of 1991, clearly and specifically
declares that notwithstanding any exemption granted by law or other special law, the province
may impose a tax on business enjoying a franchise, at a rate not exceeding fifty percent (50%) of
one percent (1%) of the gross annual receipts for the preceding calendar year based on the
incoming receipts realized within its territorial jurisdiction.

As to the conflict between the provisions of the Local Goverment Code of 1991, a general law,
and the NPC Charter, a special law, it was held that while admittedly the established
jurisprudence is that if a general law is enacted after the special law, the special law nevertheless
remains, this admits of exceptions. One such exception is the cited case of Compania General vs.
Collector of Customs, 46 Phil. 8, in which it was ruled that when there is a clear, necessary and
irreconcilable conflict between the general and special law, the general law shall prevail.
(BLGF Letter, September 4, 1995 to National Power Corp., Baguio Cit)

Section 228. Variations of the "In Lieu" clause in the terms of franchise. - It devolves upon
Provincial and City Treasurers to examine the terms of franchise holders operating in their
respective jurisdictions, inasmuch as the terms of fanchises vary such that while some admit of
the local impost, others do not.

Illustrative Cases:

Franchises which are subject to franchise tax:

1) In one case, the franchise proviso stipulates that, "This (national goverment franchise) tax
shall be in lieu of all other taxes on all properties except real property, used by the grantee
under this franchise". Accordingly, it was opined that such exemption "is limited to the taxes

on personal property (e.g. poles, wires, insulators, transformers, conductors, x x x) used by

the grantee, and does not confr a blanket exemption" (Opinion No. 89, s. 1974, Secretar of
Justice). Such type of franchise proviso does not exempt the holder from the franchise tax
which a city may impose (Opinion No. 116, S. 1974, Secretar ofJustice).

Franchise not subject to franchise tax:

2) Where the franchise terms provide that, "it shall be in lieu of all other taxes and assessments

of whatever nature and by whatever authority upon the privilege, earnings, income
franchise
x x x ", it was held to be not subject to the local franchise tax. (DOF Letter, March 19,
1975
to Messrs. Quimzon, De Guzman, Makalintal and Veneracion, Greenhills, Rizal)

3) In another case, the franchise provides that, "Such annual x x x payments shall be in lieu of
all taxes of every name and nature - municipal, province or central upon the capital stock,

franchises, right of way, earings and all other property owned or operated by the grantee x
x x". Clearly this may not be subject to the additional provincial franchise tax. Thus,
business establishments with franchises containing the "in lieu of all taxes" proviso are not
subject to the said local tax, such as those of the Radio Communications of the Phil., Inc.
(RCPI), the Manila Electric Co (Meralco), and the Philippine Long Distance Telephone
Co. (PLDT).

(Local Tax Regulations No. 3-75, Department of Finance)

Section 229. Uncollected Gross Receipts are Included in Computing Franchise Tax. - The
uncollected amounts due from customers should be included in computing the fanchise tax
payable, which is based on gross receipts. The terms "gross receipts" means "gross earings". A
person may have eared his salary but may not have collected it, thereby showing that "to
collect" is a different act fom "to ear". Consequently, the uncollected "gross receipts" which
should be construed as meaning the same thing as "gross earings" should be subject to the
franchise tax. (Escudero Electric Service vis. Tabios, 33 SCRA 547)

Chapter 3. FEES AND CHARGES

Section 230. Authority to Impose and Collect Fees and Charges. - (a) Every local
goverment unit created or recognized under R. A. No. 7160 or the Local Goverment Code of
1991, is a body politic and corporate endowed with powers to be exercised by it in confrmity
with law. As such, it shall exercise powers as a political subdivision of the National
Government and as a corporate entity representing the inhabitants of its territory. (Sec. 15,
LGC)

(b) Every local goverment unit shall exercise the powers expressly granted, those necessarily
implied therefrom, as well as powers necessary, appropriate, or incidental to its efficient
and
effective goverance, and those which are essential to the promotion of the general welfre.
(Sec. 16, LGC)

(c) Local goverment units shall have the power and authority, among others:

1) To create their own sources of revenue and to levy taxes, fees and charges which
shall accrue exclusively for their use and disposition and which shall be retained by
them.
 2) To have an equitable share in the proceeds from the utilization and development of
the national wealth and resources within their respective territorial jurisdictions
including sharing the same with the inhabitants by way of direct benefits.

3) To acquire, develop, lease, encumber, alienate, or otherwise dispose of real or

personal property held by them in their proprietary capacity and to apply their
resources and assets for productive, developmental, or welfare purposes, in the
exercise or frtherance of their govermental or proprietary powers and fnctions.

(Sec. 18, LGC)

Illustrative Cases:

1) In the exercise of their govermental functions, local goverment units are endowed with
police powers, under which they may regulate and inspect businesses and their activities
and the practice of any profession or calling, and collect fes commensurate to the cost of
regulation, inspection, and licensing. Police powers are defined as the power to prescribe
regulations to promote the health, morals, peace, education , good order or safety and
general welfare of the people. (Sangalang, et al., vs. !C, 176 SCRA 179)

2) Local goverment units are also authorized to levy and collect charges in the exercise of
their proprietary fnctions. Proprietary fnctions are exercised not for regulatory
purposes but for the peculiar benefit and advantage of citizens. (Cit ofPueblo vs. Weed,
Colo. App. 570 p.2d 15, 18)

Section 231. Definition of Terms:

a) Charges - pecuniary liability, as rents or fes against persons or property. (Sec. 131 (g),
LGC)

b) Fee - a charge fixed by law or ordinance for the regulation or inspection of a business or
activity (Sec. 131(l), LGC). It shall also include charges fixed by law or agency for the
services of a public officer in the discharge of his official duties. (Art. 220 (!), !RR
implementing Sec. 131 (!), LGC)

c) Franchise - a right or privilege, affected with public interest which is conferred upon private

persons or corporations, under such terms and conditions as the goverment and its
political
subdivisions may impose in the interest of public welfare, security, and safety. (Sec. 131(m),

LGC)

d) Gross Sales or Receipts - the total amount of money or its equivalent representing the
contract price, compensation or service fee, including the amount charged or 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 returns, excise tax,
and
value-added tax (VAT). (Sec. 131-n, LGC)

e) Permit Fee - the allowable local government imposition intended to cover the cost of
regulation, inspection, and surveillance of a business or occupation. (. 126, Philippine
Law
on Local Government Taxation, Annotated 2000 edition, Ursa!)
f) Police Power - the power to prescribe regulations to promote the health, morals, peace,
education, good order or safty and general welfare of the people. (Sangalang, et al., vs. IA
C, 176 SCRA 179)

g) Service Charges - impositions for services rendered by local goverments, or

for conveniences furished. (p. 126, Philippine Law on Local Government Taation,
Annotated, 2000 edition, Ursa/)

h) Toll fe - a sum of money fr the use of something, generally applied to the consideration
which is paid for the use of a road, bridge, or the like, of a public nature. (Sec. 14, Cooley
on
Taation ih ed)

i) User's Charges - prices charged by local goverments for the use of public utilities.

Section 232. Common Revenue Raising Powers. -Local goverment units have common
revenue raising powers that allow them to impose the following:

a) Service Fees and Charges. - Local government units may impose and collect such
reasonable fes and charges fr services rendered. (Sec. 153, LGC)

b) Public Utility Charges - Local goverment units may fix the rates for the operation of
public utilities owned, operated and maintained by them within their jurisdiction. (Sec.
154,
LGC)

c) Toll Fees or Charges - The sanggunian concered may prescribe the terms and conditions
and fix the rates fr the use of any public road, pier or wharf, waterway, bridge, ferry or

telecommunication system funded and constructed by the local goverment unit concered:
Provided, That no such toll fes or charges shall be collected from officers and enlisted
men
of the Armed Forces of the Philippines and members of the Philippine National Police on

mission, post office personnel delivering mail, physically-handicapped, and disabled

citizens
who are sixty-five (65) years or older.

When public safty and welfare so requires, the sanggunian concered may discontinue the
collection of the tolls, and thereafer the said facility shall be free and open for public use.
(Sec. 155, LGC)

Section 233. Criteria in Determining the Reasonableness of Fees and Charges. - The
power to impose a tax, fee, or charge or to generate revenue under R. A. No. 7160 or the
Local Goverment Code of 1991, shall be exercised by the sanggunian of the local
goverment unit concerned through an appropriate ordinance. (Sec. 132, LGC)

Fees and charges shall be reasonable and commensurate with the cost of regulation, inspection
and licensing. In fixing the amount of fees and charges the following shall be considered:
l) In the absence of special authority to impose a tax to raise revenues, the fee for
regulation of usefl occupations may only be of an amount sufficient to cover the
expenses of issuing the license (permit fee) and the cost of the necessary inspection or
police surveillance, taking into account not only the expense of direct regulation but also all
other incidental consequences.

2) While local goverment units are allowed much wider discretion in fixing the amount
of license fes in the case of non-useful occupations, fees and charges must not be
unreasonable, oppressive, or tyrannical.

Section 234. Mayor's Permit. - All businesses are required to obtain Mayor's Permit before
they engage in any business within a city or municipality. This permit allows them the
privilege of conducting their business within the jurisdiction of the city or municipality.

The following procedures shall be observed in securing Mayor's Permit fr business:

1) Application fr Mayors' Permit. - An application for a Mayor's Permit shall be filed

with the Office of the City/Municipal Mayor. The frm fr the purpose shall be issued by
the Mayor's Office and shall set forth the requisite infrmation, including the name and
residence of the applicant, the description of business or undertaking that is to be
conducted, and such other data or infrmation as may be required. (Local Tx Regulation
No. 1-77, Department of Finance; p. 138, Philippine Law on Local Government
Taxation, Annotate, 2000 edition, Ursa!)

2) Documentation Requirements. - The following documents may be required, if

applicable:

A. For a newly started business:

a) Location sketch of the new business

b) Department of Trade and Industry (DTI) Registration Certificate with

approved Application Form, in case of single proprietorship

c) Securities and Exchange Commission (SEC) Registration and Articles of

Incorporation and By-Laws, in case of partnership or corporation

d) A certificate attesting to the tax exemption if the business is tax exempt

e) Certification fom the officer in charge of the zoning that the location of
the new business is in accordance with zoning regulations

f) Tax Clearance showing that the operator has paid all tax obligations in the
city/municipality

g) Barangay Clearance/proof of filing (In case of non-issuance of barangay clearance

within seven (7) working days fom the date of filing, the City/Municipality may issue
the permit to the applicant257

257
See Sec. 222 (c), this Manual
 h) Three (3) passport size pictures of the owner or operator or in cases of
partnership or corporation the pictures of the senior or managing partners and that of the
President or General Manager

i) Health Certificate for all food handlers, and those required under the
provisions of a duly-enacted revenue code

j) Community Tax Certificate

k) Contract of Lease, if renting

B. For renewal of existing business permit:

a) Mayor's Permit for the previous year

b) Copies of the annual or quarterly tax payments

c) Copies of all receipts showing payment of all regulatory fes as

provided
for in the Code

d) Certificate of Tax Exemption from local taxes or fees, if exempt

e) Audited Financial Statement with a gross income prescribed by the

BIR
fr the next preceding year

f BIR registration certificate and annual registration fe payment

g) Barangay Clearance

h) Declaration of previous year's gross sales/receipts

3) Inspection and other Requirements. - Upon submission of the application, it shall be

the duty of the proper authorities to verify if other city/municipal requirements regarding
the operation of the business or activity such as sanitary requirements, installation or
power and light requirements, as well as other safety requirements are complied with.
The permit to operate shall be issued only upon compliance with such safty
requirements and after the payment of the corresponding inspection fes and other
impositions required by the Revenue Code and other city/municipal tax ordinances.

4) Time and Manner of Payment. - The fee for the issuance of a Mayor's Permit shall be
paid to the City/Municipal Treasurer upon application, befre any business or
undertaking can be lawfully begun or pursued, and within the first twenty (20) days of
January of each year in case of renewal of the permit.
5) Issuance of Permit - A Mayor's Permit shall be secured for every separate or distinct
establishment or place where business is conducted (Art. 242 (a), !RR implementing Sec.
146, LGC). The following are the guidelines for the issuance of Mayor's Permit:

a) The Mayor's Permit shall be issued by the City/Municipal Mayor's Office upon
submission of official receipt issued by the City/Municipal Treasurer for the
payment of the business tax.

b) Every permit issued by the Mayor shall reflect the name and residence of the
applicant, his nationality and marital status; nature of the organization (whether
the business is a sole proprietorship, corporation or partnership, etc); location of
the business; date of issue and expiration of the permit; and other infrmation as
may be necessary.

c) The City/Municipality shall, upon submission of satisfactory proof that the

original of the permit has been lost, stolen or destroyed, issue a duplicate of the
permit upon the payment of a fe prescribed by ordinance.

6) Posting of Permit. - Every business owner shall keep his permit conspicuously posted at
all times in his place of business or office or if he has no place of business or office, he
shall keep the permit on his person. The permit shall be immediately produced upon
demand by the City/Municipal Mayor, the City/Municipal Treasurer or any of their duly
authorized representatives.

7) Duration of Permit and Renewal. - The Mayor's Permit shall be valid fr a period of
not more than one (1) year and shall expire on the thirty-first (31 51) of December
following the date of issuance, unless revoked or surrendered earlier. Every permit shall
cease to be in frce upon revocation or surrender thereof. The permit issued shall be
renewed within the first twenty (20) days of January. It shall have a continuing validity
only upon renewal and payment of the corresponding fe.

8) Revocation of Permit. - The Mayor's Permit may be revoked on the fllowing grounds:

a) When a person doing business under the provisions of the revenue code of the
city or municipality violates any of its provisions.

b) When the person refuses to pay any indebtedness or liability to the

city/municipality.

c) When the person abuses his privilege to do business to the injury of the public moral or
peace.

d) When such business is being conducted in a disorderly or unlawful manner, is a nuisance or

allows its premises to be used as a resort fr disorderly characters, criminal or women of ill-
repute.
 Such revocation shall operate to:

1.
1. frfeit all sums which may been paid in respect to said privilege, in addition to the fines
and imprisonment that may be imposed by the court or any provision of an enabling
ordinance govering the establishment and maintenance of business; and

1 2. prohibit the exercise of the business by the person whose privilege is revoked, until
restored.

9) Sanctions. - Any business establishments operating without Mayor's Permit shall be

subjected to penalties provided by law or ordinance.

a) Any flse statement deliberately made by the applicant shall constitute ground
from denying or revoking the permit issued by the Mayor, and the applicant or
licensee may be prosecuted in accordance with the penalties provided by
ordinance.

b) A Mayor's Permit shall not be issued to the following persons:

.
1. Any person who previously violated any ordinance or regulation
govering permits granted.

2. Any person whose business establishment or undertaking does not

conform with zoning regulations, and safety, health and other
requirements of the city/municipality.

3. Any person who has unsettled tax obligation, debt or other liability to
the goverment
4. Any person who is disqualified under any prov1s1on of law or
ordinance to establish or operate the business applied fr
5. Any person or applicant fr a business who declares an amount or
gross sales or receipts that are manifestly below industry standards or
the Presumptive Income Level of gross sales or receipts as established
in the city/municipality fr the same or a closely similar type of
activity or business

10) Computation of Fee for Mayor's Permit. -

a) The rates of Mayor's Permit fes shall not be based on ca fital investment or gross
sales or receipts of the person or business. (Art. 233 211' par., IRR implementing Sec. 147,
LGC)

b) The Mayor's Permit fee may be based on various schemes, as follows:

 1.
Fixed rates for each kind of business activity;

11. A schedule of graduated fixed rates fr each kind of business

activity;

iii. Grouping similar businesses or occupations and assigning a fixed

rate of permit fee for each group;

1v. Fixing or graduating the permit fee based on the number of

employees of business establishments. (A variation of schemes (a)
and (b)); and

v. Graduated rate based on the area being used by the business.

c) For a newly started business or activity that starts to operate after January 20, the
fe shall be reckoned fom the beginning of the calendar quarter.

d) When the business or activity is abandoned, the fe shall not be exacted for a
period longer than the end of the calendar or quarter. If the fee has been paid fr a
period longer than the current quarter and the business activity is abandoned, no
refnd of the fe corresponding to the unexpired quarter or quarters shall be
made.

Section 235. Fees fr Sealing and Licensing Weights and Measures. - (a) The municipality
may levy fees for the sealing and licensing of weights and measures at such reasonable rates as
shall be prescribed by the sangguniang bayan. (Sec. 148 (a), LGC) Cities are similarly
empowered to levy such fes. (Sec. 151, LGC)

(b) The sanggunian concered shall prescribe the necessary regulations for the use of such
weights and measures, subject to the guidelines prescribed by the Department of Science and
Technology. The sanggunian concerned shall, by appropriate ordinance, penalize fraudulent
practices and unlawful possession or use of instruments of weights and measures and
prescribed the criminal penalty in accordance with the provisions of R. A. No. 7160 or the
Local Goverment Code of 1991. However, the sanggunian may authorize the Local
Treasurer to settle an offense not involving the commission of faud before a case is filed in
court, upon payment of a compromise penalty of not less than Two Hundred Pesos
(P 200.00). (Sec. 148 (b), LGC)

(c) The ordinance of the sangguniang bayan may also embody such sanctions as may deem
appropriate as regards the use of any weight or measure not properly sealed or license in
accordance with the fregoing provisions, such as the confiscation of said illegal weight and
measure, or the revocation of the permit or license of the business, and/or the filing of
appropriate charges against the owner or operator of the business. (Art. 234 (c), IRR
implementing Sec. 148, LGC)
Section 236. Fishery Rentals, Fees and Charges. - (a) Municipalities shall have the exclusive
authority to grant fishery privileges in the municipal waters and impose rentals, fees or
charges
therefor in accordance with the provisions of this section (Sec. 149 (a), LGC). Cities are
similarly authorized to grant such privileges and impose such rentals, fees or charges. (Sec
151,
LGC

(b) Such rentals, fees and charges shall be imposed in accordance with the following provisions:

A. Fishery Privileges. - The sangguniang bayan may grant fishery privileges to erect
fish corrals, oyster, mussel or other aquatic beds or bangus fry areas, within a definite
zone of the municipal waters, as it may determine:

1) Provided further, That duly registered organizations and cooperatives of

marginal fisherman shall have the preferential right to such fishery privileges;

2) Provided, however, That the sangguniang bayan may require a public bidding
in confrmity with and pursuant to an ordinance fr the grant of such privileges; and

3) Provided finally, That in the absence of such organizations and cooperatives

or their filure to exercise their preferential right, other parties may participate
in the public bidding in conformity with the above cited provisions. (Sec. 149(b) (]), LGC)

B. Fishing Privileges for Marginal Fisherman. - The sangguniang bayan may grant
the privilege to gather, take or catch bangus fry, prawn fry, or kawag-kawag or fr of
other species and fish from the municipal waters by nets, traps, or other fishing gears
to marginal fisherman free from any rental, fee, charge or any other impositions
whatsoever. (Sec. 149 (b) (2), LGC)

C. Licensing of Fishing Vessels. - The sangguniang bayan may issue licenses for the
operation of fishing vessels of three (3) tons or less fr which purpose it shall promulgate
rules and regulations regarding the issuances of such licenses to qualified applicants
under existing laws.

D. Illegal Activities. - Provided however, That the sangguniang bayan concerned shall, by
appropriate ordinance, penalize the use of explosives, noxious or poisonous substances,
electricity, muro-ami, and other deleterious methods of fishing and prescribe a criminal
penalty therefor in accordance with the provisions of R. A. No. 7160 or the Local
Goverment Code of 1991. Provided, finally, That the sanggunian bayan concered
shall, have the authority to prosecute any violation of the provisions of applicable fishery
laws. (Sec. 149 (b) (3), LGC)

Section 237. Fees and Charges that May Be Imposed by Barangays. - Barangays may levy
fees and charges which shall accrue exclusively to them (Sec. 152, LGC, as fllows:
 1) Service Fees or Charges. - Barangays may collect reasonable fees or charges for
services rendered in connection with the regulation or use of barangay-owned properties
or service facilities such as palay, copra, or tobacco dyers. (Sec. 152 (b), LGC)

2) Barangay Clearance. - No city or municipality may issue any license or permit for
any business or activity unless a clearance is first obtained from the barangay where
such business or activity is located or conducted. For such clearance, the sanggunian
barangay may impose a reasonable fe. The application fr clearance shall be acted upon
within seven (7) working days from filing thereof. In the event that the clearance is not
issued within the said period, the city or municipality may issue the said license or permit.
(Sec. 152 (c), LGC)

3) Other Fees and Charges. -The barangay may also levy reasonable fees and charges:

1. On commercial breeding of fighting cocks, cockfights and cockpits;

.
2. Places of recreation which charge admission fes; and

3. Billboards, signboards, neon signs, and outdoor advertisements. (Sec.

152 (d), LGC)

Section 238. Fees and Charges that may be Imposed by Local Government Units.
-The
fllowing are some of the fes and charges that may be imposed by local goverment units:258

1) Registration and Transfer of Large Cattle

2) Permit Fee fr Excavations on Streets
3) Fee fr the Sealing and Licensing ofWeights and Measures
4) Permit Fee on Film Making Within LGUs Territory
5) Permit Fee for Agricultural Machinery and Other Heavy Equipment for Rent
6) Permit Fee on Occupations/Callings Not Requiring Goverment Examination
7) Permit Fee for the Storage of Flammable and Combustible Materials
8) Permit Fee on Certain Types of Machinery and Engines
9) Permit Fee for Temporary Use of Roads, Streets, Sidewalks, Alleys, Patios
10) Secretary's Fees
11) Local Civil Registry Fees
12) Police Clearance Fees
13) Sanitary Inspection Fees
14) Service Fees fr Health Examinations
15) Dog Registration and Vaccination Fees
16) Fishery Rentals, Fees and Charges
17) Service Charge fr Garbage Collection
18) Charges for Parking
19) Cemetery Charges
20) Slaughter and Corral Fees

258
Typical approaches in imposing and administering the fees and charges aforementioned are presented
under Chapter 3, Book V of this Manual.
 21) Toll Fees or Charges
22) Permit Fee fr Cockpit Owner/Operators/Licensees/Promoters and Cockpit Personnel
23) Permit Fee for the Conduct ofGroup Activities

Section 239. Fees and Charges Collected by Local Government Units for the National
Government. - Certain fes and charges imposed by the National Goverment on businesses
and activities are collected on its behalf by the local goverment units. It is the duty of the Local

Treasurer concered to collect fees and charges and to remit collections promptly in
accordance
with law or issuance, authorizing the local goverment unit to undertake the collection.

A. Fire Safety Inspection Fee -

1) The Fire Safety Inspection Certifcate shall be issued upon payment by the applicant
of a fe equivalent to ten percent (10%) of all fes charged by the building official,
goverment agencies concered in the granting of pertinent permits or licenses. (Sec.
I, 206, P.D. No. 1185259)

2) The Annual Fire Inspection Fee should not exceed the amount equivalent to one tenth
percent (0.01%) of the assessed value of the building or structure. To partially
provide for the funding of the Fire Service, the fllowing taxes and fees are imposed:
(Sec. 13-b, P. D. No. 1185)

1. One-tenth of one per centum (0.01%) of the verifed estimated value

ofbuildings or structures to be erected, to be collected fom the owner,
but not to exceed Fifty Thousand Pesos (P 50,000.00), one half (1/2) to
be paid prior to the issuance of the Building Permit, and the balance
after final inspection and prior to the issuance of the Use and
Occupancy Permit.

11. One-hundredth of one per centum (0.01%) of the assessed value of

buildings or structures annually payable upon payment of the real
estate tax, except on structures used as single fmily dwellings. 260

B. Fees and Charges fr National Meat Inspection Commission Services. -The fes and
charges fr services rendered by the National Meat Inspection Commission (NMIC) are
subject to the rates prescribed under Article 17 (d) ofR. A. No. 7394261, on the following:

1) Ante-Mortem Inspection Fees;

2) Post-Mortem Inspection Fees;
3) Accreditation Fees of Slaughterhouses, Poultry Dressing Plants,
Meat Processing Plants, Meat Cold Storage and Meat Delivery Van;
4) Meat Import and Export Clearance and Inspection Fees;
5) Fees for the Issuance of License to Meat Handlers; and

259
Fire Code ofthe Philippines
260
Cited in BLGF 3rd Jndorsement, June 15, 1995 to the Municipal Treasurer of!pi/,
Zamboanga de/ Sur) 261 The Consumer Act ofthe Philippines
 6) Laboratory Fees for the Examination of Meat and Meat Products:

a) Pathological Examination
b) Parasitological Examination
c) Microbiological Examination
d) Chemical Examination
e) Oranoleptic Examination

Section 240. Building Permit. - No person, firm or corporation, including any agency or
instrumentality of the goverment, shall erect, construct, alter, repair, move, convert, or demolish
any building or structure or cause the same to be done without first obtaining a building permit
from the building official assigned in the place where the subject building is located or the
building work is to be done. (Sec. 301, P. D. No., 1096262)
A. Payment of Related Fees and Charges. - The corresponding fees and charges shall be
collected fr services rendered in connection with the processing and issuance of building
permit fes, signboard permit fee, plumbing inspection permit fe, sanitary inspection fees,
mechanical installation and inspection fees and such other impositions as may be
prescribed
by the Department of Public Works and Highways from persons, firms and corporations
before they are allowed to erect, construct, alter, move, convert or demolish any public or
private building or structure within the city/municipality in the exercise of regulatory powers

over public buildings and structures.

B. Issuing Official. - The City/Municipal Engineer shall be responsible for the issuance of
building and other permits and the computation of the correct regulatory fes. Payments shall
be paid at the Treasurer's Office.

Section 241. Permit Fee for Zoning and Locational Clearance Permit. - (a) There shall be
collected a Mayor's Permit Fee for Zoning/Locational Clearance for all structures to be
constructed in the city/municipality in accordance with existing ordinances and Housing and
Land Use Regulatory Board (HLURB) guiding rates.

(b) Time and Manner of Payment. - The fees shall be paid by the applicant or his
representatives to the City/Municipal Treasurer when zoning/locational clearance is granted.

(c) Administrative Provisions - The City/Municipal Mayor shall administer the provision of
existing ordinances, executive orders, laws relating to and govering zoning/locational clearance.

(d) Coverage. - The following developments and activities are covered:

A. Zoning/Local Clearance:

a) Residential structure, single or detached other than apartments/townhouses,

dormitories, and subdivisions/condominium projects

b) Apartments
262
National Building Code
 c) Dormitories
d) Institutions
e) Commercial, industrial, agro-industrial projects
t) Special uses/special projects
g) Alterations/Expansions (affected areas/cost of expansion only)
B. Subdivisions and Condominium Projects/Activities (P. D. No. 957263):

a) Approval of Subdivision Plan (including Townhouse):

1) Preliminary Approval and Locational Clearance - for every

additional hectare or a faction thereof
2) Final Approval and Development Permit - additional fee on floor area of
houses/building sold with the lot
3) Inspection Fee
4) Alteration of Plans (affected areas only)
5) Certificate of Registration and License to Sell (per saleable lot)
6) Additional fee on floor area of house/buildings sold with the lot; and
7) Certificate of Completion (per hectare)

b) Approval of Condominium Project (under P.O. No. 957):

1) Preliminary Approval and Locational Clearance (PA/LC):

• Land Area
• Building
2) Final Approval & Development Permit:
• Per square meter of the total land area
• Additional cost on the area of the building
3) Inspection Fee
4) Alteration (affected areas only)
5) Conversion (affected areas only)
6) Certificate of Registration and License to Sell:
• Residential (per square meter of saleable area)
• Commercial/office (per square meter of saleable area)
7) Certificate of Completion

c) Projects under B.P. Big. 220264:

1) Subdivision:

a) Preliminary Approval and Locational Clearance:

• Socialized Housing
• Economic Housing
263
An Act Regulating the Sale of Subdivision Lots and Condominiums, Providing Penalties/or Violation Thereof
264
An Act Authorizing the Ministry of Human Settlements to Establish cnd Promulgate Dierent Levels
of Standards and Technical Requirements for Economic and Socialized Housing Projects in Urban and
Rural Areas from those Provided under P. D. Nos. 957, 1216, 1096 and 1185
 b) For every additional hectare or a faction thereof:
• Socialized Housing
• Economic Housing
c) Final Approval & Development Permit
d) Inspection Fee:
• Socialized Housing
• Economic Housing
e) Alteration of Plan (affected areas only)
t) Building Permit (per square meter of floor area of housing unit)
g) Certificate of Registration & License to Sell:
• Socialized Housing
• Economic Housing
h) Certificate of Completion (per hectare or a faction of land area)
i) Certificate of Occupancy (per square meter of floor area of the housing
unit)

2) Simple Subdivision:

a) Approval
b) Inspection Fee

3) Condominium:

a) Preliminary Approval & Locational Clearance

b) Final Approval & Development Permit:
• Per square meter of total land area
• Additional cost per square meter of housing unit
c) Inspection fe (per square meter of total saleable floor area)
d) Alteration of Plan (affected areas only)
e) Building permit (per square meter of housing unit)
t) Certificate of Registration & License to Sell
g) Certificate of Completion
h) Certificate of Occupancy

d) Approval of Industrial Subdivision:

1) Preliminary Approval and Locational Clearance:

a) First five (5) hectares
b) Every additional hectare or a fraction thereof

2) Final Approval & Development Permit of location Inspection Fee:

a) Alteration of Plan (affected areas only)
b) Certificate of Registration & License to Sell
c) Certificate of Completion

e) Approval of Commercial Subdivision:

 1) Preliminary Approval and Locational Clearance:
• First two (2) hectares
• Every additional hectare or fraction thereof
2) Final Approval and Development Permit
3) Inspection Fee
4) Alteration of Plan (affected areas only)
5) Certificate of Registration & License to Sell
6) Certificate of Completion

f Approval of Farmlot Subdivision:

1) Preliminary Approval and Locational Clearance:

• First five (5) hectares
• Every additional hectare
2) Final Approval and Development Permit
3) Inspection Fee
4) Alteration of Plan (affected areas only)
5) Certificate of Registration & License to Sell
6) Certificate of Completion

g) Approval of Memorial Park/Cemetery Project:

1) Preliminary Approval and Locational Clearance:

• Memorial Projects
• Cemeteries
2) Every additional hectares or a fraction thereof:
• Memorial Project
• Cemeteries
3) Final Approval & Development Permit:
• Memorial Projects
• Cemeteries
4) Inspection Fees:
• Memorial Projects
• Cemeteries
5) Alteration of Plan (affected areas only)
6) Certificate of Registration and License to Sell (per saleable plot):
• Memorial Projects
• Cemeteries
7) Certificate of Completion:
• Memorial Projects
• Cemeteries

C. Other Transactions/Certifications:
 a) Application/Request fr:

1) Advertisement Approval
2) Cancellation/Reduction of Performance Bond
3) Lifting of Suspension of License to Sell
4) Extension of Time to Complete Development
5) Exemption fom Cease and Desist Order
6) Clearance to Mortgage
7) Lifting of Cease and Desist Order
8) Change of Name/Ownership
9) Voluntary Cancellation of CR/LS
10) Revalidation/Renewal of Permit (condominium)

D. Other Certifications:

a) Zoning Certifications
b) Certificate of Town Plan/Zoning Ordinance Approval
c) Certificate of New Rights/Sales
d) Certificate of Locational Viability
e) Certificate of Registration and License to Sell (form)
f) Others to include:
• Availability of records/public request of copies/research works
• Certificate of no records on file
• Certificate of with or without CR/LS
• Certified true copies of documents

E. Registration of Dealers/Brokers/Salesmen:

a) Dealers/Brokers
b) Salesmen/Agent

Section 242. Motorized Tricycle Operator's Permit. - The sangguniang bayan or

panlungsod shall, subject to the guidelines prescribed by the Department of Transportation
and Communications (DOTC), regulate the operation of tricycles and grant fanchises
for the operation thereof within the territorial jurisdiction of the municipality or city. (Sec.
447 a) (3)(vi), LGC)

The issuance of licenses to tricycle drivers and charging of fes for the registrations of
tricycles are under the jurisdiction of the Land Transportation Office (LTO).

a) Definition of Terms. - The following terms as used in relation to the regulation of

the operation of motorized tricycles shall refer to:

1) Motorized Tricycle - a motor vehicle propelled other than by muscular power,

composed of a motorcycle fitted with a single wheel sidecar or a motorcycle with
a two-wheeled cab, the former having a total offour (4) wheels, otherwise known as the
motorela.

2) Tricycle Operators - persons engaged in the business ofoperating tricycle.

3) Tricycle-fr-Hire - a motorized tricycle operated to render transport services to

the general public for a fee.

4) Motorized Tricycle Operator's Permit. 265 - a document granting franchise or

license to a person, natural or juridical, allowing to operate tricycle-for-hire over
specified zones.

5) Zone - a contiguous land area or block, such as a subdivision or barangay, where

tricycle-for-hire may operate without a fixed origin and destination.

b) Annual Franchise Fee. - The city or municipality may, through a duly approved ordinance,
fix, impose and collect an annual franchise fee for the operation of motorized tricycle-for
hire.

c) Other Fees on Motorized Tricycle Operations. - In addition to the annual franchise fee,
the city or municipality may, also by passing the appropriate legislation, fix and collect
other
fees on motorized tricycle-for-hire operations, such as but not limited to the following:

1) Filing fe (when applying fr franchise)

2) Fare adjustment fee for fare increase
3) Filing fee for amendment ofMTOP

d) Guidelines in the Payment of Fees:

1) Prospective operators oftricycle should first secure MTOP from the sanggunian;

2) The fe shall be paid to the City/Municipal Treasurer upon application or renewal

ofthe permit;

3) The filing fe shall be paid upon application for an MTOP based on the number of
units;

4) Filing fee for amendment ofMTOP shall be paid upon application for transfer to
another zone, change ofownership ofunit or transfr ofMTOP.

e) Scope of Franchising Power of the Sanggunian. - The sanggunian ofthe city/municipality

shall:

1) Issue, amend, revise renew, suspend, or cancel the MTOP;

2) Prescribe the appropriate terms and conditions ofthe MTOP;

265
MOP
3) Prescribe and regulate zones of service in coordination with the barangay;

4) After public hearing, determine, fix, prescribe or periodically adjust fares or rates
for the service provided in a zone;

5) Fix, impose and collect, and periodically review and adjust but not ofener than
once every three (3) years, reasonable fes and other related charges in the
regulation of tricycle fr hire and;

6) Establish and prescribe the conditions and qualifications of service.

t) Other Provisions. - In the exercise of the regulatory powers of the sanggunian, the
fllowing additional provisions are to be observed:

1) Fares. - The sanggunian shall establish a fre structure that will provide the operator a
reasonable retur or profit and still be affordable to the general public:

a) The fare structure may either be flat (single fre regardless of distance) or a
minimum amount plus a basic rate per kilometer;

b) The official rate to be initially adopted shall be minimum fee fixed by way of an
ordinance;

c) Operators of tricycle-for-hire are required to post in a conspicuous part of the

tricycle the schedule of fres.

2) Zoning and Coding. - The sanggunian may impose a common color for
tricycles-fr-hire in the same zone. Each tricycle shall be assigned and bear an
identification number, aside fom its license plate number issued by the Land
Transportation Office.

Any zone must be set within the boundaries of the city/municipality. Existing
zones that extend beyond the territorial limits of the city/municipality to other
adjoining municipalities or cities shall be maintained, provided, the operator
serving the said zone secures the MTOPs that may be required by the sharing
municipalities.

4) Registry of Operators. - The City/Municipal Treasurer shall keep a registry of all

tricycle operators which shall, among others, include the name and address of the
operators and the number and brand of tricycles owned and operated by the said
operators.

5) Regulatory Board. - A City/Municipal Tricycle Operator's Permit Regulatory Board

shall be constituted, the membership of which shall be determined by the sanggunian.

Section 243. Registration and Transfer of Large Cattle. -

A. Registration Requirements:

1) Certificate of Ownership. - The owner of large cattle is hereby required to register

ownership of said cattle with the City/Municipal Treasurer for which a Certificate of
Ownership shall be issued to the owner upon payment of a registration fee fixed by an
ordinance.

2) Certificate of Transfer. - When large cattle is sold or its ownership is transferred to

another person, the sale or transfer shall be registered with the City/Municipal Treasurer,
fr which a Certificate of Transfer shall be issued to the purchaser or new owner upon
payment of a transfer certificate fee in an amount fixed by ordinance.

3) Registration of Owner's Brand. - The owner of large cattle shall register his owner's
brand with the City/Municipal Treasurer and pay the brand registration fee provided by
ordinance.

B. Guidelines in the Registration of Large Cattle:

1) Large cattle shall be registered with the Office of the City/Municipal Treasurer upon
reaching the age of two (2) years.

2) The ownership of large cattle or its sale or transfr of ownership to another person shall
be registered with the Office of the City/Municipal Treasurer. All branded and counter
branded large cattle presented to the City/Municipal Treasurer shall be registered in a
book showing among others, the name and residence of the owner, the consideration or
purchase price of the animal in cases of sale or transfr, and the class, color, sex, brands
and other identification marks of the cattle. These data shall also be stated in the
certificate of ownership issued to the owner of the large cattle.

3) The transfr of the large cattle, regardless of its age, shall be entered in the registry book
setting forth, among others, the names and the residences of the owners and the
purchaser, the consideration or purchase price of the animal fr sale or transfer, class,
sex, brands and other identifing marks of the animals; and a refrence by number to the
original Certificate of Ownership with the name of the city/municipality who issued it.

4) No entries of transfr shall be made or certificate of transfr shall be issued by the

City/Municipal Treasurer except upon the production of the original Certificate of
Ownership and Certificate of Transfer and such other documents showing title to the
owner.

5) All other matters relating to the registration of large cattle shall be govered by the
pertinent provisions of the Revised Administrative Code and other applicable laws,
ordinances and rules and regulations.

Section 244. Permit Fee for Excavation on Streets. -

A. General Provision. - There shall be collected a fee on every person who shall make or cause
to be made any excavation on public or private streets within the city/municipality, such as:

1) For crossing streets with concrete pavement.

2) For crossing streets with asphalt pavement.
3) For crossing streets with gravel pavement.
4) For crossing existing curbs and gutters resulting in damage.
5) Additional fee for every delay in excess of excavation period provided in the
Mayor's Permit.

B. Guidelines for Excavation on Public or Private Streets:

1) No person shall undertake or cause to undertake any digging or excavation, on any part

or portion of the municipal streets unless a permit shall have been first secured from the
Office of the City/Municipal Mayor, specifying the duration of the excavation.

2) The City/Municipal Engineer/Building Official shall supervise the digging

and
excavation and shall determine the necessary width of the streets to be dug or excavated.
Said official shall likewise inform the City/Municipal Treasurer of any delay in the
completion of the excavation work for purposes of collection of the additional fe.

3) In order to protect the public from any danger, appropriate signs must be placed in the
area where work is being done.

Section 245. Permit Fee fr Sealing and Licensing of Weights and Measures. -

A. General Provision. - Every person befre using instruments of weights and measures for
business, service, commercial, or other transactions with the public within
the
city/municipality, shall first have them sealed and pay the corresponding fee, fixed under
an
ordinance, to the City/Municipal Treasurer.

B. Instruments Usually Covered - Sealing shall include the fllowing instruments:

1) linear metric measures.

2) metric measures of capacity.
3) metric instruments of weights.
4) apothecary balances of precision.
5) scales or balances with complete set of weights.

For each and every re-testing and re-sealing of weights and measuring instruments including
gasoline pumps outside the office upon request of the owner or operator, an additional
service charge to be fixed by ordinance fr each instrument shall be collected.
C. Exemptions:
1) All instruments fr weights and measures used in goverment work or maintained for
public use by any instrumentality of the goverment shall be tested and sealed free.

2) Dealers of weights and measuring instruments intended for sale.

D. Administrative Provisions:

1) Unless otherwise provided by ordinance, law or other valid order, the official receipt fr
the fe issued fr the sealing of weight or measure shall serve as a license to use such
instrument for one (1) year from the date of sealing, unless deterioration or damage
renders the weight or measure inaccurate within the period.

Unless otherwise provided, the license shall be preserved by the month of the year
following its original issuance. Such license shall be preserved by the owner and together with
the weight or measure covered by the license shall be presented (exhibited) on demand by
the City/Municipal Treasurer or his deputies.

2) The City/Municipal Treasurer is hereby required to keep fll sets of secondary standards
which shall be compared with the fundamental standards in the Department of Science
and Technology annually. When fund to be within accepted tolerances, the secondary
standards shall be distinguished by label, tag or seal and shall be accompanied by a
certificate showing the degree of their variation fom the fndamental standards. If the
variation is of sufficient magnitude to impair the utility of instrument, it shall be
destroyed at the Department of Science and Technology.

3) The City/Municipal Treasurer or his deputies shall conduct periodic physical inspection
and test of weights and measures instruments within the locality.

4) Instruments of weights and measures fund to be defective beyond repair shall be

confiscated in favor of the goverment and shall be destroyed by the City/Municipal
Treasurer in the presence of the City/Provincial Auditor or his representative.

E. Fraudulent Practices and Corresponding Penalties:

1) Fraudulent practices relative to weights and measures. - It shall be considered a

faudulent practice for any person other than the official sealer of weights and measures
to:

a) Place an official tag or seal upon any instrument of weights and measures or attach it
thereto.

b) Fraudulently imitate any mark, stamp or brand, tag or other characteristic sign used to
indicate that the weights and measures have been officially sealed.

c) Alter in any way the certificate given by the sealer as an acknowledgement that the
weights and measures mentioned therein have been duly sealed.
 d) Make or knowingly sell or use any flse or counterfit stamps, tag, certificate, license,
or any dye for printing or making stamps, tags, certificates, or licenses which is an
imitation of or purports to be a lawfl stamp, tag, certificate or license required.

e) Alter the written or printed figures or letters on any stamp, tag, certificate of license
used or issued.

f) Have in his possession any such false, counterfeit restored or altered stamp, tag,
certificate, or license for the purpose of using or re-using the same in payment of fees
or charges.

g) Procure the commission of any such offense by another.

A person who commits any of the offences above shall, for each offense, be fined an
amount or imprisoned or, at the discretion of the court, both fined and imprisoned in
accordance with the amounts and terms imposed under an ordinance duly enacted by the
sanggunian of the local goverment unit.

h) Any person with fraudulent intent, alters any scale or balance, weight or measure
after it is officially sealed or who knowingly uses any false scale or balance, weight
or measure, whether sealed or not shall be punished by a fine of an amount fixed in
the ordinance or by imprisonment for a period prescribed therein, or both, at the
discretion of the court.

i) Any person who fraudulently gives short weight or measure in the making of a sale,
or who fraudulently takes excessive weight or measure in the making of a purchase,
or who, assuming to determine truly the weight or measure of any article bought or
sold by weight or measure, fraudulently misrepresents the weights or measures
thereof shall be punished by a fine of an amount fixed by an ordinance or by
imprisonment fr a period prescribed therein, or both at the discretion of the court.

2) Unlawful possession or use of instrument not sealed before using and not sealed
within the period prescribed. - Any person with the practice of buying or selling goods
by weights and/or measures, or of furishing services the value of which is estimated by
weight or measure who has in his possession, without permit, any unsealed scale,
balance, weight or measure, and any person who uses in any purchase or sale or in
estimating the value of any service frnished, any instrument of weight or measure that
has not been officially sealed, or if previously sealed, the license therefor has expired and
has not been renewed in due time shall be punished by a fine of an amount imposed in
the ordinance or by imprisonment for a period prescribed therein, or both at the discretion
of the court.

If, however, such scale , balance, weight or measure, has been officially sealed at some
previous time and the seal and tag officially affixed thereto remain intact and in the same
position and condition in which they were placed by the official sealer, and the
instrument is found not to have been altered or rendered inaccurate but still to be
 sufficiently accurate to warrant its being sealed without repairs or alterations such
instruments shall, if presented fr sealing promptly on demand of an authorized sealer or
inspector of weights and measures, be sealed, and the owner, possessor, or user of the
same shall be subject to no penalty except a surcharge to be fixed by ordinance plus the
regular fee fixed by law for the sealing of an instrument of its class, this surcharge to be
collected and accounted for by the City/Municipal Treasurer in the same manner as the
regular fes fr sealing such instruments.

3) Administrative Penalties:
a) Any person with the practice of buying or selling by weight and measure using
unsealed and/or unregistered instrument shall be penalized an amount fixed in an
ordinance:

1. When correct
11. When incorrect, but within tolerable allowance of defect or short measure

b) Failure to produce weight and measure tag or license or certificate upon demand,
but the instrument is duly registered:

1. When correct
11. When incorrect, but within tolerable allowance of defect or short measure

c) Any person found violating any of the above two (2) provisions for the second
time shall be fined twice the above penalty.

d) Recommendation shall be made to the Mayor for the closure of business

establishments using fraudulent weights and measures.

Section 246. Permit Fee on Film-Making within the Territory of the Local
Government Unit. - There shall be collected a permit fee from any person who shall
go on location-filming within the territorial jurisdiction of the city/municipality, such
as:

a) Commercial movies
b) Commercial advertisements
c) Documentary film
d) Videotape coverage

Section 247. Permit Fee on Agricultural Machinery and Other Heavy Equipment
for Rent. - There shall be collected an annual fee for each agricultural
machinery or heavy equipment from operators of said machinery, renting out said
equipment in the city/municipality such as but not limited to the following:

a) Hand Tractors
b) Light Tractors
c) Heavy Tractors
 d) Bulldozers
e) Forklifts
f) Heavy Graders
g) Light Graders
h) Mechanized Threshers
i) Manual Threshers
j) Cargo Trucks
k) Dump Trucks
l) Payloaders
m) Prime Movers/Flatbeds
n) Backhoes
o) Rock Crushers
p) Batching Plants
q) Transit/Mixer Trucks
r) Cranes
s) Other Agricultural Machinery and Heavy Equipment

Section 248. Permit Fee on Occupation or Calling not Requiring Government

Examination.

A. General Provision. - There shall be collected an annual fee for the issuance of Mayor's
Permit to every person who shall be engaged in the practice of occupation or calling
not requiring goverment examination.

B. Common Occupations or Callings. - The application of these fes generally are applied but
need not cover, nor are limited to the following common classifications or groups of
occupations and callings:

1) Employees and workers m generally considered "offensive and dangerous

business establishments".

2) Employees and workers in commercial establishments who cater or attend to

the daily needs of the inquiring or paying public.

3) Employees and workers in food or eatery establishments.

4) Employees and workers in night or night and day establishments.

5) All occupations or callings subject to periodic inspection, surveillance and/or

regulations by the City/Municipal Mayor, such as, animal trainer; auctioneer;
barber; bartender; beautician; bondsman; bookkeeper; butcher; blacksmith;
criminologist; electrician; electronic technician; club/floor manager; frensic
electronic expert; fortune teller; guest relations officer; hair stylist;
handwriting expert; hospital attendant; lifguard; magician;
make-up artist; manicurist; masonry worker; masseur attendant; mechanic; certified
hilot; painter; musician; pianist; photographer (itinerant); professional boxer;
private ballistic
 expert; rig driver (cochero); taxi driver; stage-performer; salesgirl; sculptor; waiter or
waitress; and welder and other occupation/calling
.
C. Exemptions. - All professionals who are subject to the city/provincial tax imposition
pursuant to Section 139 of R. A. No. 7160 or the Local Goverment Code of 1991, 266 and
government employees are exempted from payment of this fee

D. Persons Usually Covered: The fllowing workers or employees whether working on

temporary or permanent basis, shall secure the individual's Mayor's Permit prescribed
under the ordinance.

l) Employees or workers in generally considered offensive and dangerous business

establishments such as but not limited to the following:

a) Employees or workers in industrial or manufacturing establishment such as

aerated water and soft drink fctories; air rifle and pellets manufacturing;
battery charging shops; blacksmith; breweries; candy and confectionery
factories; canning factories; coffee, cocoa and tea factories; cosmetics and
toiletries fctories; cigar and cigarette factories; construction and/or repair
shops of motor vehicles; carentry shop; drug manufacturing; distillers; edible
oil or lard factories; electric bulbs or neon lights factories; electric plant;
electronics manufacturing; oxidizing plants; food and flour· mills; fish curing
and drying shops; footwear factories; foundry shops; frniture manufacturing;
garments manufacturing; general building and other construction jobs during
the period of construction; glass and glassware factories; handicraft
manufacturing; hollow block and tile fctories; ice plants; milk, ice cream and
other allied products fctories; metal closure manufcturing; iron steel plants;
leather and leatherette factories;, machine shops; match factories; paints and
allied products manufcturing; plastic products factories; perfume factories;
plating establishment; pharmaceutical laboratories; repair shops of whatever
kind and nature; rope and twine factories; sash factories; smelting plants;
tanneries; textile and knitting mills; upholstery shops; vulcanizing shops and
welding shops.

b) Employees and workers in commercial establishments, cinematography film

storage, cold storage or refrigerating plants, delivery and messengerial
services, elevator and escalator services, funeral parlors, janitorial services,
junk shops, hardwares, pest control services, printing and publishing houses,
service stations, slaughterhouses, textile stores, warehouses and parking lots.

c) Employees and workers on other industrial and manufacturing firms or

commercial establishments who are normally exposed to excessive heat, light, noise, cold and
other environmental factors which endanger their physical and health well-being.

266
See Sec. 205, this Manual
2) Employees and workers in commercial establishment who generally enter or attend to the
daily needs of the general public such as but not limited to the following: Employees and
workers in drugstores, department stores, groceries supermarkets, beauty saloons, tailor
shops, dress shop, bank teller, receptionist, receiving clerk in paying outlets of public
utilities corporation except transportation companies, and other commercial
establishment whose employees and workers attend to the daily needs of the inquiring or
paying public.

3) Employees and workers in fod or eatery establishments such as but not limited to the
fllowing:

a) Employees and workers in canteen, carinderia, catering services, bakeries, ice cream or
ice milk factories, refreshment parlor, restaurants, sari-sari stores, and soda funtains.

b) Stallholders, employees and workers in public markets.

c) Peddlers of cooked or uncooked food.

d) All other food peddlers, including peddlers of seasonal merchandise.

4) Employees or workers in night or night and day establishments such as but not limited to
the fllowing:

a) Workers or employees in bars, boxing stadium, bowling alleys, billiards and

pool halls, cinema houses, cabarets and dance halls, cocktails lounges,
circusses, carivals and the like, day clubs and night clubs, golf clubs,
massage clinics, sauna baths, or similar establishments, hotels, motels, horse
racing clubs, pelota courts, polo clubs, private detective or watchman security
agencies, supper clubs and all other business establishments whose business
activities are perfrmed and consumed during night time.

b) Provided, That in the case of night and day clubs, night clubs, day clubs,
cocktail lounges, bars, cabarets, sauna bath houses and other similar places of
amusements, they shall under no circumstances allow hostesses, waitresses,
waiters, entertainers, or hospitality girls below 18 years of age to work as
such. Workers who shall secure the individual Mayor's Permit on their 18 1h
birth year, shall present their baptismal or birth certificate duly issued by the
local civil registrar concered.

5) All other employees and persons who exercise their profssion, occupation or calling
within the jurisdiction limits of the city/municipality aside from those above mentioned.

E. Surcharge fr Late Payment. - Failure to pay the fee within the time prescribed shall
subject a taxpayer to a surcharge of twenty-five percent (25%) of the original amount of the
fee due, such surcharge shall be paid at the same time and in the same manner as the tax due.
F. Other Provisions:

1) In the case of single proprietorships, if the business changes ownership or relocates

fom one city/municipality to another, it shall be the duty of the new owner, agent or
manager of such business to secure a new permit as required and pay the
corresponding permit fee as though it were new business

2) Newly hired workers and/or employees employed in the covered occupations shall
secure their individual Mayor's Permit from the moment they are actually accepted
by the management of any business or individual establishments to start working.

3) The Treasurer shall keep a record of persons engaged in occupation and/or calling not
requiring goverment examination and the corresponding payment of fes required
under personal data for refrence purpose.
Section 249. Permit Fee for the Storage of Flammable and Combustible Materials. -

A. Basic Provisions. - There shall be collected an annual permit fee fr the storage of
combustible materials at the rates fixed by an ordinance on the fllowing:

1) Storage of gasoline, diesel, fel, kerosene and similar products.

2) Storage of cinematographic film.
3) Storage of celluloid.
4) Storage of calcium carbide.
5) Storage of tar, resin, nd similar materials.
6) Storage of coal deposits.
7) Storage of combustible, flammable or explosive substance not mentioned above.

No person shall keep or store at his place of business any of the above cited
flammable, combustible or explosive substance without securing a permit therefor.

B. Exemption. - Gasoline or naptha not exceeding the quantity of one hundred (100)
gallons, kept in and used by launches or motor vehicles, shall be exempt from the permit
fee herein required.

C. Monitoring/Compliance. - The Mayor shall promulgate regulations for the proper

storing of said substances and shall designate the proper official who shall be in charge of
ensuring compliance with the provisions of the ordinance.

Section 250. Permit Fee on Certain Types of Machineries and Engines. - There shall be
imposed an annual fee fixed by an ordinance on the fllowing but not limited to:

1) Interal combustion engines

2) Other stationary engines or machines
3) Electrical generators

The basis fr the fe generally is the need to regulate machinery and equipment that may
be considered pollutive, or hazardous when operated without care or in certain locations or
under certain conditions, or that may create a nuisance (e.g., noise, vibrations). Other
reasonable bases for regulation may also be considered.

Section 251. Permit Fee for Temporary Use of Roads, Streets, Sidewalks, Alleys, Patios,
Plaza and Playgrounds.

a) General Provision. - Any person who shall temporarily use and/or occupy a street,
sidewalk, or alley or portion thereof in the city/municipality in connection with their
construction works and other purposes, shall first secure a permit from the Mayor and pay a
fee in accordance with the ordinance.
b) Exemptions. - For wakes and other charitable, religious and educations purposes, use and/or
occupancy is exempted from the payment of permit fe provided the proper permit is secured

before such use and/or occupancy.

Section 252. Permit Fee for the Conduct of Group Activities.

A. General Provision. - Every person who shall conduct or hold any program or activity
involving the grouping of people within the jurisdiction of the city/municipality shall obtain

Mayor's Permit for every occasion and pay to the City/Municipal Treasurer the

corresponding fee imposed under an ordinance:

1) Conference, meetings, rallies and demonstrations in outdoor, in parks, plazas,

roads/streets
2) ·Dances
3) Coronation and ball
4) Premiere showing
5) Pop/rock concerts
6) Promotional sales
7) Other Group Activities

B. Exemptions. - Programs or activities conducted by educational, charitable, religious and

govermental institutions free to the public shall be exempt from the payment of the
fe
herein imposed: Provided, That the appropriate Mayor's Permit shall be secured befrehand.
However, programs or activities requiring admission fes for attendance shall be subject
to
the fees herein imposed even if they are conducted by exempt entities.

Section 253. Secretary's Fees. -

A. General Provision. - There shall be collected the fees fixed in an Ordinance fom every
person requesting for copies of official records and documents from the offices of the
city/municipality.

B. Usual Coverage:

1) For every page or fraction thereof, typewritten (not including the certification and
notation):

a) Typewritten

b) Computerized print-out

2) For each certificate of correctness (with seal of office) written on the copy or attached
thereto:
1) For certifying the official act of the City/Municipal Judge or other judicial
certificate
with seal.
 2) For certified copies of any papers, records, decrees, judgment or entry of which any
person is entitled to demand and received a copy (in connection with judicial
proceeding) fr each page.

3) Photocopy or any other copy produced by copying machine, per page.

C. Exemption. - The fees imposed shall not be collected for copies furished to other offices

and branches of the goverment for official business, except for those copies required by the
court at the request of the litigant, in which case, charges shall be in accordance with the
prescribed rates under an ordinance.

Section 254. Local Civil Registry Fees. -

A. General Provision. - There shall be collected for services rendered by the Local Civil

Registrar of the city/municipality the fees, fixed under an ordinance, on the

fllowing:

1) Marriage Fees:

a) Application for Marriage License;

b) Marriage License Fee; and
c) Marriage Solemnization Fee.

2) For registration of the following:

a. Legitimation;
b. Adoption;
c. Annulment of Marriage;
d. Divorce/Legal Separation;
e. Naturalization;
f. Change ofName; and
g. Other legal documentation for record purposes.

3) For certified copies of any document in the register, fr each page.

4) Burial Fees

a) Burial Permit Fee or transfr ofcadaver

b) Fee for exhumation of cadaver
c) Fee for removal of cadaver

B. Exemption. - The fee herein imposed shall not be collected in the fllowing cases:

l) Issuance of certified copies of documents for official use at the request of a

competent court or other goverment agency, except those copies required by
the courts at the request of litigants, in which case the fee should be collected.
 2) Issuance of Birth Certificates of children reaching school age when such certificates are
required for admission to the primary grades in a public school.

3) Burial Permit of a pauper, per recommendation of the City/Municipal Mayor.

Section 255. Police Clearance. -

1) Purpose. - Fees shall be fixed by ordinance and paid for each Police Clearance Certificate
obtained from the Station Commander of the Philippine National Police
(PNP) of the city/municipality for the following purposes:

a) Change of name
b) Application fr Filipino citizenship
c) Passport or visa application
d) Firearms permit application
e) PLEB clearance
f) Employment, scholarship, study grant and other purposes specified by
ordinance

2) Collection of Fees. - The fes shall be collected by the City/Municipal Treasurer.

Section 256. Sanitary Inspection Fee. -

1) Provision. - There shall be collected an annual fe from each business establishment and
house for rent in the city/municipality, for the purpose of supervision and enforcement of
existing rules and regulations on sanitation and safety of the public:

a) For house for rent

b) For each business, industrial, and agricultural establishment

2) Provisions on Inspection and Payment:

a) The City/Municipal Health Officer or his duly authorized representative shall conduct
an annual inspection of all establishments and buildings, and accessories and houses
for
rent, in order to determine their adequacy of ventilation, general sanitary conditions and

propriety fr habitation.

b) The City/Municipal Health Officer shall require evidence of payment of the fe

imposed herein before he issues the sanitary inspection certificate.

Section 257. Service Fees for Health Examinations. -

A. Provisions. - There shall be collected a fee from any person who is given a
physical
examination by the City/Municipal Health Officer or his duly authorized representative,
as
required by existing ordinances.
B. Usual Coverage. - Individuals engaged in an occupation or working in the following
establishments, are hereby required to undergo physical and medical examination before they
can be employed and once every six (6) months thereafer.

1) Food establishments - where fod or drinks are manufactured, processed, stored,

sold, or served.

2) Public swimming or bathing places.

3) Dance schools, dance halls and nightclubs - include dance instructors, hostess,
cooks, bartenders, waitresses, etc.

4) Tonsorial and beauty establishments - include employees of barber shops, beauty

parlors, hairdressing and manicuring establishments, exercise gyms and figure
slenderizing saloons, fcial centers, aromatherapy establishments etc.

5) Massage clinics and sauna bath establishments - include masseurs, massage

clinic/bath attendants, etc.

6) Hotels, motels and apartments, lodging, boarding, or tenement houses, and

condominiums.

C. Responsibility of Employers. - Owners, managers or operators of the establishment shall

see to it that employees who are required to undergo physical and medical examination
have
been issued the necessary medical certificates.

Section 258. Dog Registration and Vaccination Fees. –

A. General Provision. - There shall be collected/imposed fom every owner of a

dog a vaccination fe imposed under the ordinance for every dog vaccinated within the
territorial jurisdiction of the city/municipality.

B. Specific Provision on Vaccination Against Rabies:

1) "Vaccination" means the inoculation of a dog with rabies vaccine licensed for the
species
by the Bureau of Animal Industry (BAI), Department of Agriculture.

2) Such vaccination must be perfrmed by trained individual from the BAI, the
City/Municipal Veterinarian Office, and the City/Municipal Agriculture Office.

3) The dog owners shall be provided with a copy of the vaccination certificate. The
veterinarian/vaccinator will retain one copy fr the duration of the vaccination. A durable
metal or plastic tag, serially numbered issued by the veterinarian/vaccinator, shall be
securely attached to the collar of the dog.
The above provision may not apply in a mass vaccination program. During a free mass
vaccination, the cost shall be bore by the owner afer the scheduled date.

C. Specific Provision on Dog Registration or Licensing. - Every dog shall be registered by its
owner upon reaching the age of three (3) months and every year thereafter. Unvaccinated
dogs registered afer reaching the age of three (3) months and dogs three (3) months old
and
above not previously registered shall be vaccinated upon registration. The dog owner shall
pay such registration fe as may be determined by the sanggunian. The registration officer

shall provide a Certificate of Registration of the dog and affix to a distinguished collar tag
as proof of registration.

D. Specific Provision on Responsibility for Enforcement. - It shall be the responsibility of

the City/Municipal Rabies Control Authority to administer the ordinance and to
promulgate
the necessary rules and regulations for its implementation. Enfrcement shall be the

responsibility of the City/Municipal Rabies Control Authority.

E. Other Provisions:

1) Elimination of Unregistered Dog. - Unregistered dogs over the age of fur (4) months
shall be seized and humanely exterminated under the supervision of a licensed
veterinarian or the City/Municipal Rabies Control Authority or vaccinated under the
above provision.

2) Reporting of Biting Incidents. - The owner of a dog which has bitten any person and
the person who has been bitten shall, within twenty-four (24) hours from the occurrence,
report the incident to the City/Municipal Rabies Control Authority, a health care worker
or a police officer. On receiving such information, the health care worker or police
officer shall immediately transmit it to the City/Municipal Rabies Control Authority fr
investigation.

Section 259. Fishery Rentals, Fees and Charges. -

A. Purpose - The purpose of this ordinance is to enable the City/Municipality to exercise its
exclusive rights to grant certain fishery privileges within its municipal waters.

B. Definition of Terms:

1) Marginal Fisherman - refers to an individual engaged in subsistence fishing which shall

be limited to the sale, barter or exchange of marine products produced by himself and his
immediate family, and whose annual net income from fishing does not exceed Fifty
Thousand Pesos (P 50,000.00) or the poverty line established by NEDA for the particular
region or locality whichever is higher. (Art. 220 (p), IRR implementing Sec. 131 (p),
LGC)
2) Municipal Waters include the following:
a) Streams, lakes, and tidal waters within the municipality, not being the subject of
private ownership and not comprised within national parks, public forest, timber
lands, forest reserves, or fishery reserves;

b) Marine waters included between two (2) lines drawn perpendicularly to the general
coastline from points where the boundary lines of the municipality or city touch the
sea at low tide and a third line parallel with the general coastline and fifeen (15)
kilometers from it.

c) Where two (2) municipalities are so situated on the opposite shores that there is less
than fifteen (15) kilometers of marine waters between them, the third line shall be
equally distant fom opposite shores of the respective municipalities. (Sec 131 (r),
LGC)

3) Vessel includes every type of boat, craf or other artificial contrivance used, or capable of
being used as a means of transportation on water. (Sec. 131 (x), LGC)

C. Coverage. - The municipality shall have the exclusive authority to grant the
fllowing fishery privileges within its municipal waters and impose rentals, fees or charges
therefr:(Sec. 149, LGC)

1) To erect fish corals, oyster, mussel, or other aquatic beds or bangus fry areas.

2) To gather, take or catch bangus fry, prawn or kawag-kawag or fry of other species and
fish fom municipal waters by nets, traps or other fishing gears. However, marginal
fishermen shall be exempt from any rentals, charge or any other imposition whatsoever.

3) Duly registered organizations and cooperatives of marginal fishermen shall have the
preferential right to such fishery privileges without being required to undergo public
bidding. In the absence of such organizations and cooperatives or upon failure to exercise
their preferential right, other parties may participate in the said public bidding.

D. Public Bidding Committee. - For this purpose, there is hereby created a committee to
be determined by the sanggunian to conduct the public auction.

1) Membership: The Mayor or his duly authorized representative as Chairman;

b) Three (3) members of the sanggunian to be designated by said body; and
a) The Municipal Treasurer

2) The Public Bidding Committee shall advertise the call for sealed bids fr the leasing of a
zone or zones of municipal waters in public auction for two (2) consecutive weeks in the
bulletin board of the city/municipal hall. If no bids are received within two (2) weeks,
such notice shall be posted for another two (2) weeks. If after said two (2) notices for the
grant of exclusive fishery rights through public auction, there are no interested bidders,
the sanggunian shall grant the rights within the definite area or portion of the municipal
waters to any interested individual upon payment of a license fee fixed by an ordinance.

3) The notice advertising the call for bids shall indicate the date and time when such
bids
shall be filed with the City/Municipal Treasurer.

4) An application to participate in the public bidding shall be submitted to

the
City/Municipal Mayor in a frm prescribed therefr. Upon submitting a sealed bid, a
person shall accompany such bid with a deposit of an amount fixed by an ordinance
which shall be deducted fom the first rental of the person should the bid be awarded to
him.

5) At the time and place designated in the notice, the Committee sitting en bane shall
open all the bids and award the lease to the qualified bidder offering the highest bid. The
lease shall be executed within ten ( 10) days afer the award is made by a committee and
if the successfl bidder refuses to accept, or fails or neglects to execute the lease within
such time, his deposit shall be frfeited in fvor of the city/municipal goverment in such
a
case another bidding shall be held in the manner provided above.

6) The deposits of the unsuccessful bidders shall be retured upon the execution of
the
Lease Contract by the successful bidder or before the calling of another bid.

E. Duration of Lease. - The grant of fishery rights through public auction shall be for a
period prescribed by an ordinance.

F. Zoning of Municipal Waters. - The municipal waters of the municipality are divided and
classified into zones for purposes of granting a lease or exclusive fishery rights through

public auction as prescribed in the ordinance.

G. Privilege of Residents to Take Fish in Municipal Waters. - Any person who is not a
grantee of license or privilege to engage in commercial fishing is hereby allowed to fish for
domestic use, in every municipal water, for as long as no commercial fishery therein is yet
established. Provided, That such fishing shall not take place within Two Hundred (200)
meters from a fish corral licensed by the city/municipality; and that such fish caught under
this privilege shall not be sold. Furthermore, no rental fe, charge, or any other imposition
whatsoever shall be collected from marginal fishermen (Sec. 149 (b) (2), LGC.184

H. Applicability of Pertinent Provisions of Laws. - All existing Jaws, rules and regulations
govering municipal waters and municipal fisheries are hereby adopted.

Section 260. Service Charge for Garbage Collection. - There shall be collected from every
owner or operator of a business establishment an annual garbage fe fixed in an ordinance on
the fllowing:

1) Manufacturers, Millers, Assemblers, Processors, and similar businesses.

184
See Sec. 236 (BJ. this Manual
 2) Hotels, Apartments, Motels and Lodging Houses.
3) Restaurants, Day and Night Clubs, Cafs' and Eateries.
4) Hospitals, Clinics, Laboratories and similar businesses.
5) Movie Houses and Retailers.
6) Other Businesses not mentioned above.
7) Residential. Establishments

Section 261. Charges for Parking. -

A. Provision for Charges. - There shall be collected fees fr the use of

city/municipality owned parking areas or designated streets for pay parking in
accordance with the fllowing:

1) Day Parking Rates for the following types of vehicles:

a) Tricycles;
b) Private Cars and Service Vehicles;
c) Passenger Jeepneys;
d) Cargo Truck/Delivery Vans;
e) Passenger Buses; and
f) Other Vehicles

2) Overnight Parking Rates/Night Parking Rates for all types of vehicles.

3) Towing fee and impounding fee fixed under an ordinance shall be collected from
owners of vehicles who shall violate the rules/regulations on parking.

B. Time and Manner of Payment. - The fees fixed by an ordinance shall be paid to the
City/Municipal Treasurer or his duly authorized representative upon parking thereat.

Section 262. Cemetery Charges. - There shall be collected rentals fr the city/municipal
cemetery lots at the rates prescribed by an ordinance.

Section 263. Slaughter and Corral Fees. -

A. General Provision. - Before any animal is slaughtered for public consumption, a

permit therefor shall be secured from the Office of the City/Municipal
Veterinarian/Health Officer or his duly authorized representative who will determine
whether the animal is fit for human consumption, through the City/Municipal
Treasurer upon payment of the corresponding fe, prescribed by an ordinance on the
following animals:

1) Large cattle
2) Hog Goats
3) Sheep
4) All Others
B. Slaughter Fee. - The fee fixed by an ordinance shall be paid to cover the cost of service in
the slaughter of animals at the city/municipal slaughterhouse.

C. Corral Fee - The fee fixed by an ordinance, may be collected for the animals to be
slaughtered which are deposited and kept in a corral owned by the local goverment. (Sec.
31, P. D. No. 231/85

D. Condemned Animals. - No permit to slaughter shall be granted nor the corresponding fee
collected on any animals condemned by the City/Municipal Veterinarian.

Section 264. Toll Fees or Charges. -

\

A. Nature and Purpose of Tolls. - There shall be collected fees or charges fr the use of
certain utilities owned and operated by the city/municipality as a means to recover parts of the
public investments to construct/acquire them, to cover maintenance or operating costs, and fr
similar reasonable purposes. Piers, ferries, bridges and roads are only some examples of utilities
that may be subject to toll charges.

B. Exemptions - No such tolls or fees or charges shall be collected fom officers and enlisted
men of the Armed Forces of the Philippines and members of the Philippine National Police
on mission, ambulances, post office personnel deliverin mails, physically handicapped and
disabled citizens who are sixty five (65) years or older.18

Section 265. Permit for Cockpit Owners/Operators/Licensees/Promoters and Personnel.

-

A. Powers and Relevant Provisions of Law. - The provisions of P. D. No. 449 187, P. D. No.
1802188, and such other pertinent laws shall apply to all matters regarding the operation of
cockpits and the holding of cockfighting in the city/municipality.

The power to authorize the establishment, operation and maintenance of cockpits and to
regulate cockfighting has been lodged with the city/munic al government even befre R. A.
No. 7160 or the Local Government Code of 1991. (GAB1 9-0pinion unnumbered, Februar
3, 1995). Considering that the functions of the Philippine Gamefowl Commission 190 have
been devolved to the cities and municipalities, there is no need to issue the rules governing
the Commission. The power to regulate the importation of gamefowls shall be left to the
local goverment units subject to quarantine laws and regulations (OC Resolution No. 95-05,
May 19, 1995). Although regulation of cockfighting has been devolved to local governments,
a municipal goverment cannot issue a permit to a promoter to hold cockfights in places
other than a licensed cockpit since this would violate said law (DILG Opinion Nos. 296-
1993, 31-1194 and PNP Opinion OLSILO No. 352-1994, March 22, 1994).

185
Enacting a Local Tax Code for Provinces, Cities, Municipalities and Barrios 186 See Sec. 232 (c), this Manual
187
Cockfighting Law of 1974
188
Law Creating the Philippine Game/owl Commission 189 Game and Amusement Board
190
PGC
B. Application, Payment and Issuance of Mayor's Permit.

a) The application/filing fee is payable to the City/Municipal Treasurer upon application fr

a permit or license to operate and maintain cockpits.

b) The cockpit registration fee is also payable upon application for a permit before a cockpit
can operate and within the first twenty (20) days of January of each year in case of
renewal thereof.

c) The permit fees on cockpit personnel shall be paid before they participate in a cockfight
and shall be paid annually upon renewal of the permit on the birth month of the permitee.

d) Upon payment of the fes imposed, the corresponding Mayor's Permit shall be issued.

C. Ownership, Operation and Management of a Cockpit. - Only Filipino citizens not

otherwise inhibited by existing ordinances or laws shall be allowed to own, manage and
operate cockpits. Cooperative capitalization is encouraged.

D. Establishment of a Cockpit. - The sanggunian concerned shall determine the number of

cockpits to be allowed in the city/municipality.

E. Cockpit Size and Construction. - Cockpits shall be constructed and operated within the
appropriate areas as prescribed in the zoning law or ordinance. In the absence of such law or
ordinance, the City/Municipal Mayor shall see to it that no cockpits are constructed within or
near existing residential or commercial areas, hospitals, school buildings, churches or other
public buildings. Owners, lessees, or operators of cockpits which are now in existence and do
not conform to this requirement are required to comply with these provisions within a period
to be specified by the City/Municipal Mayor. The City/Municipal Engineer shall approve and
issue building permits fr the construction of cockpit in accordance with the existing
ordinance, laws and practices.

F. Cockfighting Officials. - Gaffers, referees, bet-managers, bet-takers, cashiers, pit

refrees,
and promoters shall not act as such in any cockfight in the city/municipality without first
securing a license renewable every year on their birth month from the city/municipality
where such cockfights are held. Only gaffers, refrees, bet-takers, or promoters licensed by
the city/municipality shall officiate in all kinds of cockfighting authorized. No operator or
owner of a cockpit shall employ or allow any of the mentioned personnel to participate in a
cockfight unless they have registered and paid the imposed fee.

G. Cockfighting for Entertainment of Tourists or fr Charitable Purposes. - Subject to the

preceding sub-section hereof, the holding of cockfights may also be allowed for the
entertainment of foreign dignitaries or for tourists, or for returing Filipinos, commonly
known as Balikbayans or for the support of national fund-raising campaigns for charitable
purpose as may be authorized upon resolution of the sanggunian, in licensed cockpits, or in
playgrounds or parks. This privilege shall be extended for only one (1) time fr a period not
exceeding three (3) days, within a year.
Chapter 4. GOVERNMENT ENTERPRISE OPERTIONS

Section 266. Political and Corporate Nature of Local Government Units. - Every local
goverment unit created or recognized under R. A. No. 7160 or the Local Goverment Code of
1991, is a body politic and corporate endowed with powers to be exercised by it in conformity
with law. As such, it shall exercise powers as a political subdivision of the National Goverment
and as a corporate entity representing the inhabitants of its territory. (Sec. 15, LGC)

Local goverment units shall enjoy full autonomy in the exercise of their proprietary functions
and in the management of their economic enterprise, subject to the limitations provided in the
Local Goverment Code of 1991, and other applicable laws.

Section 267. Nature of Government Enterprise. - A goverment enterprise is a project or

undertaking of the goverment that is more or less permanent in nature, with the objective of
promoting public health, safty, morals, general welfre, security, prosperity and contentment of
the inhabitants. (Black's Law Dictionar)

Section 268. Ordinance Establishing and Governing the Enterprise. - (a) An enterprise
may only be established and operated by virtue of an ordinance duly enacted by the sanggunian.

(b) In relation to the imposition and collection of fees and charges, the ordinance shall include
provisions on the following:

1) Public utility charges/rates for the operation of public utilities owned, operated
and
maintained by the local government units within their jurisdiction. ( Sec. 154, LGC);

2) Toll fees or charges for the use of any public road, pier or wharf, waterway, bridge,
ferry
or telecommunications systems, etc. (Sec. 155, LGC and Sec. 47, Vol. I, GAAM;

3) Officers and enlisted men of the Armed Forces of the Philippines and members of
the
Philippine National Police on mission, post office personnel delivering mail,
physically handicapped, and disabled citizens who are 65 years or older shall not be
collected the toll fes or charges. (Sec. 155, LGC);

4) When public safety and welfare so requires, the sanggunian concered may discontinue

the collection of the tolls, and thereafer the said fcility shall be free and open for
public use. (Sec. 155, LGC)

Section 269. Basic Services and Facilities. - (a) Local government units shall endeavor to be
self-reliant and shall continue exercising the powers and discharging the duties and functions
currently vested upon them They shall also discharge the fnctions and responsibilities of
national agencies and offices devolved to them pursuant to R. A. No. 7160 or the Local
Government Code of 1991. Local government units shall likewise exercise such other powers
and discharge such other functions and responsibilities as are necessary, appropriate, or
incidental to efficient and effective provision of the basic services and fcilities enumerated
herein. (Sec. 17 (a), LGC)
 (b) Such basic services and facilities include, but are not limited to the following:

1) For a Barangay -

a) Agricultural support services which include planting materials, distribution

system and operation of frm produce collection buying stations;

b) Health and social welfare services which include maintenance of barangay

health center and day-care center;

c) Services and facilities related to general hygiene and sanitation,

beautification,
and solid waste collection;

d) Maintenance of katarungang pambarangay;

e) Maintenance of barangay roads and bridges and water supply systems;

f) Infastructure facilities such as multi-purpose hall, multi-purpose pavement,

plaza, sports center, and other facilities;

g) Infrmation and reading center; and

h) Satellite or public market, where viable

2) For a Municipality –

a) Extension and on-site research services and fcilities related to agriculture and
fishery activities which include dispersal livestock and poultry, fingerlings, and
other seeding materials for aquaculture, palay, corn, and vegetable seed farms,
medicinal plant gardens, fuit trees, coconut, and other kinds of seedling
nurseries, demonstration farms; quality control of copra and improvement and
development of local distribution channels preferably through cooperatives; inter
barangay irrigation system, water and soil resources utilization and conservation
projects; and enforcement of fishery laws in municipal waters including the
conservation of mangroves;

b) Pursuant to national policies and subject to supervision, control and review of the
Department of Environment and Natural Resources (DENR), implementation of
community-based forestry projects which include integrated frestry programs
and similar projects, management and control of communal frests with an area
not exceeding fifty (50) square kilometers, establishment of tree parks, and
similar forest development projects;
c) Subject to the relevant provisions of Title 5, Book I of R. A. No. 7160 or the
Local Goverment Code of 1991,184 health services which include the
implementation of programs and projects on primary health care, materal and
child care, and communicable and non-communicable disease control services
access to secondary and tertiary health services; purchase of medicines, medical
supplies, and equipment needed to carry out the services herein enumerated;

d) Social welfre services which include programs and projects on child and youth
welfre, family and community welfre, women's welfre, welfare of the elderly
and disabled persons, community-based rehabilitation programs for vagrants,
beggars, street children, scavengers, juvenile delinquents, and victims of drug
abuse, livelihood and other pro-poor projects, nutrition services and family
planning services;

e) Information services which include investments and job placement information

systems, tax and marketing information systems, and maintenance of a public
library;

f Solid waste disposal system or environmental management system and services or

fcilities related to general hygiene and sanitation;

g) Municipal buildings, cultural centers, public parks including freedom parks,

playgrounds, and sports facilities and equipment, and other similar facilities;

h) Infrastructure facilities intended primarily to service the needs of the residents of

the municipality and which are funded out of municipal fnds including, but not
limited to municipal roads and bridges, school buildings and other facilities for
public elementary and secondary schools, clinics, health centers and other health
facilities necessary to carry out health services, communal irrigation, small water
impounding projects and other similar projects, fish ports, artesian wells, spring
development, rain water collectors and water supply systems, seawalls, dikes,
drainage and sewerage, and flood control, traffic signals and road signs and
similar facilities;

i) Public markets, slaughterhouses and other municipal enterprises;

j) Public cemetery;

k) Tourism fcilities and other tourist attractions, including the acqms1t10n of

equipment, regulation and supervision of business concessions and security
services for such facilities; and

1) Sites fr police and fire stations and sub-stations and the municipal jail
3) For a Province -
184
Local Health Boards
a) Agricultural extension and on-site research services and facilities which include
the prevention and control of plant and animal pests and diseases, dairy farms,
livestock markets, animal breeding stations, and artificial insemination centers,
and assistance in the organization of frmers' and fishermen's cooperatives and
other collective organizations, as well as the transfr of appropriate technology;

b) Industrial research and development services, as well as the transfr of

appropriate technology;

c) Pursuant to national policies and subject to supervision, control and review of the
DENR, enfrcement of frestry laws limited to community-based forestry
projects, pollution control law, small-scale mining law, and other laws on the
protection of the environment, and mini-hydro-electric projects fr local
purposes;

d) Subject to the provisions of Title 5, Book 1 of R. A. No. 7160 or the Local

Goverment Code of 1991, health services which include hospitals and other
tertiary health services;

e) Social welfre services which include programs and projects on rebel returees
and evacuees, relief operations and population development services;

f) Provincial buildings, provincial jails, freedom parks and other public assembly
areas, and other similar fcilities;

g) Infastructure facilities intended to service the needs of the residents of the

province and which are funded out of provincial funds including, but not limited
to, provincial roads and bridges, inter-municipal water-works, drainage and
sewerage, flood control, and irrigation systems, reclamation projects and similar
facilities;

h) Programs and projects for low-cost housing and other mass dwellings, except
those funded by the Social Security System (SSS), Government Service Insurance
System (GSIS), and the Home Development Mutual Fund (HDMF): Provided,
That national fnds for these programs and projects shall be equitably allocated
among the regions in proportion to the ratio of the homeless to the population;

i) Investment support services, including access to credit financing;

j) Upgrading and moderization of tax information and collection services through

the use of computer hardware and software and other means;

k) Inter-municipal telecommunications services, subject to national policy

guidelines; and
 l) Tourism development and promotion programs.

4) For a City. - All the services and facilities of the municipality and province, and in
addition thereto are the following:

a) Adequate communication and transportation fcilities; and

b) Support for education, police and fire services and facilities; Sec. 17 (b), LGC)

(c) Notwithstanding the provisions of sub-section (b) hereof, public works and infrastructure
projects and other fcilities, programs and services fnded by the National Goverment
under the annual General Appropriations Act (GAA), other special laws, pertinent executive
orders, and those wholly or partially fnded from freign sources, are not covered under this
section, except in those cases where the local goverment unit concered is duly designated
as the implementing agency for such projects, fcilities, programs and services. Sec. 17 (c),
LGC)

(d) The designs, plans, specifications, testing of materials, and the procurement of equipment
and materials fom both freign and local sources necessary for the provision of the
foregoing services and facilities shall be undertaken by the local goverment unit concered,
based on national policies, standards and guidelines. (Sec. 17, LGC)

Section 270. Examples of Government Enterprises. - Among the government enterprises

known to have been established and operated by local goverment units are the following:

a) Beach Houses
b) Coliseums
c) Cold Storage Plants
d) Communication and Transportation Facilities
e) Cultural Centers
f) Electric Power Plants
g) Ferries
h) Food Terminal Markets
i) Health Resorts
j) Hospitals
k) Irrigation Systems
1) Lease of Equipment and Machinery
m) Low-Cost Housing and Other Dwelling Projects
n) Markets
o) Multi-Purpose Hall, Multi-Purpose Pavements and Plazas
p) Public Cemeteries
q) Radio Stations
r) Sports Complexes and Sports Facilities '
s) Telephone Systems
t) Toll Roads & Bridges
u) Tourism Facilities and Other Tourist Attractions
 v) Waterworks Systems
w) Wharves
x) Water Supply Systems

Section 271. Role of Treasurers in Local Government Enterprise Operations. - The

Treasurer of the local goverment unit operating a public enterprise shall have the
following fnctions in its establishment and operations:

a) Advise the local chief executive, the sanggunian, and the management of the
public enterprise on its financing aspects.

b) Advise the sanggunian in the enactment of ordinances on public enterprises,

especially in relation to their financial management.

c) Take charge ofthe collections and take custody of funds of all goverment enterprises.

d) Ensure that payments are made on duly certified and approved disbursement vouchers.

e) Advise the local chief executive of delinquencies of goverment enterprise

clientele fr purposes of enforcing sanctions and taking the necessary remedial measures.

f) Recommend qualified persons for designation as collectors.

g) Maintain records of payments of market stall holders and of other goverment

enterprise's lessors.

h) Prepare periodic financial reports for each goverment enterprise as required by BLGF
rules and regulations.

Section 272. Private Sector Participation in the Operation and Management of Local
Government Unit Enterprises. - The participation of the private sector in local governance,
particularly in the delivery of basic services, shall be encouraged to ensure the viability of local
autonomy as an alterative strategy fr sustainable development. (Sec. 3 (!), LGC

To ensure the active participation of the private sector in local goverance, local
goverment units may, by ordinance, sell, lease, encumber, or otherwise dispose of
public economic enterprises owned by them in their proprietary capacity. (Sec. 17 0, LGC)

Section 273. Common Modes of Contracting for Local Government Units. - (a) The local
chief executive may be authorized through a sanggunian resolution to enter into a contract
with the private sector fr the management and operation of goverment enterprise.

(b) The Local Treasurer shall advise the local chief executive and sanggunian on the
relative advantages and propriety of the following, as well as other common modes of
contracting by which local goverment units might engage the private sector:
1) Service Contract. - This is appropriate when the LGU requires the assistance of a private

entity to perform specific tasks.

a) The contract is generally short-term (usually less than one year, and not more than
2 years);

b) The responsibility for fixed investment fnd and working capital remains in the
LGU;

c) The contractor is assured of a fixed fee fom the LGU budget or from the
revenues of the enterprise; and

d) This scheme provides an avenue fr tapping private sector expertise for the
performance of specialized, particular tasks.

2) Management Contract. - In this type of contract, the LGU transfrs the entire management,
including the operation and maintenance of the fcility, to the private operator. The contract

may have a duration of three (3) to five (5) years, but the LGU should provide for
earlier
termination, in case this is needed to protect its interests.

The following are the features of a management contract:

a) Fixed investments continue to be bore by the LGU, but the working capital is often but
not always provided by the private proponent; and

b) To encourage efficiency, the payment fr services in management contracts is ofen a

combination of a fixed fee and a success fe.

The success fe is based primarily on the performance of the enterprise in relation

to profit targets, although other factors may also be used as part of the criteria.
The fixed fe may come from the LGU budget or from the enterrise revenues.
The success fee, which is contingent in nature, invariably comes fom enterprise
revenues.

3) Lease Contract. - Under this type of arrangement, the private firm leases an asset of an
LGU fr a fixed lease payment, and assumes the responsibility fr operating,
maintaining, and managing the asset, aside from the commercial risks of the operations.
It effectively buys the rights to the income stream of the leased asset.

The features of a lease contract are as fllows:

a) Lease contracts are generally long-term, usually eight (8) to fifeen (15) years;

b) Lease arrangements are appropriate fr goverment enterprises whose

operations have a wide latitude fr improving efficiency; and
c) The ownership of the asset and the improvements made generally revert to the
LGU at the end of the lease.

4) Concession Agreement. - Under this type of contract, a private sector proponent is

allowed to manage, operate, maintain, and introduce investments on the assets of the
contracting goverment entity. The concession agreement has the following features:

a) The concession agreement generally involves large government enterprises and long-term
contracts typically lasting twenty (20) to thirty (30) years;

b) The concession contract specifies the performance targets, mechanisms for setting and
adjusting tariffs, schedule of concession fees, income sharing, etc.;

c) Since the responsibility for putting new investments in concessions is with the private
operator, the goverment does not need to raise financing;

d) The goverment can generally expect greater efficiency and improved service since the
commercial risks are bore by the concessionaire; and

e) Any improvements or additional assets brought in by the proponent accrue to the

goverment when the contract ends.

Concessions involve large enterprises and long-term contract that ofen are related to the
delivery of important services to the public. They generally confr monopolistic powers on
concessionaire. For these reasons, it is essential for responsibilities and
accountabilities to be carefully defined, and for the LGU to set into place, as an integral
feature of the arrangements, a well-designed, effective regulatory framework that will protect
the public fom possible predatory practices and poor services.

Section 274. Barangay Micro-Business Enterprise. 185 - Section 2 of R. A. No. 9178,

otherwise known as the Barangay Micro Business Enterprise Act of 2002, provides that it is the

policy of the State to hasten the country's economic development by encouraging the frmation

and growth of barangay micro-business enterprises which effectively serve as seedbeds

of Filipino entrepreneurial talents, and integrating those in the informal sector with the
mainstream economy, through the rationalization of bureaucratic restrictions, active
intervention of the goverment specially in the local level, and granting incentives and
benefits to generate much needed employment and alleviate poverty. (Sec. I, Rule I, DOF Order
No. 17-04186)

Section 275. Registration of Barangay Micro-Business Enterprise. - Any business entity or

enterprise flling under the following conditions, whether operated as a sole proprietorship or
a corporation, partnership, cooperative or association, organized/incorporated and existing
under Philippine laws can 1cgister as a Barangay Micro-Business Enterprise:

iRs
BME
Providing/or Guidelines in the Registration of BMBEs and the Availment of Tax Incentives under the
186

BMBE Act
o/2002.
 Those engaged in the production, processing or manufcturing of products or commodities,
including agro-processing, trading and services, and which activities are barangay-based and
micro-business in nature and scope: Provided, That, "services" shall exclude those rendered
by the fllowing:

1) Natural persons who are duly licensed by the goverment afer having passed a
goverment licensure examination in connection with the exercise of
one's
profssion; and

2) Juridical persons such as partnerships or corporations engaged in consultancy,

advisory and similar activities where the performance of such services are
essentially carried out through licensed professionals;

b) Those whose total assets, real or personal, inclusive of those ansmg from loans, but
exclusive of the land on which the particular business entity's office, plant and equipment are
situated, shall not be more than Three Million Pesos (F 3,000,000.00) or as may be adjusted
by the Small and Medium Enterprises Development 187 Council as mandated under R. A. No.
697?188, as amended by R. A. No. 8289 189: Provided, that for the purpose of registering as a
Barangay Micro-Business Enterprise, the assets must be owned and used fr the conduct of
its business as such enterprise.

Section 276. When is a Business Enterprise "Barangay-Based". - A business enterprise

shall be considered barangay-based under the following conditions:

a) The majority of its employees are residents of the municipality where its principal
place of business is located; or

b) Its principal activity consists in the application/use of a particular skill peculiar to

the locality or of raw materials predominantly sourced from the area; or

c) Its business operations are confined within the territorial jurisdiction of the
municipality or local goverment unit in which its principal place of business is
located: Provided, however, that the enterprise may establish warehouses, buying
stations, sales outlets, and booking or administrative offices anywhere in the
Philippines, subject to pertinent rules and registration requirements of the concered
local goverment units and other goverment agencies where such warehouses, outlets,
stations or offices are established.

Section 277. Meaning of Micro-Business in Nature and Scope. - A business is

considered a micro-business in nature and scope when:

187
SMED
188
An Act to Promote, Develop and Assist SMED Council, and the Rationalization of Goverment Assistance
Program and Agencies Concerned with the Development of Small and Medium Enterprises and for Other
Purposes, or the Magna Carta for Small Enterprises.
189
An Act to Strengthen the Promotion and Development of and Assistance to Small and Medium Scale
Enterprises, Amending for that Purpose R. A. No. 6977, and for Other Purposes.
a) Its principal activity is primarily fr livelihood or determined by the Small and Medium
Enterprises Development Council or the Department of Trade and Industry as a priority area
for development or goverment assistance;

b) The enterprise is not a branch, subsidiary, division or office of a large enterprise; and

c) Its policies and business modus operandi are not determined by a large scale enterprise or
by
persons who are not owners or employees of the enterprise.

Section 278. Registration of Barangay Micro-Business Enterprises. - The Office of the

Treasurer of each city or municipality shall register Barangay Micro-Business Enterprises
and
issue a Certificate of Authority to enable the Barangay Micro-Business Enterprises to avail of

incentives under Barangay Micro-Business Enterprise Act of 2002: Provided, That only one
Certificate of Authority shall be issued fr each Barangay Micro-Business Enterprise and only
by the Office of the Treasurer of the city or municipality that has jurisdiction over the
principal
place of business of the Barangay Micro-Business Enterprise. (Sec. 2, IRR, R. A. No. 9178)

Section 279. Exemption of Barangay Micro-Business Enterprises fom Taxes and Fees. -
All Barangay Micro-Business Enterprises shall be exempt from income tax fr income arising
from the operation of the enterprise.

Interests, commissions, and discounts derived from loans by the Land Bank of the
Philippines,
Development Bank of the Philippines, People's Credit and Finance Corporation and Small

Business Guarantee and Finance Corporation granted to Barangay Micro-Business

Enterprises,
as well as loans extended by the GSIS and SSS to their respective member-employees under
the
Barangay Micro-Business Enterprise Act of 2002 shall be exempt from gross receipts tax. 190
(Sec. 9, IRR, R. A. No. 9178)

Section 280. Submission of Documents for Registration as Barangay Micro-Business

Enterprise. - The application for registration as Barangay Micro-Business Enterprise shall be
processed by the Office of the Local Treasurer upon submission of all of the fllowing
documentary requirements:

A. For new applicant:

1) Application fr Registration; 191

2) Registration as a business entity or enterprise fom the appropriate goverment

agency, such as the following:

a) Securities and Exchange Commission, m the case of corporations,

partnerships or associations;

b) Cooperatives Development Authority, in the case of cooperatives; and

190
GRT
191
BME Form OJ
Department ofTrade and Industry, in the case of sole proprietorship;

3) Tax Identification Number 192;

2) Certificate of Registration from the Bureau of Interal Revenue;

3) Mayor's Permit or City/Municipal Business Permit;

4) Swor Affidavit executed by the sole proprietor or the president of the enterprise, as
the
case may be, that the enterprise is barangay-based and micro-business in nature and
scope;

5) Swor Statement of Assets and Liabilities, showing the value of the assets owned and
to
be used in the conduct of business which shall be supported by pertinent information
such as the date of acquisition, acquisition cost and depreciated value. In the case of
assets acquired in the year of registration, it shall be supported by either the invoice or
official receipt or the contract document or deed;

6) Pictures of the place of business and its assets, other than cash, receivables
and
intangibles;

7) Copy of loan contracts, if any, and duly-notarized certification of amortization

payments on the loan; and

8) Income Tax Return193 with proof that it has been filed with the Bureau of
Interal
Revenue, including attachments, if any (for existing business only).
'

B. For renewal of registration:

1) Documents listed under (A) (1) to (A) ( 9) above, inclusive; and

2) Annual Infrmation Retur (for the year immediately preceding the renewal of
registration) duly filed with the Bureau oflnteral Revenue, together with attachments.

Section 281. Verification of Qualifications. - The City or Municipal Treasurer must conduct a
verification of the physical existence of the business and the true amount of its assets. A swor
certification shall be executed by the Local Treasurer that such verification has been
conducted, and which shall frm part of the records ofthe application for registration.

Section 282. Issuance of the Certificate of Authority. - Afer determining the eligibility of
the business enterprise, the Office of the City or Municipal Treasurer shall register the business

entity as a Barangay Micro-Business Enterprise and issue a Certificate of Authority. 194 The
1 TIN
92

1 ITR
93

194
BMBE Form 02
Certificate of Authority shall be effective for a period of two (2) years and renewable for a

period of two (2) years for every renewal. The Local Treasurer shall indicate in the Certificate
of
Authority the date when the registration of the Barangay Micro-Business Enterprise commences.

Section 283. Registration Fee. - The Office of the Local Treasurer shall issue the Certificate

of Authority promptly and fee of charge, unless a fe therefor, not exceeding One Thousand
Pesos (P 1,000) is imposed by the local goverment unit through a properly enacted ordinance.

Section 284. List of Registered Barangay Micro-Business Enterprises to be Furnished the

Bureau of Internal Revenue. - The Office of the City/ Municipal Treasurer shall frish the
Revenue District Officer of the Bureau of Interal Revenue in the locality concered on a
quarterly basis, the list of all registered Barangay Micro-Business Enterprises of good standing.

Said list of registered Barangay Micro-Business Enterprises shall be one of the bases of the

Bureau of Interal Revenue in granting the income tax exemption to the said enterprise.

Section 285. Periodic Evaluation by the Local Treasurer. - The Office of the
City/Municipal Treasurer shall conduct an evaluation and verification of the Barangay
Micro
Business Enterprise's financial status, including the amount and condition of its assets within
thirty (30) days from the close of the year after a Barangay Micro-Business Enterprise's
initial
registration, and within thirty (30) days from the close of each year thereafter. The Local
Treasury official(s) conducting the verification must be authorized in writing by the
City/Municipal Treasurer. The written authority should include the name of the official(s)
who
will conduct the verification, the address of the place of business to be verified, and the duration

of the written authority which should not exceed a period of one (1) week from its issuance.

Section 286. Cancellation of Registration. - The Office of the City/Municipal Treasurer shall

cancel the registration of a Barangay Micro-Business Enterprise under the fllowing

circumstances:

a) When the Barangay Micro-Business Enterprise transfers its place of business to another
locality;

b) When the value of its total assets as determined exceeds Three Million Pesos
(P 3,000,000.00);

c) When the Barangay Micro-Business Enterprise voluntarily surrenders its Certificate of

Authority to the Office of the City/Municipal Treasurer;
d) In case of death of the registered individual owner of the Barangay Micro-Business
Enterprise, in the case of a sole proprietorship;

e) In case of violation or non-compliance with the provisions of R. A. No. 9178 and its
Implementing Rules and Regulations, as well as DOF Order No. 17-04;

f) In case of merger or consolidation with an entity which is not eligible to be a Barangay

Micro-Business Enterprise;
g) In case of sale or transfr of the Barangay Micro-Business Enterprise, if it is a sole
proprietorship, without prejudice to the transfree applying fr registration should it be
qualified under the provisions hereof;

h) Submission of fake, flse or falsified documents;

i) In case of retirement from business or cessation/suspension of operations fr one (1) year;

and

j) Making false or omitting required declarations or statements.

In circumstances (e), (h) and (j) above, the City/Municipal Treasurer should initiate the filing of
appropriate criminal complaints before the Office of the Public Prosecutor.

In the cancellation of registration, the Barangay Micro-Business Enterprise shall surrender its
Certificate of Authority to the Local Treasurer. The Local Treasurer shall immediately notify
the
Bureau of Interal Revenue of any cancellation of registration of a Barangay Micro-Business
Enterprise.

Section 287. Exemption of Barangay Micro-Business Enterprises from Income Tax. - All
duly registered Barangay Micro-Business Enterprises shall be exempt from income tax
arising
purely from their operations as such enterprise: Provided, That such exemption shall not apply
to
the fllowing:

a) Interest, including those from any currency bank deposit and yield or any other monetary
benefit from deposit substitutes and fom trust funds and similar arrangements;

b) Royalties;

c) Prizes and other winnings;

d) Cash and/or property dividends;

e) Capital gains fom the sale of shares of stock not traded through the stock exchange;

f) Capital gains from the sale or other disposition of real property;

g) The share of an individual in the net income after tax of an association, a joint account, or a

joint venture or consortium;

h) The share of an individual in the distributable net income after tax of a taxable partnership of

which he is a partner;
i) Income from the practice of profession received directly from the clients or from the
profssional partnership of which the individual is a partner;
j) Compensation; and

k) All other forms of passive income and income from revenues not effectively connected
with
or arising from operations of the Barangay Micro-Business Enterprises as such.

Section 288. Determination of the Value of Assets of the Barangay Micro-Business

Enterprise for Income Tax Exemption Purposes. - For the purpose of exemption from income
tax, the following conditions shall be met:

a) The total assets of the Barangay Micro-Business Enterprise, which shall not exceed Three

Million Pesos (P 3,000,000.00), shall include all kinds of properties, both personal properties
and real properties (but excluding land on which the particular business entity's office, plant
and equipment are situated) that are owned and used/to be used, or even if not owned but
used/to be used, by the Barangay Micro-Business Enterprise and/or its affiliates for the
conduct of its/their business/es.

b) Provided, That the term, "affiliate" shall refr to any person or business enterprise/entity
that,
directly or indirectly through one (l ) or more intermediaries, controls or is controlled by, or
is under common control with, the Barangay Micro-Business Enterprise concered.

Section 289. Procedures in Availing Tax Incentives. - For purposes of availing the tax
incentives, the Barangay Micro-Business Enterprise shall register as such Barangay Micro
Business Enterprise with the Revenue District Office of the Bureau of Interal Revenue where

the principal office or place of business of the Barangay Micro-Business Enterprise is located.

Its application fr registration shall be supported by the following documents:

a) Copy of the Certificate of Authority of the Barangay Micro-Business Enterprise duly

authenticated by the Office of the City/Municipal Treasurer;

b) Sworn Statement of the Values of the Assets owned and/or used/to be used by the
Barangay
Micro-Business Enterprise and/or its affiliates reflecting the current values thereof. The
sworn statement shall be supported by the following:

1) Acquisition cost, date of acquisition and depreciated value fr existing assets;

2) Invoices and/or official receipts for newly-acquired assets not yet depreciated;

3) Duly-notarized copy of the Contract of Lease fr assets used in the conduct of

business covered by lease agreement; and
4) Copy of Loan Contract/s, if any, and duly notarized Certification of Amortization
Payments on the Loan.
c) Certified list of branches, sales outlets, places of production, warehouse and storage places,
or such other facility owned and/or operated by the Barangay Micro-Business Enterprise,
indicating their respective addresses, whether located in the same municipality or city where
the principal place of business is located, or elsewhere;

d) Certified list of affiliates, indicating addresses, line of business and responsible officers

thereof; and

e) Latest Audited Financial Statements, or Account Information Form or its equivalent,

containing data lifed from the audited financial statements.

Section 290. Filing of Annual Information Return. - Every Barangay Micro-Business

Enterprise entitled to fll income tax exemption is required to file an Annual Information Retur,
together with an Account Infrmation Form, or its equivalent, containing data lifted from the

audited financial statements and a swor statement of assets owned and/or used in the business.

Section 291. Where and When to File the Annual Information Return. - Except in cases
where the Bureau of Interal Revenue Commissioner otherwise permits, the Annual Information
Return shall be filed with the Revenue District Officer or the Revenue Collection Officer or the
duly authorized Treasurer of the city or municipality in which the Barangay Micro-Business

Enterprise has its princi

l place of business. The Annual Information Retur shall be filed on or
fa
before the fifteenth (15t ) day of the furth (4th) month fllowing the close of the taxable year.
Section 292. Revocation of Income Tax Exemption Privilege. - (a) The Bureau of Interal
Revenue shall revoke the income tax exemption privilege of a Barangay Micro-Business
Enterprise fr any of the causes set frth in Section 286 of this Manual on the cancellation of
registration of a Barangay Micro-Business Enterprise.

(b) The Bureau of Interal Revenue shall notify the Barangay Micro-Business Enterprise in
writing of its findings and require the Barangay Micro-Business Enterprise to pay the
corresponding income tax, without prejudice to the filing of administrative or criminal
complaints, if warranted.

(c) The Bureau of Interal Revenue shall also notify the Office of the City/Municipal Treasurer
concered of its action, whereupon the City/Municipal Treasurer shall make a determination
within fifteen (15) days from receipt of the Bureau of Interal Revenue's notice, whether or not
the Barangay Micro-Business Enterprise's Certificate of Registration issued by the Local
Treasurer must likewise be cancelled.

Chapter 5. CREDIT FINANCING AND ALTERNATIVE SOURCES OF

FUNDS

Section 293-. General Policy. - (a) It shall be the basic policy that any local goverment unit
may create indebtedness, and avail of credit facilities to finance local infrastructure and other
socio-economic development projects in accordance with the approved local development plan
and public investment program.
(b) A local goverment unit may also avail of credit lines from goverment or private banks and
lending institutions for the purpose of stabilizing local finances. (Sec. 296, LGC)

Section 294. Credit and Other Sources of Funds Available to Local Government Units. -
Local goverment units may avail of the following credit financing, indebtedness and other
financing mechanisms for the purposes under, and in accordance with, the provisions of R. A.
No. 71 60 or the Local Goverment Code of 1991, as well as other relevant laws:

a) Loans, credit, and other forms of indebtedness; (Sec. 297, LGC)

b) Deferred payment and other financial schemes; (Sec. 298, LGC)
c) Loans, grants and subsidies to other Local Goverment Units; (Sec. 300, LGC)
d) Joint and several loans with other Local Government Units; (Sec. 300, LGC)
e) Loans from funds secured by the National Government fom freign sources; (Sec. 301,
LGC)
f) Bonds and other long-term securities; (Sec. 299, LGC)
g) Private sector financing, construction, maintenance operations, and management of
infrastructure projects under Build Operate Transfer arrangement; and
h) Grants

Section 295. Definition of Terms:

1) Assignment - a transfer or making over to another of the whole of any property, real or
personal, in possession or in action, of any estate or right therein. It includes transfers of all
P· 2d 723, 83 P. 2d 516, 519), including
kinds of property (Higgins V. Morckton, 28 Cal. Af
negotiable instruments (Black's Law Dictionar, 51 ei., (1979).

2) Bond - a certificate or evidence of a debt on which the issuing company or govermental

body promises to pay the bondholders a specified amount of interest for a specified length of
time, and to repay the loan on the expiration date. In every case, a bond represents debt.
(Philippine Law Dictionary, 3rd edition, Federico B. Moreno)

3) Build-Operate-and Transfer -strictly construed, Build-Operate-Transfr 195 is a contractual

arrangement under which the project proponent is authorized to finance, construct, and
subsequently operate and maintain an infrastructure facility. However, the term is often also
used to refer to other types of private participation in the financing and management of
public sector projects. (Sec. 302, LGC)

Under the Build-Operate-Transfer, in its original sense, ownership of the fcility is vested in
the project sponsor, but the project proponent operates the facility for a contractually set
fixed term during which it is allowed to charge fcility users tolls, fees, rentals, or other
appropriate charges based on the approved contract. These charges are the means by which
the project proponent recovers its investments, covers the costs of maintenance and operation
of the project, and realizes a reasonable retur. At the end of the contracted period, which by

i9s
BOT
 law should not exceed fify (50) years, the project proponent transfers the fcility to the
sponsor agency or local goverment unit.

Also classified as Build-Operate-Transfr are supply-and-operate contracts under which the

goverment finds it in its interest to allow the supplier of equipment and machinery for a
given facility to operate these: Provided, That the process involves technology transfr and
training of Filipino nationals.

4) Other Build-Operate Transfer Arrangements - Build-Operate-Transfer arrangements

entail various degrees of involvement of the private sector in the financing, construction
and
management of public infrastructure and facilities. Among the arrangements referred to as
Build-Operate-Transfer, although they have some fatures that are different from those
described in (3) above, are the following:

a) Build-and-Transfer: 196

1. A contractual arrangement under which the project proponent finances

and constructs an infrastructure or fcility and after its completion
turs it over to the goverment agency or local goverment unit
concerned.

11. The local goverment unit shall pay the proponent on an agreed
schedule its total investment plus a reasonable rate of retur.
iii. This arrangement is most suitable fr the construction of any
infrastructure or development project, including sensitive fcilities
with security or strategic implications that the Goverment opts to
operate directly.

b) Build-Lease-and Transfer: 197

1. A contractual arrangement under which project proponent finances and

constructs an infrastructure or facility and upon its completion turns it
over to the sponsor agency or local goverment unit on a lease
arrangement.

11. The terms and fixed period of the lease enable the proponent to
recover its investments and make a reasonable profit.

iii. The title of the fcility is transfrred to the sponsor agency or local
goverment unit at the end of the contracted lease period.

c) Build-Own-and-Operate: 198

196
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197 BLT
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BOO
 1. A contractual arrangement under which a project proponent is
authorized to finance, construct, own, operate and maintain an
infrastructure or development facility.

11. The proponent, which in this case owns the assets, is allowed to
recover its total investment, the costs of maintaining and operating
the facility and a reasonable retur, by collecting tolls, fees,
rentals or other charges from facility users.

iii. Under this scheme, the proponent, as project owner, may assign
its
operation and maintenance to a facility operator.
199
d) Build-Transfr-and-Operate:

1. A contractual arrangement under which the sponsor goverment

agency or local goverment unit contracts a private entity to build an
infrastructure facility on a tum-key basis.

11. The contractor assumes cost over-runs, delays, and specified

performance risks.

iii. The title is transferred to the project sponsor as soon as the fcility is
commissioned satisfactorily, but the private entity operates the facility
on its behalf under an agreement.

e) Contract-Add-and-Operate:200

1. A contractual arrangement under which the project

proponent is authorized to add to any existing infastructure
facility which it is renting from the goverment and to operate
the expanded project over an agreed franchise period.

2.Any transfer arrangement as regards the added facility depends

on the specific agreements and approved contractual
arrangements.

f) Rehabilitate-Operate-and-Transfer201 - A contractual arrangement which an existing

facility is tured over to the private sector to refurbish, operate and maintain fr a
franchise period, at the expiry of which it is tured to the Goverment.

g) Rehabilitate-Own-and-Operate 202 - A contractual arrangement under which an existing

facility is tured over to the private sector to refurbish and operate with no time

199 BTO
200 CA O
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01 ROT
202
ROO
limitation imposed on ownership. As long as the operator is not in violation of its
fanchise, it can continue to operate the fcility in perpetuity.

5) Collateral - property pledged as security fr a debt. It is additional security for performance

of principal obligations.

6) Construction - refrs to new construction, rehabilitation, improvement, expansion,

alteration and related works and activities. The term includes the necessary supply of
services and labor, equipment, materials, and related items needed to build or rehabilitate an
infrastructure or development fcility.

7) Credit Line - in banking and commerce, the amount of money or merchandise which a
banker or supplier agrees to supply to a person on credit, which is generally agreed to in
advance. Thus, it also refers to the agreed limit of the money which may be borrowed or of
the value of merchandise that may be purchased on credit. (Philippine Law Dictionar, 3 rd
edition, Federico B. Moreno)

8) Deferred Payment - payments or principal or interest postponed to and scheduled for a

fture time; installment payments.

9) Development Programs - usually, the term refers to the plans and programs included in the
Medium-Term Philippine Development Plan, the Regional Development Plans and Local
Development Plans. It may, however, also refr to other plans and programs not included in
these.

10) Investment - the placing of capital or laying out of money in a w' intended to secure
income or profit fom its employment. (Philippine Law Dictionar, 3 , edition, Federico B.
Moreno)

11) Loan - in refrence to money, is a contract under which one of the parties delivers to
another
a sum of money on the condition that the same amount shall be paid (Art. 1933, Civil Code of
the Philippines). It involves the delivery by one party and the receipt by the other party of a
given sum of money, upon an agreement, express or implied, that the recipient will repay the
same sum, with or without interest (People v. Concepcion, 44 Phil 129).

12) Mortgage - the conveyance of an estate or pledge of property as security for the payment
of
money or the performance of some other act, and conditioned to become void upon such
payment or performance.

Real Estate Mortgage - refers to mortgage on land or other real property.

b) Chattel Mortgage - refrs to mortgage on personal property which is recorded in the

chattel mortgage register.
13) Regular Income - comprises all recurring income from local sources or revenues plus
regular share of local goverment units in the proceeds of national taxes.
14) Securities - evidences of debts or property, of obligations to pay money, or of rights
to participate in earings and distribution ofcorporate, trust and other property.

15) Sinking Fund - assets and their earings earmarked for the retirement of bonds or other

long-term obligations. Most commonly set aside from income ofrevenue-earing property.

Section 296. Duties and Responsibilities of Local Treasurers. - Local Treasurers have the
following duties and responsibilities that relate to the powers of LGUs to use credit
financing, indebtedness and alterative sources offunds:

1) Act as the custodian of all funds directly released to the LGU fom the proceeds of
grants and from loans, credits and other forms of indebtedness, as well as income and
express profits derived from the operations ofthe projects financed from them. He shall
deposit these fnds in a separate depository account in the name of the LGU with
banks, prefrably goverment owned, located in or nearest to the area ofjurisdiction ofthe
LGU;

2) Prepare the required reports ofchecks issued, disbursements and other accountabilities;

3) In coordination with other LGU official concered, ensure that the debt servicing
for the LGU credit does not exceed twenty percent (20%) ofits annual regular income for
each year until the loan is fully paid. (Sec. 324 (b), LGC);

4) Pay or amortize loans, including all interests incurred, as appropriate from the income
ofthe projects or services and/or fom the regular income ofthe LGUs until flly paid; and

5) Upon authorization ofthe sanggunian concered, Local Treasurers shall:

a) Establish a Sinking Fund fr the re-payment of bond issues or maintain

Trust Funds fr the purpose;

b) Maintain special accounts in the General Fund for loans, interest, bond
issues, receipts arising from Build Operate Transfer transactions, such as
toll fes, charges, and other mandatory contributions for specific purposes.
(Sec. 313, LGC);

c) Maintain separate records of funds received fr projects financed by

proceeds of loans, credits, grants, and other forms offinancing to keep track
ofthe cash flow ofthe project fund;

d) If required, provide financial data about the LGU that may be needed in
relation to its availment ofthe funding sources and mechanisms described in
this Chapter.

Section 297. Provisions for the Servicing of Contractual Obligations of Local Government
Units:
a) Using Portion of IRA Shares as Payment to Contractual Obligations. - Any LGU,
through its Local Chief Executive and upon authorization by the sanggunian concered,
may
authorized the National Goverment to deduct or withhold a portion of its IRA share fr the

payment of its contractual obligation, subject to the limitations defined in the succeeding

paragraph (c) hereof. (Article 401, IR implementing Sec. 303, LGC)

b) Mandatory Appropriations for Re-payment of Loans. - Local goverment units shall

appropriate in their respective annual budgets such amounts as are sufficient to pay the
loans
and other indebtedness incurred or redeem or retire bonds, debentures, securities, notes
and
other contracted obligations issued under this Chapter as they become payable until the
total
obligations shall have been paid in fll. Provided, That failure to provide the appropriations
herein shall render their annual budgets inoperative. (Sec. 303, LGC)

c) Mandatory Requirements and Limitations on Debt Service. - Local goverment units

shall make full provision fr all statutory and contractual obligations: Provided however,

That the amount of appropriations for debt servicing shall not exceed twenty percent
(20%)
of the regular income of the local goverment unit concered. (Sec. 324 (b), LGC)

d) Regular Income shall refer to revenues and receipts realized by provinces, cities and
municipalities from regular sources of the local General Fund including the Interal
Revenue
Allotment and other shares provided fr under R. A. No. 7160 or the Local Goverment

Code of 1991, but exclusive of non-recurring receipts such as other national aids, grants,
financial assistance, loan proceeds, sale of fixed assets and other similar receipts.

Section 298. Enforceability of Loan Obligations Notwithstanding the Expiration of the

Terms of the Elective Contracting Officials. - Loan obligations contracted by local
goverment units will subsist and remain binding and enfrceable notwithstanding the
expiration of the terms of the elective local officials who contracted the same. The corporate
existence of the local government unit is not co-terminus with the term of its officials who
merely are its agents. The sanggunian which authorized the contracting of loan
obligations binds the succeeding sanggunian of the local government unit which is separate
and distinct from the personality of its officials. (DOJ Opinion No. 160, series of1994)

Section 299. Guidelines on the Use of Funds Raised by Indebtedness:

a) A local goverment unit may contract loans, credits, and other forms of indebtedness with
any government or domestic private bank and other lending institutions to finance the:

1) construction, installation, improvement, expansion, operation, or maintenance of

public fcilities, infrastructure facilities, housing projects;
2) acquisition of real property; and

3) implementation of other capital investment projects, subject to such terms and

conditions as may be agreed upon by the local government unit and the lender. (Sec.
297 (a), LGC)
b) A local goverment unit may likewise secure fom any goverment bank and lending

institution short, medium, and long term loans and advances against security of real estate
or
other acceptable assets fr the establishment, development, or expansion of agricultural,
industrial, commercial, house financing and livelihood projects, and other economic
enterprises. (Sec. 297 (b), LGC)

Goverment financial and other lending institutions are authorized to grant loans, credits, and
other forms of indebtedness out of their loanable funds to local goverment units for
puroses specified above. (Sec. 297, LGC)

Section 300. Tax Exemption Privileges of Local Government Units. - Local goverment
units shall be exempt fom payment of duties and taxes fr the importation of heavy equipment
or machinery which shall be used fr the construction, improvement, repair and maintenance
of roads, bridges, and other infrastructure projects, as well as garbage trucks, fire trucks, and
other similar equipment: Provided That such equipment or machinery shall not be disposed
of, either by public auction or negotiated sale, within five (5) years from their importation.

To avail of the incentives and fr expeditious processing of request fr duty and tax exemption,
the fllowing specific requirements are prescribed:

a) A letter application signed by the Local Chief Executive (Goveror, City Mayor or
Municipal Mayor) or his duly authorized representative, attaching therewith the pertinent
Board Resolution, authorizing the Local Chief Executive to import/accept donation;

b) The usual import-documents such as:

1) Bill of Lading, Airway Bill, Parcel Post Notice or other shipping documents;
2) Commercial Invoice and Packing List; and
3) Other relevant documents covering the shipment.

c) Swor Statement that the imported articles are not fr sale, hire or barter; and

d) An undertaking from the local goverment unit that, upon release and physical possession
of
the machinery and equipment, the notice, "ENTERED DUTY/TAX-FREE UNDER THE
NEW LOCAL GOVERNMENT CODE" shall be printed in a conspicuous space on the
machinery and equipment which was accorded duty-and-tax-fee release. (Sec. 5,
Department Order No. 21.92, Department ofFinance)

Section 301. Limitations on the Use of Credit Lines to Stabilize Local Finance. - In the use of
credit lines for the purpose of stabilizing local finances as provided in Section 296 of R. A.
No. 7160 or the Local Goverment Code of 1991 203, local goverment units shall observe the
following guidelines:

a) Availment must be approved by the concered sanggunian;

203
See Sec. 293, this Manual
c
)
b) Funds availed through credit for this purpose shall be spent and disbursed solely to
finance
expenditures covered by appropriations authorized in the duly approved local goverment
budget for the current year.

Section 302. Common Requirements for Credit Financing of Local Development Projects. -
Local goverment units shall observe the following common requirements in the use of
credit financing for their development projects:

a) Inclusion of the proposed project in the approved local development plan and public

investment program. (Sec. 296 (a), LGC

b) Sanggunian resolution authorizing the Local Chief Executive to secure/negotiate and/or

enter
into an agreement, which may include the following:

1) endorsing the proposed project.

2) identifying the frms/types of financing the projects.
3) authorizing the mode/form of financing the projects.

c) Swor statement of the Local Treasurer and Accountant on the fllowing outstanding
debts
and obligations of the local goverment unit, if any:

1) kinds of loans.
2) purpose of loans and other obligations.
3) lending agencies/institutions.
4) dates approved/granted and maturities.
5) terms and conditions.
6) annual amortizations (segregate/specif principal and interest);
7) remaining balances (principal and interest):
• current
• arrears
8) assignments/collaterals.

d) Current year budget together with the twenty percent (20%) development fund program.

e) Financial data on the financial and other operations of the local goverment unit, as well
as the socio-economic climate within its territory. The more common financial data are
shown
in the following table.204

204
Other.financial data are also contained in the Statement ofReceipts and Expenditures (SRE) shown in LTO
Form 14 ofthis Manual.
TABLE ON LGU FINANCIAL DATA COMMONLY REQUIRED WHEN AVAILING
OF INDEBTEDNESS AND OTHER FINANCING MECHANISMS205

LGUINCOME Social Security/Social Services & Welfare

Economic Services
Local Sources: Debt Servicing
Other Purposes
Tax Revenue Special Education Fund
Real Property Taxes Education, Culture and Sports/Manpower
Business Taxes and Licenses Development
Other Taxes
2.2By Sector:
Non Tax Revenue:
Economic Services
Operations of Economic Enterprises Social Services
Regulatory Fees General Public Services
Service/Users Charges DebtBurden
Other Receipts
Shares from National Tax Collections/ 2.3By Object:
Grants/Aids
Interal Revenue Allotment (IRA) Personnel Services (PS)
Share in National Wealth Maintenance and Other Operating Services
Share in Tobacco Excise Tax (MOOE)
Capital Outlay
Grants: 20% Development Fund
Domestic Other Capital Outlay
Foreign LiabilitiesBeing Serviced
National Aid
3.0TAXBASE
Loans,Borrowing, and Transfrs:
Loans 3.1 Potential Collection
Transfrs 3.2 Actual Collection
Inter-Local Transfrs
4.0VALUE ASSETS
LGU EXPENDITURES
4.1 Equipment
2.1By Function: 4.2Buildings
4.3 Land
General Public Services
Education, Culture and Sports 5.0 PROJECTIONS OF INCOME AND
Labor and Employment EXPENDITURES
Housing and Community Development
6.0ECONOMIC ENTERPRISES
6.1 Service/Commodity

6.2 Capacity

6.3 Summer of Operation

Section 303. Acceptable Collateral. - The most common securities or collaterals which local
goverment units may offer fr loans to satisf the requirements of lending institutions are any
one or a combination of the following:

a) Assignment of a portion of the share fom the Interal Revenue Allotment of the local

goverment unit concerned. Any local goverment unit through its local chief executive and
upon authorization by way of a resolution of the sanggunian concered, may authorize the

National Goverment to deduct or withhold a portion of its Interal Revenue Allotment share

fr the payment of its contractual obligations, subject to the limitations under Sec, 324 (b)
of

R. A. No. 7160 or the Local Government Code of 1991. 184

The resolution of the sanggunian shall clearly state the name of the creditor, the nature of
indebtedness, the amount to be withheld, and the period and term that such withholding of the
Interal Revenue Allotment shares shall be made;

b) Chattel Mortgage of equipment financed by the loan;

c) Real Estate Mortgage of the patrimonial property of the local goverment unit; and

d) Net profit from the project financed by the credit.

Section 304. Special Account fr Loans, Interests, Bonds, and Contributions fr Specific
Purposes. - Local goverment units shall maintain Special Accounts in their General Fund for

the fllowing:

a) Public utilities and other economic enterprises;

b) Loans, interests, bond issues, and other contributions fr specific purposes;
c) Development projects funded from the Interal Revenue Allotment; and
d) Such other special accounts which may be created by law or ordinance.

Section 305. Other Requirement for Loans, Deferred Payments and Other Financial
Schemes. - The officials of local goverment units contracting loans and other frms of
indebtedness under the provisions of this Chapter shall also comply with the following:

a) Any other provisions of R. A. No. 7160 or the Local Government Code of 1991, or
other
laws that may be relevant to a particular project or the transactions necessary to realized it;

b) The rules and regulations on property and supply management, which shall be applied in the
acquisition of equipment or machinery under the loans, deferred payment and other financial

schemes; and

c) All applicable accounting and auditing policies and regulations;

Section 306. Inter-Local Government Units Loans, Grants and Subsidies. - Provinces,
cities and municipalities may, upon approval of the majority of all members of the sanggunian
184
See Sec. 297 (c), this Manual
concered and in amounts not exceeding their surplus funds, extend loans, grants, or subsidies
to other local goverment units under such terms and conditions as may be agreed upon by
the contracting parties. (Sec. 300 1s1 par., LGC)

There are no standard terms and conditions for loans under this scheme. However, the creditor

LGU and the borrower LGU have to negotiate, come to an agreement, and observe the
following
processes:

a) Enactment by the lending and the borrowing LGUs of the required resolutions and/or
ordinances duly signed/approved by the majority of all the members of their respective
sanggunian, stipulating the terms and conditions that shall include the following:

I) repayment scheme and grace period;

2) interest lending/borrowing rate;
3) security/collateral;
4) benefits to both the lending and the borrowing LGUs; and
5) automatic budget allocation of the necessary amount fr repayment

b) Ratification of the loan contract by the sanggunian of both contracting LGUs/parties, which

is needed for the loan agreement to- become valid and enforceable.

c) Certification by the Local Treasurer of the lending LGU, attested to by its Auditor, of the
accumulated surpluses eligible for lending, grants or subsidies.

Section 307. Joint and Several Local Government Unit Loan Arrangements. - Local
government units may, upon approval of their respective sanggunian, jointly and severally
contract loans, credits, and other forms of indebtedness for purposes mutually beneficial to them.
(Sec. 300 211d par., LGC)

Section 308. Loans fom Funds Secured by the National Government from Foreign
Sources. - The President or his duly authorized representative may, through any goverment
financial or other lending institution, re-lend to any province, city, municipality, or barangay, the

proceeds of loans contracted with freign financial institutions or other interational funding
agencies.

A. Guidelines:

l) The loans shall be used fr the purpose of:

1. financing the construction, installation, improvement, expansion, operation or

maintenance of public fcilities, infrastructure fcilities, or housing projects;

2 acquiring real property; and

.

3.. implementing other capital investment projects.

 2) Such loans shall be subject to the terms and conditions agreed upon by the President and
the local goverment unit. The proceeds from such loans shall accrue directly to the local
goverment unit. (Sec. 301 (a), LGC)

3) The President may likewise authorize the re-lending to local government units the
proceeds of grants secured from foreign sources, subject to the provisions of existing
laws and the applicable grant agreements. (Sec. 301 (b), LGC)
4) Re-payment or amortization of loans, including their accrued interest thereon, may be
financed partly from the income of the projects or services and from the regular income
of the local goverment unit, which must be provided fr and appropriated regularly in
its annual budget until the loan and interest thereon shall have been fully paid. (Sec. 301

(c), LGC)

B. The Municipal Development Fund as Conduit. - The Municipal Development Fund,185

created under P. D. No. No. 1914, operates for the above purposes with the Department of
Finance as administrator. Provinces, cities and municipalities may tap the Municipal
h agreements with the Department of Finance, setting the
Development Fund for loans throuf
terms and conditions of the loan.18 (Sec. 1, P. D. 1914)

Section 309. Deferred Payments and Other Financial Schemes. - Provincial, city and
municipal goverments may acquire property, plant, machinery, equipment, and such necessary
accessories under a supplier's credit, deferred payments plan, or other financial schemes (Sec.
298, LGC) under the fllowing conditions:

a) That the acquisition of such equipment, machinery, and their accessories shall be govered
by the pertinent provisions of the Implementing Rules and Regulations of R. A. No. 7160 or
the Local Goverment Code of 1991, on "Local Goverment Supply and Property
Management", whether such items are to be supplied or purchased fom a local or freign
supplier; and

b) That the Local Chief Executive, through a sanggunian resolution, is authorized to negotiate
the contract executed under the defrred payment scheme. (Art. 396, IRR implementing Sec.
298, LGC)

Section 310. Bonds and Other Long Term Securities. - Subject to the rules and regulations of
the Bangko Sentral ng Pilipinas and the Securities and Exchange Commission, provinces, cities
and municipalities are authorized to issue bonds, debentures, securities, collaterals, notes and
other obligations to finance self-liquidating, income-producing development or livelihood
projects pursuant to the priorities established in the approved local development plan or the
public investment program. (Sec. 299, LGC)

iss MDF
186
The dierent Municipal Development Fund Of ice's new loan !grant financing packages that may be availed of
by LGUs are discussed in a separate manual on the "Proposed New MDFO Lending Programs and Products".
A. Debt Service Requirement and Limitations. - As debt instruments, bonds are subject to
the mandatory appropriations in the respective annual budgets of local goverment units as
provided under Section 303 ofR. A. No. 7160 or the Local Goverment Code of 1991.187

Likewise, bonds are subject to the debt service limitations

ofR. A. No. 7160 or the Local Goverment Code of 1991. 88

The BLGF certification on the maximum borrowing or debt service capacity of a

local
goverment unit is part of the documentation required for the issuance of local
goverment
bonds.189

B. Sanggunian Approval. - The sanggunian concered shall, by way ofan ordinance

approved by a majority ofall its members, declare and state the terms and conditions ofthe
bonds and the purpose fr which the proposed indebtedness is to be incurred. (Sec. 299, LGC)

C. National Government Guarantee. - In cases where the bond issue shall bear the guarantee
of the National Goverment, the approval of the Secretary of Finance shall be required. (Art.
397 (b), IRR implementing Sec. 299, LGC)

D. Local Government Bond Issuances are Subject to Rules and Regulations of the Bangko
Sentral ng Pilipinas. - Whenever local goverment units contemplate to borrow within the
Philippines, the prior opinion of the Monetary Board shall be requested in order that it may
render an opinion on the probable effects of the proposed operation on monetary aggregates,
the price level and the balance of payments. (Sec. 123, Art 111, R. A. No. 7653 or the Bangko
Sentral ng Pilipinas Charter/90

E. Local Government Bonds are Exempt from Registration Requirements of the Securities
and Exchange Commission. - Local goverment bonds are exempt from the registration
requirements of the Securities and Exchange Commission. However, in order to maintain
standards in the securities market, the Securities and Exchange Commission maintains
authority and control over the underwriters and brokers of all types of securities including
local goverment bonds.

F. Special Documentation Requirements for Local Government Bonds. - In addition to the

common requirements reflected in Section 302 of this Manual, the following documentary
requirements shall be complied with in the issuance oflocal goverment bonds:

1) BLGF Certification as to the Debt Service Capacity of the LGU concerned (ESP
Letter, Nov 27, 2000);

See Sec. 297 (b). this Manual

187

See Sec. 297 (c) and (d), this Manual 189

188

See Sec. 302 (e), this Manual

1) DOF Certification as to the national goverment guarantee in case the floatation
requires National Goverment guarantee (ESP Circular No. 44);

2) Monetary Board opinion on the probable effects of the proposed issuance of the LGU
Bonds on the monetary aggregates, price levels and balance of payments (ESP
Circular No. 41);

3) Sanggunian Resolution, for the following:

a) Establishment of sinking fnd for the payment of retiring or maturing bonds;

b) Authorizing the Local Chief Executive to enter into and agreement with the
Financial Advisor/Trustee; and

c) Certifying that the LGU will or will not seek any National Government
guarantee fr the bond.

4) Annual Audit Report for the immediately preceding year;

5) Budget Operation Statement/Statement of Actual Income and Expenditure fr the

past five (5) years duly signed by the Local Treasurer and/or Local Accountant
indicating the IRA actually received fr the same period.

Section 311. Private Sector Financing Under the Build-Operate-Transfer Arrangement. -

Local goverment units may avail of the several variations of Build-Operate-Transfer
arrangement to finance, construct, maintain, operate and manage infastructure projects.

A. General Provisions:

1) Authorization. - Local goverment units may enter into contracts with duly pre
qualified individual contractor, fr the financing, construction, operation, and
maintenance of any financially viable infrastructure facilities, under the build-operate
and-transfer agreement, subject to the applicable provisions of R. A. No. 6957,
authorizing the financing, construction, operation and maintenance of infrastructure
projects by the private sector and the rules and regulations issued thereunder and as such
terms and conditions provided for in this section. (Sec. 302 (a), LGC)
2) Inclusion in Development Plans and Investment Programs. - Local goverment units
shall include in their respective local development plans and public investment programs
priority projects that may be financed, constructed, operated and maintained by the
private sector under this section. (Sec. 302 (, LGC)

3) Disclosure and Public Endorsement. - It shall be the duty of the local goverment unit
concered to disclose to the public all projects eligible for financing under this section,
including official notification of duly registered contractors and publication in newspaper
of general or local circulation and in conspicuous and accessible public places. Local
projects under the build-operate-and-transfer agreement shall be confirmed by the local
development councils. (Sec. 302 (b), LGC)

4) Terms and Conditions. - Projects implemented under the provisions of this section shall be
subject to the following terms and conditions:

a) The provincial, city or municipal engineer, as the case may be, upon frmal request in
writing by the local chief executive, shall prepare the plans and specifications for the
proposed project, which shall be submitted to the sanggunian for approval. (Sec. 302 (c)
(), LGC)

b) Upon approval by the sanggunian of the project plans and specifications, the provincial,
city or municipal engineer shall, as the case may be, cause to be published once every week
for two (2) consecutive weeks in at least one (1) local newspaper which is circulated in the
region, province, city or municipality in which the project is to be implemented, a notice
inviting all duly qualified contractors to participate in public bidding for the projects so
approved. The conduct of public bidding and award of contracts fr local goverment projects
under this section shall be in accordance with R. A. No. 7160 or the Local Government
Code of 1991, and other applicable laws, rules and regulations. (Sec. 302 (c) (2) F1 par., LGC)

c) In the case of a build-operate-and-transfer agreement, the contract shall be awarded

to the lowest complying bidder whose offer is deemed most advantageous to the
local government and based on the present value of its proposed tolls, fes, rentals, and
charges over a fixed term fr the facility to be prescribed minimum design and perfrmance
standards, plans and specifications. For this purpose, the winning contractor shall be
automatically granted by the local goverment unit concered the fanchise to operate and
maintain the facility, including the collection of tolls, fees, rentals, and charges, in
accordance with sub-section (c) (4) hereof. (Sec. 302 (c) (2) 2ndpar., LGC)

d) In the case of a build-operate-and-transfer agreement, the contract shall be awarded

to the lowest complying bidder based on the present value of its proposed schedule of
amortization payments for the fcility to be constructed according to the prescribed minimum
designs and performance standards, plans and specifications. (Sec. 302 (c) (2) 3rd par., LGC)

e) Any contractor who shall undertake the prosecution of any project under this section
shall post the required bonds to protect the interest of the province, city, or municipality, in such
amounts as may fixed by the sanggunian concered. (Sec. 302 (c) (3), LGC)

f The provincial, city or municipal engineer shall, as the case may be, not allow any projects
under this section unless such contractor presents proof or evidence thathe has posted the
required bond. (Sec. 302 (c) (3), LGC)
 g) The contractor shall be entitled to a reasonable return of its investment in
accordance with its bid proposal as accepted by the local goverment unit
concered

In the case of build-operate-and-transfr agreement, repayment shall be made by

authorizing the contractor to charge and collect reasonable tolls, fes, rentals, and
charges fr the use of the project fcility not exceeding those proposed in the bid and
incorporated in the contract:

1 Provided, That the local government unit concered shall, based on

.
reasonableness and equity, approve the tolls, fees, rentals and charges;

Provided further, That the imposition and collection of tolls, fees, rentals and
charges shall be for a fixed period as proposed in the bid and incorporated in
1
1
the contract which shall in no case exceed fifty (50) years;
.
iii. Provided, finally, That during the lifetime of the contract, the
contractor shall undertake the necessary maintenance and
repair of the facility in accordance with standards prescribed in
the bidding documents in the contract. (Sec. 302 (c) (4) ; and st

2 pars., LGC)
nd

h) In the case of build-operate-and-transfer agreement, the repayment shall be made

through amortization payments in accordance with the schedule proposed in the
bid and incorporated in the contract:

1 In the case of land reclamation or construction of industrial estates, the repayment

.
plan may consist of the grant of a portion or percentage of the reclaimed land or
the industrial estate constructed. (Sec. 302 (c) (4) 3 and 4t pars., LGC)
rd h

i) Every infrastructure project undertaken under this section shall be constructed,

operated, and maintained by the contractor under the technical supervision of the
local goverment unit and in accordance with the plans, specifications, standards,
and costs approved by it. (Sec. 302 (c) (5), LGC)

5) Review of Contracts. - The provincial, city or municipal legal officer shall, as the case
may be, review the contracts executed pursuant to this section to determine their legality,
validity, enforceability and correctness of form. (Sec. 302 (d), LGC)

6) Build-Operate-Transfer Project Formulation and Proponent Selection. - The

191
existing Build-Operate-Transfer legal framework based on R. A. No. 7718 recognizes
191
BOT Law
two (2) modes fr identifing projects and selecting proponents, which affect the
processes involved in the early phases of the Build-Operate-Tansfer project. These modes
are as follows:

a) Solicited Proposals. - These are the priority projects identified by the sponsor agency or
local goverment unit. The sponsor formulates the project based on its objectives and studies,
and then invites ("solicits") the private sector to participate in its realization.

b) Unsolicited Proposals. - These are Build-Operate-Transfr project proposals of private

proponent to prospective sponsor agencies/local goverment units. An unsolicited project
may be accepted if it addresses existing priorities or needs that may or may not have been
previously realized by the prospective sponsor. The agency/local goverment unit may
accept an unsolicited proposal on a negotiated basis if the project meets certain conditions.

Section 312. Authority to Negotiate and Secure Grants. - Local chief executives may, upon
authority of the sanggunian, negotiate and secure financial grants or donations in kind,
in support of the basic services or fcilities enumerated under Section 17 of R. A. No. 7160
or the Local Goverment Code of 1991, 192 from local and foreign assistance agencies,
without necessity of securing clearance or approval therefre fom any department, agency,
or office of the National Goverment or from any higher local goverment unit.

A. Projects with National Security Implications. - Provided, That projects financed by such
grants or assistance with national security implications shall be approved by the national
agency concered: Provided further, That when such national agency fails to act on the
request fr Report to Congress and the President. - The local chief executive shall, within
thirty (30) days upon signing of such grant agreement or deed of donation, report the nature,
amount, and terms of such assistance to both Houses of Congress and the President. (Sec. 23
2 par., LGC)
nd

C. Formal Procedural Requirements. - In availing of the Official Development

Assistance (ODA) facilities, the LGU needs to consider that ODA donors as a matter of
procedure coordinate regularly with the National Economic Development Authority
(NEDA), which in tur coordinates local goverment matters with the Department of the
Interior and Local Government (DILG). For this reason, the fllowing frmal procedures
shall be observed:

1) The LGU prepares the project proposal using the required NEDA forms in
consultation with the DILG and NEDA and with other National Goverment
Agencies (NGAs), as appropriate;
approval within thirty (30) days from receipt thereof, the request shall be deemed approved.
1
(Sec. 23 r
par., LGC)

B. Required

192
See Sec. 269, this Manual
2) The Local Development Council (LDC) evaluates the project proposal for consistency
with its Local Development Plan and the Annual Investment Program;

3) Upon satisfctory evaluation of the proposal, the sangunian authorizes the LCE to negotiate
the grant;

4) NEDA checks the proposal fr possible duplication with other proposed/on-going projects,
and upon clearance endorses it to the ODA institution. If duplications or
conflicts are found, the proposal is refrred back to the LGU for review and revision;

5) The LCE endorses the project, through NEDA, to the identified ODA-granting institution;

6) The LGU submits the project proposals to the DILG which refers it to the concered NGAs
for possible security implications;

7) The concered NGAs review the project proposal and within thirty (30) days, inform
the DILG and the LGU concered of the result of the review. As appropriate, the
proposal may be approved, objected to due to security implications, or refrred back
for revisions;

8) LGU coordinates directly with the ODA grant funding institutions in monitoring the
latter's processing of the proposal and regularly informs the DILG and the NEDA of
the status of the proposal;

9) NEDA coordinates regularly with the ODA grant funding institution in fcilitating the
evaluation and approval of the local project proposal; and

10) An NGA or higher local or regional govermental body (i.e. PDC and RDC) evaluates
the project proposals only upon express request of the ODA grant donor and the consent of the
LGU(s) concered.

Section 313. Prohibited Acts Related to the Awards of Contracts Under the Provisions on Credit
Financing. - It shall be unlawfl fr any public official or employee in the provincial, city, or
municipal goverment, or their relatives within the fourth civil degree of consanguinity or
affinity, to enter into or have any pecuniary interest in any contract fr the construction,
acquisition, operation, or maintenance of any project awarded pursuant to the provisions of Title 4,
Book II of R. A. No. 7160 or the Local Goverment Code of 1991, 193 or fr the procurement
of any supplies, materials, or equipment of any kind to be used in the said project.

Any person convicted for violation of the provisions of said Title shall be removed from office
and shall be punished by imprisonment of not less than one (1) month but not more than two (2)
years, at the discretion of the court, without prejudice to prosecution under other laws. (Sec. 520,
LGC)