Lim_Tax Reviewer.pdf

P a r t XII

Local Taxation 1222. Distinguish local taxation f r o m internal r e v e n u e tax a n d real p r o p e r t y tax: Answer. Internal Revenue Tax

All types of national taxes levied by the national government

Collected by the Bureau of Internal Revenue through accredited banks Self-assessing Exercise by the national government under its inherent power of taxation 1223. W h a t are taxation?

the

Local T a x All types of imposts which local g o v e r n m e n t units are e m p o w e r e d to enact on businesses, occupations, regulated privileges and activities, utility charges carried and within their respective territorial jurisdiction

Real Property Tax

Taxes levied by provinces, cities and municipalities on real properties and their improvements

Collected by provinces, cities, municipalities and barangays

Collected by provinces or cities w h e r e the property is located

Not self assessing Exercise by the local g o v e r n m e n t units under its delegated power of taxation

fundamental

principles

governing

local

Answer. a) T h e imposition should be within the taxing authority of t h e local government. b)

Collection of local taxes shall not be let to a n y private person or entity;

c)

Should not be in restraint of trade

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d)

S h o u l d not be oppressive, excessive, discriminatory, unjust, confiscatory a n d contrary to the declared national economic policy of the g o v e r n m e n t ; "oppressive" - u n r e a s o n a b l y b u r d e n s o m e , unjustly severe or harsh. "excessive" - characterized by w h a t e v e r is notably greater than w h a t is m o d e r a t e , reasonable, proper, usual, necessary and just. "confiscatory" - a m o u n t s to u n d u e seizure or forfeiture of private property in favor of the public treasury. "unjust" - deficient in justice a n d fairness.

e)

S h o u l d be based on t h e ability-to-pay principle;

f)

S h o u l d evolve a progressive s c h e m e of taxation in the exercise of their power of taxation as m a n d a t e d by the Constitution.

g)

Should be uniform in all local political sub-units;

h)

Levied for a public purpose

i)

Collections shall inure and redound to local welfare, interest and benefits.

1224. W h a t are t h e objectives local taxation? Answer. a)

To enjoin the e n a c t m e n t of a Local Government Code which shall allocate a m o n g the different local government units their power and resources.

b)

To ensure the viability and self-sufficiency of local government unit by directly granting t h e m general taxing powers consistent with the basic policy of local autonomy.

c)

To allocate and define the taxing and other revenue raising powers of local governments;

d)

To develop local governments thru the exercise of their taxing and other revenue-raising powers into viable, financially stable and self-sufficient communities without over-burdening the taxpayer with multiple and unreasonable impositions; 717

e)

To insure that each local government will have its fair share of available resources and that the resources of the national government will not be unduly disturbed; and

f)

To insure that local taxation shall be fair, uniform and just.

1225. W h a t are the s o u r c e s of the taxing p o w e r s of the local governments? Answer. a) The 1935 Constitution did not itself provide for any such delegation of tax powers to the local g o v e r n m e n t s , the source of their taxing powers w e r e derived from a limited statutory authority. The power of the local g o v e r n m e n t to tax w a s not inherent (then and now) b e c a u s e it could be exercised only w h e n authorized to do so by legislation of the C o n g r e s s . b)

Under the 1973 Constitution, the power of taxation of the local government is not plenary and absolute b e c a u s e the National A s s e m b l y m a y still provide for s u c h limitations, as it may desire on the exercise of said power.

c)

W h e r e a s , under Art. X, Sec. 3; Sec. 5; a n d Sec. 6. of the 1987 Philippine Constitution, the local g o v e r n m e n t s w e r e broadly conferred with such powers subject only to specific exceptions that the law m a y prescribe. T h u s , w h e r e there is neither grant nor prohibition by statute the tax power must n o w be d e e m e d to exist. Previous to t h e effectivity of the Local G o v e r n m e n t C o d e of 1 9 9 1 , P. D. 231 (The Local T a x C o d e ) w a s the law governing the exercise by provinces, cities, municipalities and barangays of their taxing and other revenue-raising powers. 3

C o n g r e s s cannot enact laws depriving local g o v e r n m e n t units ( L G U ) from exercising s u c h p o w e r to tax but it may by law merely subject the exercise of that p o w e r to limitations and guidelines.

O

Such local taxes, fees and c h a r g e s i m p o s e d by the L G U shall accrue exclusively to t h e m .

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1226. W h o exercises the p o w e r of taxation in the local level? A n s w e r . T h e local legislative body or the S a n g g u n i a n of the local g o v e r n m e n t units through the e n a c t m e n t of tax ordinance. (Sec 132, L G C ) 1227. Do the local g o v e r n m e n t units have the inherent power to tax? A n s w e r . Local g o v e r n m e n t units (province, city, municipality and barangay) do not have t h e inherent p o w e r to tax, because they are mere creatures of law, except s u c h p o w e r as m a y be delegated to t h e m by the national legislature or conferred by the Constitution itself. By virtue thereof, local g o v e r n m e n t units have the power, independently of legislation, to create their o w n sources of revenue and to levy taxes to finance g o v e r n m e n t a l activities in their respective localities. Thus, unlike a sovereign state, municipal corporations (province/city/municipality/barangay) have no inherent power to tax. T h e y m a y exercise the power only if delegated to them by the national legislature or conferred by the Constitution itself. 1228. W h a t

is

the

nature

of

the

taxing

power

of

local

governments? Answer. a) It is not inherent b)

C a n be exercised only if delegated to t h e m by law or by the Constitution; and

c)

Not absolute; subject to limitations provided by law.

1229. H o w is the local p o w e r of taxation exercised? Answer. It is exercised by the legislative body of each local government units via the enactment of a tax ordinance. 1230. W h a t are the requisites of local tax ordinance: Answer. a) It should satisfy the procedural and substantive due process;

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b)

Public hearing prior to enactment is required with quorum, voting and approval and/or veto requirements complied with;

c)

Publication of ordinance within 10 days from approval for three (3) consecutive days in a newspaper of general circulation and/or posting in at least two (2) conspicuous and publicly accessible places.

1 2 3 1 . W h a t is the s c o p e of local taxation? Answer.

1232.

a)

The Local G o v e r n m e n t taxation covering the imposition of license taxes, fees and other impositions, including C o m m u n i t y Development Tax (Cedula). [R.A. 7 1 6 0 , the Local G o v e r n m e n t Code of 1991]

b)

Real Property Taxation that is a system of levy on real property imposed on a countrywide basis.

W h a t are the aspects of local taxation? Answer. The two aspects of local taxation are a)

Local taxation that levies t a x e s , fees, and charges under the Local G o v e r n m e n t C o d e of 1 9 9 1 , (RA 7160) w h i c h repealed the Local Tax C o d e enacted under P.D. No. 231 (June 2 8 , 1973).

b)

Real property taxation, w h i c h is g o v e r n e d by 1.

T h e Real Property T a x C o d e enacted under P.D. No. 4 6 4 as a m e n d e d , (May 2 0 , 1974)

2.

T h e Special Education Fund Law (R.A. 5 4 4 7 a p p r o v e d on Sept. 25, 1968).

Provincial, city, municipal and barangay ordinances imposing taxes are subject to the limitations provided in the Local G o v e r n m e n t C o d e , Local Tax C o d e a n d the Real Property Tax C o d e .

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1 2 3 3 . T w o (2) a c c e p t e d p r i n c i p l e o f a p p o r t i o n i n g t h e b u r d e n o f taxation: Answer. a)

Principle of Benefits Received - Persons w h o benefit from a g o v e r n m e n t service must pay tax.

b)

Principle of Ability-to-pay - P e r s o n s w h o possess more wealth or income should pay more tax t h a n those w h o have less.

1234. W h a t are the general rules/provisions on the authority of the local g o v e r n m e n t units to tax? Answer. a) Each local g o v e r n m e n t unit m a y create its o w n sources of r e v e n u e a n d levy taxes, f e e s and charges, and other forms of r e v e n u e m e a s u r e s s u c h as tolls, license, fees, rentals and service charges, through the Sangguniang Panlalawigan, Panlungsod, Bayan or Barangay, respectively, consistent with t h e basic policy of local a u t o n o m y , which shall exclusively accrue to it. T h e exercise of the power to tax by the local legislative a s s e m b l y is subject to the veto power of the local chief executive. (Sec. 55, L G C ) b)

Local taxation, like national taxation, is legislative in nature and shall be exercised through an appropriate tax ordinance and requires public hearing prior to its enactment. (Approval by the Secretary of Finance on the said enactment is not necessary)

c)

Local g o v e r n m e n t s are not authorized to condone or remit regulatory taxes. (Reyes vs. Cornista, 92 Phil. 838) but they may grant tax incentives to n e w industries, persons or entities.

d)

Local governments cannot e x e m p t persons or entities from real property taxes but they may condone liabilities on real property taxes. ( N O T E : properties exempt from property taxes are specifically identified and enumerated)

e)

Municipalities may levy taxes not otherwise levied by provinces, and the latter, would be prohibited from levying taxes that municipalities may impose under certain instances.

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f)

Cities have the broadest tax powers, embracing both such specific and general tax powers as provinces and municipalities may impose.

g)

Barangays may under certain conditions (1) levy taxes on store and retailers, (2) fees and charges o n , billboards and signboards, and cockpits, gamecocks and cockfights, and (3) impose service charges.

h)

The interpretations of laws on the grant of tax powers to local governments is to be liberally construed but doubts on the liability of a taxpayer under a valid tax ordinance is construed strictly against the local g o v e r n m e n t unit except, as regards tax exemptions, incentives and reliefs.

1235. C a n the local g o v e r n m e n t units exercise t h e p o w e r of taxation without a legislative grant? Answer. Y e s , because of Art. X. Sec. 5 of the 1987 Constitution. However, the C o n g r e s s m a y issue guidelines and limitations consistent with the policy of local a u t o n o m y . 1236. Can congress by legislation deprive local g o v e r n m e n t s of their taxing p o w e r ? A n s w e r . No. T h e power of the local g o v e r n m e n t s to tax is constitutionally granted and it exists independently of legislation. T h u s , being a constitutional provision it c a n be abolished only by constitutional a m e n d m e n t s a n d not be a m e r e legislative act. T h e Congress can only impose reasonable limitations on s u c h power to tax. 1237. C a n c o n g r e s s limit t h e p o w e r o f t h e local g o v e r n m e n t t o tax? A n s w e r . Y e s , b e c a u s e the C o n g r e s s is e m p o w e r e d to impose guidelines and limitations in t h e taxing power of the local governments units. 1 2 3 8 . C a n c o n g r e s s still e n a c t local t a x l a w s n o t w i t h s t a n d i n g an expressed grant of such power to the local governments?

A n s w e r . Y e s . W h e n C o n g r e s s delegated the power to tax to the local g o v e r n m e n t s , it did not divest itself of its inherent power to enact local tax laws. 1239. C a n c o n g r e s s e x e m p t t h o s e that are t a x e d b y the local government? A n s w e r . Y e s . C o n g r e s s has the power to control over local g o v e r n m e n t s , it c a n grant the local g o v e r n m e n t the power to tax certain matters, it c a n provide for e x e m p t i o n s or even take back such power. (Basco vs. PAGCOR, GR 91649, May 14, 1991) 1240. C a n t h e national g o v e r n m e n t tax the local g o v e r n m e n t ? H o w about the local g o v e r n m e n t units taxing the national government? A n s w e r . Y e s , the national can tax the local government units, but the local g o v e r n m e n t units c a n n o t tax the national government b e c a u s e t h e spring c a n n o t rise higher than its source. 1 2 4 1 . C a n t h e l o c a l g o v e r n m e n t t a x all k i n d s o f b u s i n e s s e n t i t i e s o p e r a t i n g w i t h i n its t e r r i t o r i a l j u r i s d i c t i o n ? A n s w e r . T h e taxing powers of the local government are not as extensive as that of the national government. There are some identified businesses that cannot be subject to local taxation. 1242. Is the p o w e r of the local g o v e r n m e n t to tax absolute? A n s w e r . T h e taxing power of the local government is not absolute as it is subject to s u c h limitations as m a y be provided by law, particularly those imposed under the Local Government Code. (Basco vs. Pagcor, -197 SCRA 52) Likewise, the exercise of the power to tax by the local legislative (Sanggunians) is subject to the veto power of the local chief executive. (Mayor) 1243. W h a t are the limitations and restrictions on the power of the local g o v e r n m e n t to tax? Answer. Yes. The constitutional, inherent, statutory and contractual limitations on national taxation are also applied to local taxation. a)

Constitutional limitations - (a) due process and equal protection clauses, (b) non-impairment of obligations of 723

contracts, (c) non-imprisonment for non-payment of poll tax, (d) rule on uniformity in taxation, and (e) tax exemptions of religious and charitable institutions. b)

Inherent restrictions - (a) public purpose, (b) territoriality, (c) direct double taxation, (d) exemption of government or instrumentalities from taxation.

c)

Statutory limitations - those expressly provided by law and applicable to all levels of local government - denominated as "common limitations on the taxing powers of local government units"

d)

Tax privilege granted by the g o v e r n m e n t under a valid contract limits the exercise of the power of taxation within the terms and conditions of the said contract. A tax ordinance that imposes a tax b e y o n d any of the limitations is VOID, it being ultra vires.

1244. W h a t are the limitations on the taxing p o w e r s of the local government

units?

(In

relation

to

the

welfare

of the

constituents of the local bodies) Answer. a) That the taxpayers will not be o v e r - b u r d e n e d or saddled with multiple and unreasonable impositions; b) That the resources of the national g o v e r n m e n t will not be unduly disturbed; c) That e a c h local g o v e r n m e n t unit will h a v e its fair share of available resource; and d) That local taxation will be fair, uniform and just. 1245. Territorial uniformity defined: A n s w e r . Uniformity of taxation within the territorial limits of the taxing jurisdiction. H e n c e , if it is a city tax it m u s t be uniform throughout the city, province, municipality or barangay. It is not required that the s a m e rate of tax be applied to all cities, provinces or municipalities, but only that such rate be uniformly applied to all of the s a m e class of taxable subjects within e a c h city, province or municipality.

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1246. W h e n is a tax m e a s u r e equitable? A n s w e r . T h e w o r d "equitable" in taxation refers to the distribution of the tax b u r d e n itself. T h e most equitable tax system is that which is most closely in conformity with the standards of equity in the distribution of real i n c o m e . 1 2 4 7 . Is a t a x o r d i n a n c e o p p r e s s i v e b e c a u s e it carries a penal clause of fine or imprisonment? A n s w e r . No. In the c a s e of Villanueva vs. City of lloilo, Dec. 28, 1968, the high court ruled that a tax ordinance does not become oppressive simply b e c a u s e it carries a penal clause of fine or imprisonment; neither d o e s it b e c o m e unconstitutional because it subjects the t a x p a y e r to criminal prosecution for non-payment of the tax validly i m p o s e d . 1248. H o w m u c h is t h e s h a r e of t h e local g o v e r n m e n t units in the internal revenue allotment? A n s w e r . Local g o v e r n m e n t units shall receive: a)

3 0 % on the first y e a r of the effectivity of the Local Government Code

b)

3 5 % o n the s e c o n d year;

c)

4 0 % on t h e third year and thereafter. 1.

2 3 % thereof t o the provinces

2.

2 3 % thereof to the cities

3.

3 4 % thereof to municipalities, and

4.

2 0 % thereof to barangays.

The share of each province, city and municipality shall be determined on the basis of the following formula: Population - 5 0 % ; Land area - 2 5 % and Equal sharing - 2 5 % O

2 0 % of the 2 3 % of cities' share in its internal revenue allotment shall be allotted for development projects and appropriated in

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accordance with the approved local development plans of the city. O

The share of the city in the internal revenue allotment shall be released directly to the City treasurer on a quarterly basis within 5 days after the end of each quarter and shall not be subject to any lien or holdback that may be imposed by the national government for whatever purpose.

1249. H o w m u c h is the share of local g o v e r n m e n t s in the proceeds from the development and utilization of national wealth? Answer. Local government units shall have the share of 4 0 % of the gross collection derived by the national g o v e r n m e n t from excise taxes on mineral products, royalties, taxes, fees, charges, surcharges, interests, fines, share from any co-production, joint venture or production a g r e e m e n t (referred to as the proceeds on the development of national wealth), - c o m p o n e n t s cities get 4 5 % from that share. For natural resources located in highly urbanized cities or independent cities, 4 0 % of its share shall be automatically apportioned in the following manner: City - 6 5 % and Barangay 35%. 1250. What do you understand by the residual taxing powers of the local g o v e r n m e n t s ? (Sec. 186, L G C ) A n s w e r . Like the National g o v e r n m e n t the local g o v e r n m e n t units do have this residual power of taxation w h i c h is t h e power to impose taxes, f e e s , and c h a r g e s w h i c h do not fall within the scope of taxes e n u m e r a t e d under the Local G o v e r n m e n t C o d e as well as those which are levied on subjects or bases w h i c h a r e not taxed under the N I R C , as a m e n d e d or other applicable laws. T h u s , local g o v e r n m e n t s may, under their residual taxing powers, raise revenue t h r o u g h other sources, s u c h as the imposition and collection of market stall f e e s ; slaughterhouse fees or charges for holding benefit s h o w s , public utility charges rendered in the operation of public utilities o w n e d , operated and maintained by t h e m ; tolls for m a i n t e n a n c e of any road, canal, bridges or ferry within its territory or for repaying borrowings for their construction; and service charges.

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1251. Elements of residual power of taxation: Answer. a)

T h e tax b a s e or subject are not t a x e d under the National Internal R e v e n u e C o d e or other applicable laws,

b)

T h e t a x e s , fees, or c h a r g e s are not unjust, excessive, confiscatory, o p p r e s s i v e or contrary to the declared national e c o n o m i c policy of the g o v e r n m e n t ;

c)

A public hearing have b e e n c o n d u c t e d prior to the enactment of the ordinance levying t h e t a x e s , fees or charges, and

d)

T h e procedures for the a p p r o v a l , effectivity and publication of tax ordinance have b e e n complied with.

1252. W h a t are the restrictions or limitations on the exercise of residual taxing p o w e r of the local g o v e r n m e n t units: Answer. a)

Constitutional limitations as provided.

b)

C o m m o n limitations on the taxing powers of local government units as prescribed.

c)

F u n d a m e n t a l principles governing local taxation particularly that requirement that they must not be "unjust, excessive, oppressive, confiscatory, or contrary to declared national policy".

d)

T h e requirement prescribed which directs that the ordinance levying such residual taxes shall not be enacted without any prior public hearing conducted for the purpose; and

e)

The Principle of Preemption or Exclusionary Rule is applicable under the premises.

1253. Define the Principle of Preemption or the Exclusionary Rule: Answer. Principle of Preemption refers to an instance where the National Government elects to tax a particular area, impliedly withholding from the local government the delegated power to tax

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the same field. This doctrine principally rests upon the intention of the Congress. Where the National Government elects to tax a particular area, it impliedly withholds from the local government the delegated power to tax the same field. Illustration: Under the V A T law, persons w h o are e x e m p t from the 1 2 % VAT are subject to the 3% percentage tax which is in lieu of the 1 2 % VAT. This arises w h e n the aggregate gross taxable sales/receipts derived by the taxpayer from all lines of businesses and every separate and distinct establishment or place w h e r e the business is conducted d o e s not exceed Php 1,919,500.00 (RR 162 0 1 1 , which took effect January 1, 2012) during any 12-month period. Preemption here would m e a n that the imposition of the 3% percentage tax on sales would impliedly preclude the imposition of that same kind of tax by local g o v e r n m e n t units. However, so long as the business tax being levied by the L G U s is not a sales tax, they may proceed with the levy, (e.g., a graduated fixed tax which is not a sales tax but a tax on the privilege of engaging in a particular business.) When

this

Doctrine

does

not

apply?

(Excluded

impositions pursuant to this Doctrine): a)

T a x e s w h i c h are levied provided by the L G U ,

under t h e N I R C ,

b)

Taxes, fees, etc. w h i c h are i m p o s e d Customs Code;

c)

Taxes, fees, etc. the imposition of w h i c h contravenes existing governmental policies or w h i c h violates the f u n d a m e n t a l principles of taxation,

d)

T a x e s , fees and other c h a r g e s i m p o s e d under special laws.

e)

W h e n C o n g r e s s allows municipal corporations to cover fields of taxation it already occupies.

f)

It does not apply b e y o n d a certain level of sales or receipts for the preceding year. ( E x a m p l e : P e r s o n s selling more than Php 1,919,500 in any 12-month period shall be liable to 1 2 % V A T

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unless otherwise

under the Tariff and

and also to any sales tax i m p o s e d by the local government unit.) g)

If the subjects of the taxes levied by the national and local g o v e r n m e n t s are different from e a c h other.

1254. Is there d o u b l e or multiple taxation in the local level? A n s w e r . D o u b l e taxation has not b e e n prohibited except implicitly against: a)

provinces a n d municipalities that either of said governments m a y not impose a tax w h i c h the other may impose under the municipalities' specific tax p o w e r s

b)

provinces, municipalities, a n d cities m a y not impose taxes w h i c h the b a r a n g a y s are specifically e m p o w e r e d to impose being to the exclusion of all other local g o v e r n m e n t units. N O T E : T h e r e is no constitutional prohibition against double taxation in the Philippines. It is something not favored but permissible, provided s o m e other constitutional requirement is not thereby violated, such as the uniformity clause on taxation. T h e r e is no double taxation in case one tax is imposed by the State a n d the other by the City or Municipality because there are t w o (2) different taxing authorizes. (Pepsi-Cola Bottling Co. of the Phils., Inc. vs. Mun. of Tanauan, Leyte, 69 SCRA 460)

1255. P o w e r of the local g o v e r n m e n t s to prescribe penalties for tax violations a n d limitation t h e r e o n : (Sec. 516, LGC) A n s w e r . This power, is limited to the fixing of imposable fines and length of time of imprisonment, particularly: a)

The Sangguniang is authorized to prescribe fines and other penalties for violation of local tax ordinances - in no case shall fines be less than Php 1,000 or more than Php 5,000, neither shall the imprisonment be less than one (1) month nor more than six (6) months.

b)

Such fines or other penalty shall be imposed at the discretion of the court.

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c)

The Sanggunian Barangay may prescribe a fine of not less than Php 100 or more than Php 1,000.

1256. P o w e r of the local g o v e r n m e n t to adjust tax rates: (Sec. 191, LGC) Answer. Local governments are authorized to adjust tax rates as prescribed under the LGC but should not do so oftener than once every five (5) years and in no case shall such adjustment exceed ten percent (10%) of the fixed rates under the C o d e . 1257. Power of the local g o v e r n m e n t exemptions: (Sec. 192, LGC)

to

grant

local

tax

Answer. The power to e x e m p t is not as broad as the power to tax. Local government units may, through ordinances duly approved grant tax exemptions, incentives or reliefs under s u c h terms and conditions, as they may d e e m necessary subject to limitations provided by law. 1258. Guidelines on the grant of tax e x e m p t i o n s or tax reliefs: Answer. a)

The s a m e shall be granted in c a s e s of natural calamities, civil disturbance, general failure of crops or adverse e c o n o m i c conditions such as substantial d e c r e a s e in prices of agricultural or agri-based products,

b)

T h e grant of tax e x e m p t i o n ordinance;

c)

A n y e x e m p t i o n or relief g r a n t e d to a type or kind of business shall apply to all business similarly situated;

d)

T h e e x e m p t i o n shall take effect only during the next calendar year for a period of not more t h a n one (1) year as m a y be provided in the tax o r d i n a n c e .

e)

In case of shared r e v e n u e s , t h e e x e m p t i o n or relief shall only extend to the L G U granting such e x e m p t i o n or relief.

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shall

be through

a

valid tax

1259. W h o s e exemptions were effectivity of the L G C ?

not

withdrawn

upon

the

Answer. a) Local water districts b)

C o o p e r a t i v e s duly registered under RA 6 9 3 8 (The Cooperative C o d e of the Philippines)

c)

Non-stock a n d non-profit hospitals, a n d

d)

Non-stock, non-profit educational institutions O

T h e p o w e r of the local g o v e r n m e n t to grant tax exemption, tax incentives and tax reliefs shall not apply to regulatory fees w h i c h are levied under the police power of the L G U .

O

T h e tax e x e m p t i o n shall be conferred through the issuance of a non-transferrable tax e x e m p t i o n certificate.

1260. Guidelines on the grant of tax incentives: Answer. a)

It shall be granted only to n e w investments in the locality and the tax ordinance shall prescribe the terms and conditions therefore;

b)

T h e grant shall be for a period not exceeding one (1) year;

c)

T h e grant shall be by tax ordinance passed prior to the 1 of January of any year, and

d)

A n y grant to a type or kind of business shall apply to all businesses similarly situated.

1261. What local

are the

common

government

units

revenue-raising (province,

powers

municipal,

s t

day

of the

city a n d

barangay)? Answer. All local government units are authorized to impose and collect the following fees and charges: a)

Service fees a n d charges - for any service rendered by local governments in an amount reasonably commensurate to such service; 731

b)

Public utility charges - for services rendered in connection with the operation of public utilities o w n e d , operated, and maintained by local governments within their territorial jurisdiction; "Wharfage" is the compensation or fee or charge for tying vessels to a wharf and for loading goods or shipping them therefrom. Local government may impose the s a m e provided that such wharves are constructed and maintained by t h e m . But, the collection may be declared null and void, if the imposition partakes of a specific tax, or a tax upon goods and merchandise carried into the municipalities. (Tan vs. Mun. of Pagbilao, 7 SCRA 887)

c)

Toll fees or c h a r g e s for roads, bridges, canals, pier or wharf, waterway, ferries and telecommunication system f u n d e d and constructed by the local g o v e r n m e n t c o n c e r n e d ; The amount, rates, terms and conditions relative thereto shall be determined and fix by the local s a n g g u n i a n c o n c e r n e d . The officers and enlisted m e n of the A F P a n d m e m b e r s of the P N P on mission, post office personnel delivering mail, physically handicapped and disabled citizens and senior citizens are e x e m p t f r o m these toll fees and c h a r g e s . W h e n public safety a n d welfare dictates, the local g o v e r n m e n t unit c o n c e r n e d m a y discontinue the collection of the tolls, fees and charges and thereafter, the said facility shall be free and o p e n for public use.

d)

Market fees - for the o c c u p a n c y or use of public markets and premises of the s a m e ;

e)

Slaughter fees - for the slaughter of any animal for public consumption;

f)

Corral fees - for the animals to be slaughtered w h i c h are deposited and kept in a corral o w n e d by the local g o v e r n m e n t ;

g)

Tuition fees - for instruction in schools w h i c h the g o v e r n m e n t operates, except in the elementary g r a d e s ;

732

local

h)

C h a r g e s for h o l d i n g benefits - those collected from benefits held by local g o v e r n m e n t s to raise funds for s o m e specific purpose; a n d

i)

L i c e n s e or P e r m i t f e e s - a m o u n t sufficient to cover the cost of regulation, inspection, and surveillance relative to the issuance of a permit to e n g a g e in any business or occupation.

1262. W h a t are t h e t a x e s that c a n n o t be i m p o s e d by the local g o v e r n m e n t units? ( C o m m o n limitations on the taxing powers of the LGU) Answer. a)

D o c u m e n t a r y S t a m p tax;

b)

T a x e s on forest c o n c e s s i o n s ; and forest products (not its sale) w h e n sold domestically by the concessionaire himself;

c)

T a x e s on estates, gifts, inheritance, legacies and other acquisitions mortis c a u s a , except the 1/2 of 1% tax on transfers of real property o w n e r s h i p that m a y be imposed by provinces and cities;

d)

T a x e s on income of any kind w h a t s o e v e r except w h e n levied on b a n k s and other financial institutions; including non-bank intermediaries, lending investors, finance and investment companies, m o n e y shops, insurance companies, stock markets, stock brokers, p a w n s h o p s and dealers in securities and foreign e x c h a n g e . T h e Local G o v e r n m e n t C o d e categorically authorizes the L G U s to impose two (2) types of taxes on banks and financial institutions, the .first being the income tax under Sec. 133(a) and the second the business tax under Sec. 143(f) of the same Code. Currently, these entities are already subject to gross receipts tax by the National Government up to 3 0 % of their lending activities, 5% on the amount of royalties of their real or personal properties, 3 0 % corporate income tax and 2 0 % withholding tax on their Philippine currency deposit interest income and yields from deposit substitutes. So that, the local government units in formulating the revenue ordinance must consider the s a m e in imposing additional tax burden on them. .

733

e)

Taxes on businesses inside the export processing zones because the power of taxation is coterminous with the territorial boundaries and therefore local government units cannot lawfully impose taxes beyond such boundaries. The zone is "outside" the territorial jurisdiction of the locality.

f)

Taxes on the business of transportation contractors and persons engaged in the transportation of passengers or freight by hire and c o m m o n carriers by air, land or water except as otherwise provided by the LTC;

g)

Local governments may tax tricycle operation. Under the L G C of 1 9 9 1 , they may impose a business tax on transportation contractors, except taxes that w o u l d use gross receipts as a tax base.

h)

Taxes or fees for the registration of motor vehicles and for the issuance of all kinds of licenses or permits for the driving thereof except tricycles;

i)

Customs duties, registration fees of vessels except as otherwise provided in the L T C , and w h a r f a g e on w h a r v e s , tonnage dues, and all other kinds of c u s t o m s fees, charges and dues except w h a r f a g e on w h a r v e s constructed a n d maintained by the local g o v e r n m e n t c o n c e r n e d at rates not e x c e e d i n g those fixed by the T C C ; (including berthing fees)

j)

T a x e s on p r e m i u m s paid by o w n e r s of property w h o obtain insurance directly with foreign insurance c o m p a n i e s ; or for reinsurance or retrocession ( p r e m i u m s refunded on account of rejection of risk);

k)

Export taxes, fees or other manufactured or processed Philippine cottage industries;

levies on Philippine finished, products, a n d products of

T h e prohibition is on t a x i n g the p r o d u c t s e x p o r t e d a b r o a d . T h e business of exporting Philippine finished, manufactured or p r o c e s s e d products is T A X A B L E by municipalities or cities. Likewise, export t a x e s , fees and other levies m a y be i m p o s e d by local g o v e r n m e n t units on raw materials E X P O R T E D T O F O R E I G N C O U N T R I E S . I)

T a x e s and other impositions u p o n g o o d s carried into or out of, or passing t h r o u g h , the territorial jurisdictions of local 734

g o v e r n m e n t s in the guise of unreasonable charges for w h a r f a g e , use of bridges, or otherwise, or other taxes in any f o r m w h a t e v e r u p o n such g o o d s or merchandise; O

An ordinance imposing a tax on the inspection of meat c o m i n g f r o m outside city limits by a veterinarian and charging fees therefore w a s declared invalid.

3

An export tax i m p o s e d on the inspection fee on every head of h o g , cattle and c a r a b a o transported to other places w a s forbidden.

O

An o r d i n a n c e imposing a tax regulating the exit of food supply and labor animals by prescribing a license permit and requiring t h e p a y m e n t of certain fee therefor w a s held to be invalid.

O

A business tax on copra dealers on every hundred kilos of copra exported a b r o a d w a s declared v o i d .

O

An ordinance charging outgoing fee in the transport of rice and corn f r o m o n e municipality to another is violative to Sec. 5(j) PD 2 3 1 , being in restraint of trade.

m ) T a x e s or fees on agricultural or aquatic products w h e n sold by the marginal farmer, f i s h e r m a n , poultry or animal-raiser himself or his immediate family; 3

T h e s e are likewise taxable w h e n sold by persons other t h a n t h e farmer or producer, even without being processed. (Oriental Kapok Industries vs. CIR, 7 SCRA 132)

O

T h e s e products b e c o m e taxable w h e n sold by agribusiness enterprises in c o m m e r c i a l quantities or when these are transformed into manufactured articles such as salted duck eggs, charcoal or sugar. (Bermejo vs. Collector, 87 Phil. 96)

n)

Percentage tax or value-added tax on sales or exchanges of goods and services or similar transactions thereon;

o)

Taxes on mines; mining operations; and minerals, mineral products, and their by-products when sold domestically by the operators;

735

p)

Taxes on countryside and barangay business enterprises and on registered cooperatives duly organized and registered with the proper government office under RA 6938, the Cooperative Code of the Philippines. O

q)

The exemption does not include payment of service charges or rentals for the use of property and equipment or public utilities o w n e d by the local government, such as on consumption of water, electricity, toll fees a m o n g others.

Taxes, fees or charges of any kind on the national government, its agencies and instrumentalities and other local government units; N O T E : LGUs are authorized to not tax local water districts, duly stock and non-profit hospitals because the Local G o v e r n m e n t their e x e m p t i o n .

tax G O C C s . But, L G U s may registered cooperatives, nonand educational institutions C o d e expressly provided for

Light Rail Transit Authority vs. Board of Assessment Appeals of Mia. & City Assessor of Manila (CBAA case No. L-06, resolved July 6, 1995) Carriageways and terminals o w n e d by the L R T A are subject to realty taxes of the L G U s , e v e n t h o u g h built or attached to the national road w h i c h is the property of the national government. T h e L R T w a s created to serve the needs of the riding public w h o pays the required rates for the use of the L R T system from w h i c h the Authority derived material gains. It is not e n g a g e d in purely g o v e r n m e n t a l service entitled to the tax e x e m p t i o n . r)

T a x e s on the business of persons e n g a g e d in t h e printing and publication of any n e w s p a p e r , m a g a z i n e , review or bulletin appearing at regular intervals primarily for t h e purpose of public advertisement except books and materials prescribed by the D E C S as school texts.

s)

Excise taxes on articles or g o o d s e n u m e r a t e d under the NIRC and taxes, fees, a n d c h a r g e s on petroleum products, but not a business tax on the businesses of importing, manufacturing or producing said products subject to excise tax, V A T , or percentage tax. T h u s , municipalities a n d cities are

736

authorized to i m p o s e business taxes of not more than 2% of the gross receipts for the preceding year on said entities. t)

T a x e s on business enterprises certified by the Board of Investments as pioneer or non-pioneer for a period of 6 and 4 y e a r s , respectively, f r o m s u c h date of registration and countryside and barangay business enterprises registered pursuant to RA 6 8 1 0 ; O

O n c e the 4 - 6 years have expired the local government m a y t h e n after exercise its power of taxation on these businesses.

3

BOI-registered c o m p a n i e s are N O T e x e m p t from Major's permits, regulatory fees and service charges that local g o v e r n m e n t m a y have i m p o s e d under a duly-enacted tax o r d i n a n c e , their e x e m p t i o n being applicable to national taxes only.

S e c . 1 9 ( A - 2 ) o f P D 231 T h e e x e m p t i o n is on t h e business of exporting

Art. 48 of PD 1789 ( O m n i b u s Investment Code) The exemption is on the products being exported.

3

Producers of agricultural, marine and fresh water products are taxable b e c a u s e w h a t is prohibited is for the local g o v e r n m e n t s to i m p o s e taxes or fees on agricultural products, but N O T those levied on the business of producing t h e m .

3

Local g o v e r n m e n t s m a y levy taxes on sugar centrals on the basis of gross sales for the preceding calendar year. Even if the sugar central itself produces the sugar cane because under the definition of "agricultural product" the yield of the soil is considered only as such for purposes of taxation w h e n it is in its original f o r m , or w h e n preserved in a more convenient and marketable form through the simple processes of freezing, drying, salting and stripping. The conversion of sugar cane into sugar is NOT included in the simple processes contemplated under the definition.

1263. Distinguish

between

"accrual

of

tax"

and

"time

for

payment": Answer. Accrual means when liability for the tax has attached or begun. Local taxes, fees and charges shall accrue on the 1st day

737

of January of each year. However, new taxes, fees and charges, or changes in the rates shall accrue on the 1st day of the quarter next following the effectivity of the ordinance imposing such new levies or rates. Local taxes, fees and charges shall be paid within the first 20 days of January or of each subsequent quarter, as the case may be. This time of payment may be extended by the Sanggunian concerned for a justifiable reason or cause, for a period not exceeding 6 months without surcharge or penalties. "Accrual of tax" It refers to the time the tax b e c o m e s due and collectible

" T i m e of p a y m e n t " It refers to the date the tax is payable without penalty. For late payment thereof surcharge, interest and other penalties are imposable.

1264. Distinctions: Tax vs. Fees vs. C h a r g e s : Answer. Tax Imposed for purposes to raising revenues

Imposed under the taxing power of the government 1265.

Fee Imposed for purposes of regulations, T h e a m o u n t is more or less equivalent to t h e cost of regulating the activity or privilege. Imposed under t h e police power of the g o v e r n m e n t

Service Charge Imposed in payment of services rendered by the local g o v e r n m e n t , or for the convenience furnished. Imposed under the principle of equity

Scope of the taxing power of the P r o v i n c e : A n s w e r . A province m a y levy the following A)

T a x on Transfer of Real P r o p e r t y O w n e r s h i p (Sec. 135) Rate of tax - Not more than 5 0 % of 1% of the total consideration involved in the acquisition of the property or of the fair market value, w h i c h e v e r is higher. W h e n p a y a b l e ? - Within 60 d a y s f r o m the date of the execution of the d e e d , or f r o m the date of t h e decedent's death in the case of transfer by s u c c e s s i o n .

738

W h o p a y s ? - T h e seller, administrator of the property.

donor,

transferor,

executor

or

T a x S i t u s ? - At the place w h e r e the property is located 3

Foreclosed properties (by banks) are subject to the transfer tax a n d c o m p u t e d b a s e d on the registration of the certificate of sale with the Register of Deeds.

3

S a l e of land for socialized housing projects is exempt from the transfer tax.

3

Agricultural land, if t h e transfer is f r o m landlords to tenantf a r m e r under the C o m p r e h e n s i v e Agrarian Reform Law is taxable.

9

Transfer of o w n e r s h i p o v e r a land pending issuance of a Free Patent under t h e Public Land Act (CA 141) by the B u r e a u of Lands, is subject to transfer tax.

3

Real properties o w n e d by t h e traditional exemptees to private parties are subject to transfer taxes. (In case the " R E C " d o n a t e s properties, they shall likewise be subject to d o n o r ' s tax)

B) T a x on b u s i n e s s of printing or publication (Sec. 136) Tax on business of printing and publication except books and materials prescribed by the D E C S as school texts, Rate of tax - For old business, not exceeding 5 0 % of 1 % of the gross annual receipts for the preceding calendar year. In case of newly started business, the tax shall not exceed 1/20 of 1 % of the capital investment. C)

Franchise tax notwithstanding any exemption granted by any law or other special law (Sec. 137). Rate of tax - For old business not exceeding 5 0 % of 1 % of the gross annual receipts for the preceding calendar year based on the incoming receipts, or realized, within its territorial jurisdiction. For newly started business, not exceeding 1/20 of 1% of the capital investment.

739

3

The power of the local government units to levy taxes is expressly made subject to the limitations provided by law, such as the provisions contained in franchise grants.

3

The province shall not impose the franchise tax on business enjoying franchise operating within the territorial jurisdiction of any city located within the province.

3

Municipalities may grant franchises but has no authority to impose franchise tax.

3

N P C , a government corporation is liable for franchise tax despite exemption granted under its Charter. R e a s o n : While admittedly the established jurisprudence is that if a general law is enacted after the special law, the special law remains, but this admits exceptions. Such as in the case of NPC w h e r e the D O J opines that the Local G o v e r n m e n t Code is a general law, w h e r e a s , the N P C Charter is a special law, but w h e r e there is a clear, necessary and irreconcilable conflict, the general law prevails. (Compania General vs. Collector of Customs, 46 Phil. 8)

3

L G U are without power to tax electric p o w e r c o m p a n i e s already subject to franchise tax unless their franchise allows the imposition of additional tax.

3

W h e r e the franchise t e r m provides that it "shall be in lieu of all other taxes and assessments of whatever nature and by whatever authority upon the privilege, earnings, income, and franchise" - s u c h privilege is not subject to the local franchise tax.

3

W h e r e the franchise provides that "such annual payments shall be in lieu of all taxes of every name and nature municipal, province or city upon the capital stock, franchises, right of way, earnings and all other property owned or operated by the grantee" - s u c h privilege m a y not be subject to the additional provincial franchise tax.

3

Business establishments ( R C P I , M e r a l c o , P L D T ) with franchises containing the "in lieu of all taxes" proviso are N O T subject to the said local franchise tax.

3

Transportation c o m p a n i e s are not holders of franchises being only grantees of certificates of public c o n v e n i e n c e ,

740

w h i c h are neither franchises privilege licenses.

nor

contracts

but

simply

D) T a x on s a n d , gravel a n d other quarry r e s o u r c e s (Sec. 138V Rate of tax - Not more than 1 0 % of fair market value in the locality per cubic meter of ordinary stones, s a n d , gravel, earth, and other quarry resources extracted f r o m public lands or from the beds of s e a s , lakes, rivers, s t r e a m s , creeks, and other public w a t e r s within the territorial jurisdiction.

E)

3

T h e proceeds of the tax on s a n d , gravel and other quarry resources shall be distributed as follows: a) Province 3 0 % ; (b) C o m p o n e n t city or municipality w h e r e the products are extracted - 3 0 % ; and (c) Barangay w h e r e the s a m e is extracted - 4 0 % .

3

Contractors of g o v e r n m e n t infrastructure subject to sand a n d gravel tax.

3

T h e s a n d and gravel tax imposed under local tax ordinance from contractors extracting materials within private c o n c e s s i o n s or lands, regardless of whether the said contractors are engaged in the construction of infrastructure projects or not.

3

O w n e r s or lessees of private lands shall have the preferential right to extract and remove sand and gravel materials that m a y be found in their land. Lands with imperfect titles (Tax Declarations) shall be recognized if supported by up-to-date payment of realty taxes.

3

T h e power Jo impose sand and gravel fee belongs to the province and N O T to the municipality.

Professional T a x occupation tax)

(Sec.

139)

(sometimes

projects

referred

to

are

as

Rate of tax - not exceeding Php 300.00 ( N O T E : cities may impose professional taxes higher than Php 300.00) W h e n payable? - on or before the 31st of January of each year. W h e r e payable? at the province where the professional exercises his profession or where he maintains his principal 741

office. If the person exercises several professions at the same time, he is required to pay as many professional taxes as the case may be, and payment thereof entitles him to practice his profession anywhere in the Philippines without being further made subject to any other national or local tax, license or fee for the practice of such profession. Professionals exclusively employed in the government shall be e x e m p t from the payment of the tax. ( N O T E : A Judge or a prosecutor w h o teaches after his/her official time with the government is required to pay the professional tax.)

F)

3

A person beginning a profession after t h e month of January is required to pay the professional tax for the whole year.

3

Local g o v e r n m e n t may not impose mayor's permits in the exercise of a profession but m a y properly impose regulatory fee by ordinance on those e n g a g e in business.

O

General professional partnership is e n g a g e d in rendering services for a fee, for that it is considered a contractor within the m e a n i n g of Sec. 13 (h) L G C . H e n c e , it is subject to the business tax as contractors [Sec. 143 (e) L G C ] and major's permit fees and other regulatory fees of the local g o v e r n m e n t s , w h e r e a s , the professional partners shall also pay their professional taxes respectively.

A m u s e m e n t tax on a d m i s s i o n (Sec. 140) Rate of tax - Not more than 3 0 % of the gross receipts from admission fees. W h o pays? T h e proprietor or operators or lessees of places of a m u s e m e n t . Except t h o s e that operate operas, concerts ( E X C E P T pop, rock or similar concerts w h i c h shall be subject to a m u s e m e n t tax), d r a m a , recitals, painting and art exhibitions, flower s h o w s , musical p r o g r a m s , and literary and oratorical presentations. W h o i m p o s e s this t a x ? T h e city or province m a y impose the a m u s e m e n t taxes on a d m i s s i o n , w h e r e a s the municipal government may impose business tax on a m u s e m e n t places which is a tax on the privilege of operating an a m u s e m e n t place paid by its operator, or proprietor or lessees.

742

3

A m u s e m e n t tax is levied as a percentage of the admission fee and actually paid by the customers of the a m u s e m e n t place.

3

T h e a m u s e m e n t tax is shared equally between the province a n d the municipality w h e r e t h e a m u s e m e n t places are located.

3

"Other a m u s e m e n t places" m a y include bath houses, s t e a m and s a u n a baths, resorts, s w i m m i n g pools, skating rinks, g y m s if any a m o u n t is c h a r g e d as entrance fee to the patrons.

3

Athletic meets, school p r o g r a m s and exhibitions and other educational activities of public schools to which admission fees are c h a r g e d is e x e m p t f r o m the a m u s e m e n t tax provided t h e net proceeds realized therefrom accrue to the athletic funds or library fund of t h e s c h o o l .

3

Philippine National a m u s e m e n t tax.

3

P e r f o r m a n c e s of non-professional musicians to promote Filipino folk music, classical or semi-classical music to arouse organ music c o n s c i o u s n e s s and promote Filipino culture a m o n g the public is e x e m p t from a m u s e m e n t tax.

3

W h e n no admission fee is collected or paid for admission to an a m u s e m e n t place, no a m u s e m e n t tax should be a s s e s s e d and collected. ( N O T E : if income is realized therefrom, income tax is due)

Red

Cross

is

exempted

from

Distinctions between A m u s e m e n t taxes collected by the Local Governments and BIR: Answer. A m u s e m e n t tax of the L G U Collected by the city or provincial government The basis of the tax is the price indicated on the ticket The tax is paid by those seeking admission to the amusement places 743

A m u s e m e n t tax of the BIR Collected by the national government The basis of the tax is the gross receipts of the proprietor, operator or lessee. This percentage tax the direct liability of the proprietor, operator, lessee of the amusement place.

Phil.

Basketball Association

vs.

CA,

337

SCRA

358:

The amusement tax on gross receipts or from the sale of admission tickets are considered national tax and not a local tax. The gross receipt shall include all income from the cession, streamers and advertising spaces of the entity sponsoring the activity. The a m u s e m e n t tax collectible by the province is a tax on admission fees paid by the viewers and collected by the proprietors, lessees or operators of theaters, cinematographs, concert halls, circuses and other places of amusement. Can an L G U impose an a m u s e m e n t tax on admission tickets to P B A g a m e s ? Answer. The tax provision (Sec. 13 of the LTC) indicates that the province can only impose a tax on admission f r o m the proprietors, lessees, or operators of theaters, cinematographers, concert halls, circuses and other places of a m u s e m e n t but it does not include the authority to tax professional basketball g a m e s . Is the cession of advertising a n d s t r e a m e r s p a c e s to vintage enterprises subject to the p a y m e n t of a m u s e m e n t tax under the N I R C ? A n s w e r . Sec. 1 of PD 1456 (for the purpose of a m u s e m e n t tax, the term gross receipts e m b r a c e s all t h e receipts of the proprietors, lessees, or operators of the a m u s e m e n t place) is broad e n o u g h to e m b r a c e t h e cession of advertising and streamer spaces as the s a m e e m b r a c e s all the receipts of the proprietors, lessees or operators of t h e a m u s e m e n t place G)

Fixed annual tax on delivery t r u c k s a n d v a n s manufacturers, producers, wholesalers, dealers retailers in certain p r o d u c t s . (Sec. 141)

of or

A n n u a l Fixed Tax is on every truck, v a n or any vehicle used in delivering products to sales outlets or customers, whether directly or indirectly, thus e x e m p t i n g the manufacturers or producers, wholesalers of, dealers, or retailers in certain products of peddler's tax. Rate of tax - not e x c e e d i n g P 5 0 0 . 0 0 for every delivery van or other vehicle used in t h e delivery or distribution of the

744

products to sales outlets or c o n s u m e r s , indirectly within the province. 3

either directly or

T r u c k i n g , freight services and cargo forwarding businesses a r e not subject to this imposition.

H) A n n u a l ad v a l o r e m tax on real property s u c h as land, building, machinery and other improvement not specifically e x e m p t e d a t the rate not e x c e e d i n g 1 % o f the a s s e s s e d v a l u e of the real property. (Sec. 232) I) Special levies following:

on

real

property

such

as

t h o s e on

the

1.

additional levy on real property for the special education f u n d at a rate of not more than 1 % of its a s s e s s e d value; (Sec. 235)

2.

additional ad v a l o r e m tax on idle lands at the rate not e x c e e d i n g 5% of the a s s e s s e d value of real property; (Sec. 2 3 6 )

3.

special levy on lands benefited by public works projects f u n d e d by the provincial government. (Sec. 240)

J)

Toll f e e s or c h a r g e s for the use of any public road, pier or wharf, w a t e r w a y , bridge, ferry or telecommunication system funded and constructed by the provincial g o v e r n m e n t . (Sec. 155)

K)

R e a s o n a b l e fees a n d c h a r g e s for services rendered. (Sec. 153)

L)

C h a r g e s for the operation of public utilities o w n e d , operated a n d maintained by the provincial government. (Sec. 154) The taxes authorized to be levied by a province are in addition to the taxes imposed by the NIRC.

M)

Slaughter fees, corral holding benefits, and

fees,

market fees,

charges

N) Tuition fees from the operation of the provincial school, except in the public elementary grades, and

745

for

high

O) Those are that are allowed under the c o m m o n taxing powers of the local government in addition to the above enumeration. 1266. Can the m u n i c i p a l g o v e r n m e n t exercise the power to c r e a t e its o w n s o u r c e s o f r e v e n u e i n d e p e n d e n t o f t h e province or city? Answer. Yes. Consistent with local autonomy, municipal government can exercise the power to create revenue sources, levy taxes, fees and charges which shall exclusively accrue to the municipality. 1267. T w o (2) types of taxes on banks and financial institutions that local g o v e r n m e n t s (municipal and/or city ) are a u t h o r i z e d to i m p o s e : Answer. a) Income tax on t h e m [Sec. 133(a)] - w h i c h is a tax on their income realized during the year, (not necessarily 3 0 % as imposed under the NIRC) b)

Business taxes [Sec. 143(f)] - w h i c h is a tax for the business of operating a bank or other financial institution, at t h e rate of 1/2 of 1 % base on their preceding year's gross receipt derived from interest, c o m m i s s i o n s and discounts f r o m lending activities, income from financial leasing, dividends, rentals on property and profits from e x c h a n g e or sale of property a n d insurance premiums.

1268. What is the composition of the gross receipts of banks? A n s w e r . It shall include: a)

Interest from loans and discounts: 1.

discounts e a r n e d a n d actually collected in a d v a n c e on bills d i s c o u n t e d ;

2.

interest e a r n e d a n d actually collected in a d v a n c e on bills discounted;

3.

interest e a r n e d and actually collected on t i m e loans, including those collected in a d v a n c e or partially collected; 746

4.

1269.

interest e a r n e d a n d contracts receivables.

actually

collected

on

mortgage

b)

Interest e a r n e d and actually collected on inter-bank loans;

c)

Rental income on properties - (1) f r o m lessees of safe deposit b o x e s (2) f r o m lessees of bank premises and equipment.

d)

Income e a r n e d and actually collected f r o m acquired assets;

e)

Income f r o m sale or e x c h a n g e of assets and property;

f)

C a s h dividends e a r n e d and received on equity investments;

g)

Bank c o m m i s s i o n s f r o m lending activities;

h)

I n c o m e c o m p o n e n t of rentals f r o m financing leasing.

W h a t bank i n c o m e are not subject to local taxation: Answer. a)

Interest e a r n e d under the e x p a n d e d foreign currency deposit system;

b)

Interest a c c u m u l a t e d by lending institutions on mortgages insured under RA 4 8 0 , as a m e n d e d ( H o m e Financing Act)

c)

Receipts from filing fees, charges.

service and

other administrative

1270. W h a t is the situs of business tax on banks? Answer. a)

All transactions filed with or negotiated in the branch shall be taxable in the said branch;

b)

Transactions filed and negotiated with branch but being beyond the approving authority of the branch manager and forwarded to the Head Office for final approval are subject to local taxation in the branch office;

1 2 7 1 . "X", a d o m e s t i c banking institution is also e n g a g e d in f i n a n c i n g activities, or if there is non-separability of the businesses of the banking, financial intermediaries and 747

insurance c o m p a n i e s , h o w s h o u l d the local g o v e r n m e n t tax the entities? Answer. If the activities are inherent, necessary or incidental to either the business of banking, financing or insurance, the business shall be treated as O N E business activity subject to one business tax under Sec. 143 (f) of the L G C . The Principle of "Non-Separability of B u s i n e s s " also applies to (a) exporting, whenever it conducts an integrated operation consisting of manufacturing, wholesaling and retailing, (b) Enterprises registered with the B O I ; and (c) Construction contractors. 1272. May

the

municipal

or

city

government

collect

both

wholesaler a n d retailer's tax on b u s i n e s s m e n e n g a g e d in both

activities

of wholesaling

and

retailing

within

the

s a m e tax period? Answer. Wholesalers w h o are at the s a m e time retailers shall be taxed on both activities but m a y avail of the concession or the reduced tax. (Sec. 143) 1273. W h a t

is

the

assembler, with

situs

of

contractor,

factory,

project

business producer office,

tax or

plant,

on

manufacturers,

exporter and

(MACPE)

plantation

or

3

branch offices? (FP B) A n s w e r . T h e tax situs of the business tax is the place w h e r e the sale is effected if a branch or sales office is there located. If no such branch or sales office is located w h e r e the sale is effected the sale shall be duly recorded in the principal office a n d taxable by the local g o v e r n m e n t s w h e r e the principal business office and the factory, project office, plant or plantation are located. T a x "situs" refers to the place w h e r e p a y m e n t of tax is m a d e according to law. In the case of a sales tax, t h e tax is u p o n the p e r f o r m a n c e of an act, enjoyment of a privilege or the e n g a g i n g of an occupation, not d e p e n d e n t on the domicile of the taxpayer but on the place in which the act is performed or occupation is e n g a g e d in and N O T upon the location of the office but the place w h e r e the sale is perfected. Tax situs of excise taxes, such as on restaurants, service shops, a m u s e m e n t , hotel, billboards, etc. is the place w h e r e the 748

privilege is being exercised. W h e r e the law is silent on the matter, tax situs follows t h e Principle of Territoriality of taxation. N O T E : Do not forget that income (subject to internal revenue tax) earned by different branches is consolidated at the principal office and filed at the place where the principal office is located. a)

On export sales m a d e by its branch office - the gross sales/receipts derived by said branch shall be taxable by the city or municipality w h e r e it is operating.

b)

T h e gross sales or receipts of the principal office from export transactions a r e taxable excluding the sales or receipts recorded in the b r a n c h e s .

c)

A w a r e h o u s e that a c c e p t s orders and or issues independent of the branch with sales office is taxable.

d)

Offices that are used for display area of the products m a n u f a c t u r e d w h e r e no stock or items are stored for sale, although orders for displayed products may be received are not branch or sales offices a n d therefore not subject to tax.

e)

In c a s e there is no branch or sales office in the locality where the sale is m a d e - t h e sale shall be recorded in the principal office.

f)

In case t h e factory also sells the g o o d s it produces - 3 0 % of all sales recorded in the principal office shall be taxable by the city or municipality w h e r e the principal office is located and the 7 0 % of the gross sales/receipts shall be taxed where the factory is located.

g)

In case there are 2 or more factories or plants located in different areas - the 7 0 % sales allocation for factories that are also selling shall be pro rated in proportion to their respective volumes of production during the period for which the tax is due.

h)

In case the manufacturer engages the services of an independent contractor to produce or manufacture some of their products - s a m e rule applies based on sales.

749

invoices

j)

If plantation is located is some place other than where the factory is located, the foregoing 7 0 % shall be subdivided as follows 1.

6 0 % to the city or municipality where the factory is located,

2.

4 0 % to the city or municipality where the plantation is located.

1274. Is the PDIC, a g o v e r n m e n t o w n e d corporation subject to business taxes?

and

controlled

Answer. Yes. T h e exemption privileges granted to it under its Charter [RA 1467(1978)] w e r e withdrawn by the L G C (1991). Thus, the PDIC is liable to pay the business tax imposed by the local governments. The 5% tax on the total p r e m i u m s paid under the NIRC is independent of the taxes due to the local government. 1275. Are

insurance companies

financial

institutions"

included

and

in the term

therefore

subject

to

"other local

business taxes? A n s w e r . Y e s . Insurance c o m p a n i e s shall include all individuals, partnerships, associations, corporations or G O C C s e n g a g e d as principals in the insurance business, including their branches. EXCEPT MUTUAL BENEFIT ASSOCIATIONS A N D PURELY C O O P E R A T I V E S insurance associations organized under the laws on cooperatives. 1276. What

is

the

situs

of

business

tax

on

insurance

companies? Answer. a) Insurance contracts or policies issued by the h e a d office or branch office shall be recorded in said offices as the c a s e m a y be and the p r e m i u m s and/or gross receipts due thereon shall be subject to local business taxes; b)

All insurance p r e m i u m s and/or gross receipts f r o m transactions not recorded in the branch office of the insurance c o m p a n y shall be recorded in t h e head office and taxable there.

750

1277. Are insurance agents, brokers and sales representatives subject to local business taxes? A n s w e r . C o m m i s s i o n s and other m e a n s of earnings of insurance agents, brokers and sale representatives are not subject to business taxes but they are liable to the occupation tax under Sec. 147 of the C o d e , aside from the V A T of t h e N I R C . 1278. Surigao City passed on ordinance imposing an annual tax on

all

business

receipts. "X"

operating therein

based

on gross

merely b u y s copra in the City, it neither

sells, e x p o r t s c o p r a f r o m said city a n d it d o e s not earn gross receipts. Is "X" subject to the tax imposed by the Local G o v e r n m e n t (City)? A n s w e r . "X" is not required to pay the tax because the business taxes that m a y be i m p o s e d by the municipal g o v e r n m e n t are those businesses e n g a g e d in manufacturing, importing, exporting, producing, w h o l e s a l i n g or retailing of any article of c o m m e r c e and t h o s e dealing in s u c h article. W h i l e "X" is dealing in an article of c o m m e r c e (copra), the act of selling the copra purchased which is an indispensable e l e m e n t of dealing is w a n t i n g . To be considered a dealer, both activities of buying and selling must have taken place in the city. 1279. Can the

municipal government impose a

b u s i n e s s tax

based on "output" or "Production"? A n s w e r . No. It is only authorized to impose business tax based on gross sales and/or receipts for the preceding calendar year. Municipalities ineluding cities may impose a tax on persons e n g a g e d in the business of producing agricultural, marine and fresh-water products on the commercial scale. The tax shall be based on the gross receipts of the producers. However, backyard fishermen, poultry and animal raisers w h o do not engage in business on a commercial scale are exempt. 1280. May municipalities impose business taxes on gasoline stations? Answer. Municipalities may not impose "business taxes" on any business engaged in the production, manufacture, refining,

751

distribution or sale of oil, gasoline and other petroleum products in line with the existing national policy of the government. 1281. Are contractors of government subject to local b u s i n e s s t a x e s ?

infrastructure

projects

Answer. Yes. There is no distinction between contractors of government and non-government projects. Both are subject to local and national business taxes. 1282. X, a domestic construction La Trinidad, Benguet, w a s construction project. May impose a business tax on Philippines?

firm with principal office in engaged to do an overseas the municipal government said project outside of the

Answer. No. in the case of overseas construction project outside the territorial boundaries of the Philippines, the power of taxation is unavailing. T h e construction contractors shall declare separately the gross receipts realized t h e r e f r o m , w h i c h shall not be subject to the local business tax. Granting that "X"

pre-fabricated the works

locally and

installed t h e m overseas, m a y the local g o v e r n m e n t of La Trinidad, Benguet imposed a business tax thereon? A n s w e r . Yes. T h e municipal g o v e r n m e n t of La Trinidad, Benguet may impose a business tax on the gross receipt of "X" realized therefrom which shall be subject to not m o r e than 14 of t h e rate prescribed under Sec. 143(e) of t h e C o d e . 1283. M a y the local legislative b o d y lower tax rates in g e n e r a l ? A n s w e r . As a rule, local legislative bodies m a y impose tax rates lower than the ceiling fixed in t h e C o d e , except w h e n otherwise expressly indicated or prohibited in t h e law itself. 1284. H o w is local b u s i n e s s taxes paid? Answer. 3

A business tax is due and payable on every separate and distinct establishment or place w h e r e business is c o n d u c t e d , and on e a c h line of business. A line of business d o e s not

752

b e c o m e e x e m p t by being conducted with another business for w h i c h the tax is paid. 2

W h e r e a p e r s o n is e n g a g e d in a distinct business, as a feature thereof, in an activity merely incidental which serves no other p e r s o n or business, the incidental and restricted activity is not to be c o n s i d e r e d as intended to be separate or additionally taxed.

O

T h e b u s i n e s s tax is paid by the person conducting the business. In c a s e he operates two (2) or more businesses that are subject to the s a m e rate of tax, the tax shall be computed on t h e c o m b i n e d total gross sales or receipts of said two (2) or more related businesses otherwise the tax liabilities accrue and shall be reported separately.

1285. Tax period and manner of payment of taxes imposed by the local g o v e r n m e n t units: A n s w e r . T h e local t a x e s , fees and charges are on the calendar year basis, unless otherwise provided by the Tax C o d e (e.g., tax on transfer of real property o w n e r s h i p w h i c h is payable within 60 days f r o m date of execution of the d e e d or from date of decedent's death). T h e basis thereof shall be the "gross sales/receipts for the preceding calendar year" w h i c h need not be the gross sale for one complete year of 12 m o n t h s . T h u s , w h e r e a business operated on a date other than J a n u a r y of the year, its "gross sales" is on what w a s realized from date of operation to the end of the calendar year. Generally, local taxes, fees or charges are payable in quarterly installments. 1286. May the local government impose surcharge penalties on unpaid local t a x e s , fees a n d c h a r g e s ?

and

Answer. Surcharge of not more than 2 5 % of the amount of taxes, fees and charges not paid on time and an interest of 2% per month from time of delinquency until fully paid may be imposed but in no case shall the total interest on the unpaid amount or portion thereof exceed 36 months or 7 2 % . The execution of a promissory note by a taxpayer from its liability to pay and its acceptance by the City Treasurer will not 753

relieve the interests.

taxpayer

from

the

imposition

of

surcharges

and

1287. What is the scope of the taxing powers of CITIES: Answer. Cities have the broadest tax powers, embracing both such specific and general tax powers as provinces and municipalities may impose. Therefore, it may levy the taxes, fees and charges which the province or municipality may impose. The rate of taxes that the city may levy may exceed the m a x i m u m rates allowed for the province or municipality by not more than 5 0 % except the rates of professional and a m u s e m e n t taxes. A city can validly tax the sales to customers outside the city as long as the orders w e r e b o o k e d and paid for in the company's branch office in the city. 1288. W h a t are the specific limitations on the taxing power of the City? Answer. Except as otherwise provided, a city shall not levy the taxes and other impositions e n u m e r a t e d under the " C o m m o n limitations on the taxing powers of local g o v e r n m e n t s " which exceptions refer to a)

Tax that m a y be levied by cities on the transfer of real property ownership; and

b)

W h a r f a g e on w h a r v e s constructed a n d maintained by t h e city;

c)

It cannot also impose additional taxes on articles subject to specific taxes under the provisions of t h e N I R C .

1289. W h a t are the non-business taxes, fees a n d charges that may be imposed by Cities? Answer. a)

Fees and charges on business and o c c u p a t i o n , and on the practice of profession;

b)

Fees for the sealing and licensing of w e i g h t s and m e a s u r e s ;

c)

Fees and charges for services r e n d e r e d .

754

d)

C h a r g e s for t h e operation maintained by the city.

e)

Toll f e e s and c h a r g e s for t h e use of any public road, pier or wharf, w a t e r w a y , bridge, ferry or t e l e c o m m u n i c a t i o n system that are f u n d e d and constructed by t h e city.

f)

Fishery rentals, f e e s and c h a r g e s including licensing for the operation of fishing vessels of three (3) tons or less.

1290. W h a t are granted?

fishery

of

privileges

public

and

to

utilities

whom

owned

are

and

they

A n s w e r . T h e city through the S a n g g u n i a n Panlunsod shall have the exclusive authority to grant t h e m fishery privileges: a)

To erect fish corrals, oyster, mussels or other aquatic beds or b a n g u s fry areas within a definite area that will determine giving preferential rights to duly registered cooperatives or organizations of marginal f i s h e r m e n .

b)

To gather, take or catch b a n g u s fry, or k a w a g - k a w a g or fry of other species f r o m city waters to marginal fishermen free of any rental, fee or c h a r g e or any other imposition.

1291. May

the

city

government

impose

business

taxes

on

gasoline stations? A n s w e r . Cities may collect business taxes on manufacturers, wholesalers, retailers or dealers in petroleum products, but the rate of tax thereon shall not exceed 2% of the gross sales or receipts of the preceding year. (Sec. 143 (h), L G C ) N O T E : Sec. 133(h) prohibits the taxing of products already tax under the N I R C , w h e r e a s , Sec. 143(h) allows the imposition on the privilege of engaging in the "business" of manufacturing or dealing in said products. 1292. A r e c o m m o n carriers required to pay local taxes based on gross receipts under the Local Government Code? Answer. No. Under Sec. 133 (I) LGC, the taxing powers of province, municipality, city or barangay shall not extend to the levy of taxes on the gross receipts of transportation contractors engaged in the transportation of passengers or freight by hire and 755

common carriers by air, land or water. {First Philippine Industrial Corp. vs. CA, 300 SCRA 661) 1293. W h a t c a n the city g o v e r n m e n t do in c a s e of d e l i n q u e n t taxes? Answer. The city government can make legal claim to personal property of delinquent taxpayers, as well as property used in business or occupation. This is enforceable by appropriate administrative and judicial actions and can only be extinguished if all delinquent revenue, including surcharges and interests, is fully paid. 1294. W h a t civil

r e m e d i e s c a n the city g o v e r n m e n t t a k e for

collecting delinquent taxes? Answer. a) Administrative action 1. Distraint of personal property 2. Levy upon real property b) Judicial action If the taxpayer pays the delinquent taxes before the date of sale, the distraint property shall be returned to h i m . He can also redeem his real property e v e n after it has b e e n sold. He or his authorized representative can exercise this right of redemption within one year from the date of sale. If the taxpayer fails to redeem the real property within t h e prescribed period after the levy, the City Treasurer shall publicly advertise that the property is now for sale or auction. A d v e r t i s e m e n t shall run for at least 30 days. 1295. S c o p e of the taxing p o w e r s of

Barangays:

Answer. B a r a n g a y s m a y levy the following t a x e s , fees and charges to the e x c l u s i o n of the other local g o v e r n m e n t units that shall exclusively a c c r u e to t h e m (a) Taxes, on stores of retailers with fixed b u s i n e s s establishment, w h o s e gross sales or receipts for the preceding calendar year does not e x c e e d P h p 50K in cities and Php 30K in municipalities, at a rate not e x c e e d i n g 1 % on such gross sales or receipt. 756

(b) Service c h a r g e s for services rendered in connection with the regulation of the use of b a r a n g a y - o w n e d properties or service facilities s u c h as palay, copra or t o b a c c o dryer and the like; (c) R e a s o n a b l e fees and c h a r g e s (a) on c o m m e r c i a l breeding of fighting c o c k s , cockfights a n d cockpits; (b) on places of recreation w h i c h charge a d m i s s i o n fees; and (3) on billboards, s i g n b o a r d s a n d outdoor advertisements. (d) B a r a n g a y C l e a r a n c e - No city or municipality m a y issue any license or permit for any business or activity unless a clearance is first obtained f r o m the b a r a n g a y w h e r e s u c h business or activity is located or c o n d u c t e d . A reasonable fee may be i m p o s e d by the b a r a n g a y unit for the issuance of the s a m e . T h e application for clearance shall be acted upon within s e v e n (7) d a y s f r o m the filing thereof. In the event that the clearance is not issued within the said period, the city or municipality m a y issue t h e said license or permit. 1296. H o w often c a n the local g o v e r n m e n t units adjust and/or change tax rates? A n s w e r . Local g o v e r n m e n t units except cities are authorized to adjust tax rate not oftener than o n c e every five (5) years but such adjustment shall not e x c e e d 1 0 % of the rates fixed in the LTC. 1297. Ordinance defined: A n s w e r . It is a law passed or enacted by the legislative body of the local g o v e r n m e n t in the exercise of its law-making authority. 1298. W h a t is t h e nature'of a local tax o r d i n a n c e ? A n s w e r . It is a legislative act passed by the local board or council in the exercise of its lawmaking authority. 1 2 9 9 . Distinctions between an ordinance and a resolution: Answer. Ordinance It is intended to permanently direct and control matters applying to persons or things in general.

757

Resolution It is used whenever the legislature wishes to express an opinion that is to have temporary effect only.

Ordinance It prescribes a permanent rule of conduct of government. It is binding not only on the inhabitants of the municipality but also on strangers or non-residents coming into its territorial jurisdiction It cannot be a m e n d e d by mere resolution but only by another ordinance enacted with the s a m e formalities as the original ordinance. Once duly enacted remains in force until repealed, either expressly or by necessary implication.

Resolution It is temporary in nature.

Not necessarily so

Can be recalled, revoked, w i t h d r a w n , modified, cancelled and revised without the formalities of law anytime. As it pertains temporarily to ministerial duties, they may be implemented until cancelled or replaced.

1300. W h a t are the pre-requisites before local tax ordinance and

revenue

measures

are

enacted

by

the

local

government? Answer. a) Prior to the e n a c t m e n t of any tax ordinance or revenue measure, public hearing shall be conducted for the purpose, which shall be in the following manner: b) 1. Within t e n (10) d a y s f r o m filing of any p r o p o s e d tax ordinance or r e v e n u e m e a s u r e , t h e s a m e must first be published for three (3) consecutive d a y s in a n e w s p a p e r of local circulation or shall be posted simultaneously in at least two (2) c o n s p i c u o u s public places within t h e territorial jurisdiction of t h e local g o v e r n m e n t unit c o n c e r n e d . 2.

The S a n g g u n i a n c o n c e r n e d shall c a u s e the sending of a written notice of the p r o p o s e d ordinance, enclosing a copy thereof, to interested or affected parties operating or doing business within the territorial jurisdiction of t h e local g o v e r n m e n t unit c o n c e r n e d .

3.

The notice shall specify the date a n d v e n u e of t h e public hearing. The initial public hearing shall be held not earlier than ten (10) d a y s f r o m the sending out of t h e notice, or the last day of publication, or date of posting thereof, whichever is later.

758

4.

During t h e public hearing, all affected or interested parties shall be a c c o r d e d an opportunity to a p p e a r a n d present or e x p r e s s their v i e w s , c o m m e n t s and r e c o m m e n d a t i o n s , and s u c h public hearing shall continue until all issues shall have b e e n presented and fully deliberated u p o n and a c o n s e n s u s shall have b e e n o b t a i n e d , w h e t h e r for or against the e n a c t m e n t of the proposed tax ordinance or revenue measure.

5.

T h e Secretary of the S a n g g u n i a n c o n c e r n e d shall prepare t h e minutes of s u c h public hearing and shall attach to the minutes t h e position papers, m e m o r a n d a , and the like, s u b m i t t e d by t h o s e w h o participated.

c)

No tax ordinance or revenue m e a s u r e shall be enacted or a p p r o v e d in the a b s e n c e of a public hearing duly conducted in the m a n n e r herein provided.

d)

E x e m p t e d f r o m the m a n d a t o r y public hearing requirement is the city or municipal ordinance levying a c o m m u n i t y tax in view of the urgency of issuing s u c h ordinance for official purposes.

e)

If the tax ordinance or revenue m e a s u r e contains penal provisions as authorized under the Local Tax C o d e , the gist of such tax ordinance or revenue m e a s u r e shall be published in a n e w s p a p e r of general circulation within the province where the S a n g g u n i a n c o n c e r n e d belongs. In the a b s e n c e of such newspaper, posting of the tax ordinance or revenue measure shall be m a d e in all municipalities and cities of the province w h e r e the S a n g g u n i a n of origin is situated.

1301. W h a t is the test applied in determining the validity of an ordinance?

'

Answer. a) It must not contravene the Constitution or statute; b)

It must not prohibit but may regulate trade;

c)

It must not be discriminatory, unreasonable and oppressive;

d)

It must be general and consistent with the national or public policy of the government.

759

unfair,

unjust,

confiscatory;

1302. What are the procedural requirements in the e n a c t m e n t of local tax o r d i n a n c e s ? Answer. The power to impose a local tax, fee or charge or to generate revenue may be exercised only by the Sanggunian Panlalawigan, Panlungsod, Bayan or Barangay concerned through an appropriate ordinance. 1.

2.

The procedure applicable to local government ordinances in general such as q u o r u m , submission for approval of the ordinance to the local chief executive, the matter of veto and overriding the s a m e , publication and effectivity shall also apply to tax ordinances. a)

A tax ordinance passed by the local board or council shall be approved and signed by the local chief executive concerned;

b)

If he considers any such tax ordinance prejudicial to the public welfare or ultra vires, he m a y veto it by signifying to the proper l a w m a k i n g body his disapproval thereon in writing;

c)

T h e lawmaking body may, by a 2/3 vote of all its m e m b e r s , pass the ordinance over the veto, in w h i c h case it shall be d e e m e d a p p r o v e d without t h e chief executive's approval or signature;

d)

If said chief executive fails to approve or veto a tax ordinance within 10 d a y s after its p a s s a g e , it shall likewise be d e e m e d a p p r o v e d .

Within ten (10) days after approval by the S a n g g u n i a n , certified copies of all provincial, city and municipal tax o r d i n a n c e s or revenue m e a s u r e s shall be published in full for three (3) consecutive d a y s in a n e w s p a p e r of local circulation. W h e r e there are no n e w s p a p e r s of local circulations the s a m e m a y be posted in at least two (2) c o n s p i c u o u s and publicly accessible places. Ordinances p a s s e d by the s a n g g u n i a n barangay shall, upon approval by the majority of all its m e m b e r s , be signed by the punong barangay. An o r d i n a n c e , unless o t h e r w i s e p r o v i d e d by it shall go into effect after ten (10) d a v s f r o m t h e date of its posting. 760

3.

Copies of all provincial, city, municipal a n d barangay tax o r d i n a n c e s and revenue m e a s u r e s shall be furnished to the respective local treasurers for public dissemination.

4.

A tax ordinance shall go into effect on the 10th day after its approval by the local chief executive. N O T E : Fixing of a m o u n t and rate of local tax cannot be delegated to administrative officials.

1303. W h e n does a tax ordinance take effect? A n s w e r . In c a s e the effectivity of any tax ordinance or revenue m e a s u r e falls on any date other t h a n the beginning of the quarter, t h e s a m e shall be considered as falling at the beginning of the next ensuing quarter a n d t h e t a x e s , fees or charges d u e shall begin to accrue t h e r e f r o m . 1 3 0 4 . T h e r e q u i r e m e n t o f r e v i e w o f t h e t a x o r d i n a n c e a f t e r its approval: A n s w e r . Within 15 d a y s after its a p p r o v a l , a certified true copy of a tax ordinance shall be furnished the Secretary of Finance for review: a)

by t h e provincial b o a r d , or city council - for provincial or city tax ordinances;

b)

by the municipal board or barrio council - for municipal or barrio tax ordinances; or Within three (3) days after its approval, copies of the approved tax ordinance of the municipality or a component city shall be furnished to the provincial Sanggunian; and, in the case of barangay ordinances, within 10 days from enactment copies shall be forwarded to the municipal Sanggunian, or the City Sanggunian as the case may be, for the review of the ordinance. The provincial or the city or municipal sanggunian, as the case may be, shall review the tax ordinance within 30 days after receipt of a copy thereof.

761

If, within 120 days after receipt of a copy thereof, the Secretary of Finance or the provincial or city treasurer, as the case may be, takes no action as authorized, the tax ordinance shall remain in force. 1305. G r o u n d s for review or s u s p e n s i o n of tax ordinance by the Secretary of Finance: Answer. The Secretary of Finance, the provincial treasurer, or the city treasurer, as the case may be, shall review and have the authority to suspend the effectivity of any tax ordinance within 120 days after receipt of a copy thereof, if in his opinion, the tax or fee therein levied or imposed is: a) prohibited of a local g o v e r n m e n t to impose and collect; b) unreasonable, unjust, excessive, oppressive and confiscatory; c) contrary to the national e c o n o m i c policy, and d) discriminatory in the conduct of business or calling or e)

in restraint of trade.

N o t e : The authority of the Secretary of Finance is no m o r e than to suspend the effectivity of a tax ordinance in w h o l e or in part and is limited to the grounds e n u m e r a t e d . 1306. H o w to question the revenue measures?

legality

of

a

tax

ordinance

or

Answer. A n y question on the constitutionality or legality of tax ordinances or revenue m e a s u r e s m a y be raised on appeal within thirty (30) days from the effectivity thereof to the Secretary of Justice w h o shall render a decision within sixty (60) d a y s f r o m date of receipt of the a p p e a l . A n y question or issue raised against the legality of any tax ordinance, or portion thereof, on g r o u n d s other t h a n those m e n t i o n e d a b o v e TNo. 1270 (a) to ( e l l , shall be referred for opinion to the Provincial Fiscal, in t h e c a s e of provincial, municipal or barangay tax ordinances, or to the City Fiscal, in the c a s e of tax ordinance of the city a n d b a r a n g a y s within t h e city, w h o s e opinion shall be rendered within a period of thirty (30) days after receipt by him of the query or protest. 762

T h e opinion of the Provincial or City Fiscal, as the case may be, m a y be raised on appeal within thirty (30) d a y s from the effectivity thereof to the Secretary of Justice w h o shall render an opinion on the matter within sixty (60) d a y s after receipt of the appeal. T h e decision of the Secretary of Justice shall be final and executory unless, within thirty (30) days u p o n receipt of the decision or the lapse of t h e sixty (60) days period without the Secretary of Justice acting u p o n the a p p e a l , the aggrieved party m a y contests the s a m e in a court of c o m p e t e n t jurisdiction. (Callanta vs. Office of the Ombudsman) T h e special civil action of certiorari is proper in questioning the decision of a g e n c i e s exercising quasi-judicial powers. Courts can scrutinize the acts of a g e n c i e s on question of law and jurisdiction e v e n w h e r e no review is given by statute. (Meralco Securities Corp. vs. Central Board of Assessment Appeals May 31, 1982, Caltex vs. Central Board of Assessment Appeals May 31, 1982) T h e Principle on Primacy of Administrative Remedies and Doctrine on Tax Refund are also applicable to local taxation. However, e x h a u s t i o n of administrative remedies before resort to judicial bodies is not an absolute rule. W h e n o b t a i n i n g ? ( w h e n e x h a u s t i o n o f administrative remedies need not be c o m p l i e d with?) 1.

W h e n the application of the "Primacy" does not provide a plain, speedy and adequate remedy; or

2.

W h e n its application may cause great and irreparable d a m a g e . (Bagatsing vs. Ramirez, 74 SCRA 306, Mun. of Trinidad vs. CFI, June 28, 1983)

C o n s e q u e n c e of failure to e x h a u s t administrative remedies: 1.

It does not affect the jurisdiction of the court over the case, as it merely implies absence of a cause of action. (Pineda vs. CFI ofDavao, 50 O.G. 5266)

2.

The failure to raise in the trial court the issue of nonexhaustion of administrative remedies prevents a party from invoking it on appeal.

763

1307. W h a t is the effect of an appeal questioning the constitutionality or legality of a tax o r d i n a n c e or r e v e n u e measure upon the accrual and payment of the s a m e ? Answer. Such appeal shall N O T HAVE the effect of suspending the effectivity of the ordinance and the accrual and payment of the tax, fee, or charge levied nor does it authorize the local legislative body to re-impose the s a m e tax or fee levied under a suspended ordinance until such time as the ground for the suspension thereof shall have ceased to exist or the appeal has been resolve in its favor. 1308. Effect of declaration of invalidity or s u s p e n s i o n of tax ordinance: Answer. The Secretary of Finance, the provincial or the city or municipal treasurer, as the c a s e m a y be, shall review the tax ordinance within 30 days after receipt of a copy thereof. The provincial S a n g g u n i a n , in its c a s e , may e x a m i n e the ordinance by itself or require the provincial attorney or prosecutor to provide it with his written c o m m e n t s or r e c o m m e n d a t i o n that may be considered by the S a n g g u n i a n in making its decision. It may declare the ordinance invalid, in w h o l e or in part, if it finds such ordinance to be b e y o n d the power conferred u p o n the city or municipal S a n g g u n i a n to i m p o s e . W h e r e a s , in t h e case of barangay ordinances, t h e city or municipal S a n g g u n i a n , if it finds the tax ordinance inconsistent with law, shall return the s a m e for adjustment, a m e n d m e n t or notification that w o u l d thereby render the ordinance s u s p e n d e d until s u c h time or after the revision thereof called for is effected. Failure on the part of the provincial, municipal or city treasurer as the case m a y be, to take action within 30 d a y s , the tax ordinance shall be d e e m e d consistent with law and therefore valid. T h e local legislative body, within 30 d a y s after receipt of the notice of suspension, m a y either (a) modify t h e tax ordinance to meet the objections thereto or (b) file an a p p e a l with t h e proper court, otherwise, the tax ordinance or the part(s) thereof declared suspended shall be considered as r e v o k e d . 3

A n y tax or fee paid pursuant to a s u s p e n d e d tax ordinance or pursuant to a protested ordinance or any part thereof shall be

764

considered as having b e e n paid resolution of the issues raised. 3

under

protest

until

final

If the decision of the treasurer or the Secretary of Finance is adverse to the taxpayer, the issue can be raised before a competent court in as much as decision of administrative bodies exercising quasi-judicial functions are subject to review by the courts.

1309. W h o has the p o w e r to s u s p e n d a tax ordinance under the LGC? Answer. a. Provincial treasurer; or b. City treasurer; or c. Secretary of Finance 1310. W h a t are the r e m e d i e s of t h e local g o v e r n m e n t in the collection of local taxes Answer. /. Persuasive devices and safeguards a)

A T a x Lien is a legal claim or charge on property (whether real or personal) established by law as a sort of security for the p a y m e n t of tax obligations Lien for taxes and other revenues due to the local g o v e r n m e n t on all property or rights of the business. This lien is s u p e r i o r , t o all liens, charges, or encumbrances in favor of any person enforceable by appropriate administrative or judicial action. T h e lien may only be extinguished upon full payment of the delinquent local taxes, fees and charges inclusive of all increments thereto. The tax lien does not extend to other revenues, such as those arising from contracts or from laws of general application.

b)

Imposition or threat of (1) surcharges and interest, (2) criminal penalties imposed under the Local Tax Code or by ordinances.

765

II.

c)

Examination of books by Provincial or City treasurer, or their deputies who should be authorized in writing.

d)

Cooperative functions of other offices, such as, (1) the Register of Deeds requiring evidences of payment of transfer taxes to provinces and cities for registration or other dealings on real properties; (2) employers to require employees to show payment of occupation taxes; (3) to require professional to show proof of payment of occupation tax; (4) requiring community tax certificate to be exhibited in s o m e instances.

Coercive Means 1.

to

Collect Delinquent Taxes:

Administrative remedies - (a) by distraint of personal properties of w h a t e v e r character to enforce collection of delinquent taxes, and (b) by judicial action. N O T E : T h e r e is no provision in the Local Tax C o d e on "levy" or sale of real property, but a lien m a y include real properties enforceable by legal action. T h e s e remedies may either be pursued concurrently or simultaneously at t h e discretion of t h e local g o v e r n m e n t unit c o n c e r n e d .

2.

Legal action in ordinary courts to enforce p a y m e n t of delinquent taxes and other revenues d u e to the local g o v e r n m e n t units, including the e n f o r c e m e n t of lien. T h e local g o v e r n m e n t unit c o n c e r n e d m a y enforce the collection of delinquent t a x e s , f e e s , and c h a r g e s or other revenue by civil action in any court of c o m p e t e n t jurisdiction. T h e civil action shall be filed by the local treasurer within the period prescribed. Z>

Judicial action to enforce collection is filed in the regular courts.

O

Under RA 1125, the C T A has no jurisdiction to take cognizance of collection of local taxes and cases of protest of a s s e s s m e n t of local taxes, Under RA 9 2 8 2 . E x p a n d e d Jurisdiction of t h e C T A (April 2 0 0 4 ) - T h e C T A has jurisdiction o v e r local t a x e s a n d real property t a x e s .

766

1311. H o w are delinquent local taxes, fees, c h a r g e s and other r e v e n u e s collected by the local g o v e r n m e n t s ? Answer. a) By distraint of personal property, or b)

By levy u p o n real property or any interest therein; or

c)

By judicial action - T h e local g o v e r n m e n t m a y institute an ordinary civil action with the regular courts of proper jurisdiction for the collection of delinquent taxes, fees, charges or r e v e n u e s . T h e civil action w o u l d preclude a criminal case as a proper r e m e d y for collection of delinquent local taxes. ( Republic vs. Patanao, 20 SCRA 712 * People vs. Arnault, 92 Phil. 252) T h e a b o v e remedies simultaneously.

may

be

pursued

alternatively

or

NOTES: 3

Unless otherwise provided under the L T C , the tax period of all local taxes, f e e s , and charges shall be the calendar year. Such taxes, f e e s , and charges m a y be paid in quarterly installments.

O

Unless otherwise provided under the LTC, all local taxes, fees, and charges shall accrue on the first day of January of each year. N e w taxes or fees or charges shall accrue on the first day of the quarter next following the effectivity of the ordinance imposing such new taxes or rates.

O

Unless otherwise prqvided in the LTC, all local taxes, fees, and charges shall be paid within the first 20 days of January or of e a c h subsequent quarter as the case may be. The Sanggunian concerned may for a justifiable reason or cause extend the time for payment of such taxes, fees, or charges without surcharges or penalties but only for a period not exceeding 6 months.

1312. Can

the

local

sanggunian

of

the

local

government

condone taxes? Answer. In the case of De Mesa vs. Collector of Internal Revenue, 53 Phil. 342, it w a s held that a municipal license (regulatory) tax already in existence shall be subject to change only by ordinance 767

and no authority is anywhere given to the municipal legislative body to condone taxes previously accrued. The ordinance imposing license (regulatory) tax is prospective in character and application. 1313. A r e the local g o v e r n m e n t s a l l o w e d to tax operating within the 'EPZA or the ecozone?

businesses

Answer. Businesses within the "export processing zone" are beyond the taxing powers of the local governments because it is a fundamental principle of law that the taxing power of the state is coterminous with its territorial boundaries. T h e s e areas are under the jurisdiction and control of the Export Processing Zone Authority. Thus, local governments cannot impose taxes upon persons, property residing or situated beyond such boundaries. (Dep'f. of Justice Opinion No. 104, s. 1974, Dep't. of Finance, letter dated June 8, 1987, to S. U. Salvador, Jr. Manila.) However, any operation or production of a zone-registered business d o n e or conducted "outside" the subject z o n e shall be taxable by the concerned local units w h e r e such operation or production is carried out. In the case of PHILPHOS, an EPZA-registered entity: P H I L P R O S has a plant inside the Leyte Industrial D e v e l o p m e n t estate a special export processing z o n e administered by EPZA. It maintains an office in M a k a t i , w h e r e it pays business taxes corresponding to 3 0 % of its gross annual sales. T h e Municipality of Isabel of Leyte claims that P H I L P R O S should likewise pay business taxes therein based on the remaining 7 0 % of its yearly gross sales. H E L D : T h e tax e x e m p t i o n privileges of P H I L P R O S under Sec. 18, PD 66, as a business enterprise operating within the export processing z o n e administered by EPZA, still applies in so far as its activities u n d e r t a k e n within the z o n e . S u c h e x e m p t i o n does not extend to t h e p a y m e n t of fees a n d service charges for rental or use of public utilities o w n e d and operated by the Municipality of Isabel, and for services actually rendered by it based on duly a p p r o v e d local ordinance. 1314. Distinction b e t w e e n tax lien a n d distraint of p r o p e r t y : A n s w e r . A tax lien is distinguished f r o m distraint in that in distraint the property must be that of the taxpayer, although it need not be the property in respect to w h i c h the tax is a s s e s s e d ; w h e r e a s , tax lien is generally directed to the property subject to the tax regardless of the owner. 768

1315.

C O M P A R I S O N OF TAX LIENS UNDER THE LTC AND THE RPTC: Answer. BASIS

L T C (Sec. 61)

What amounts due the local g o v e r n m e n t are e n f o r c e d ?

W h a t properties are subject to the lien?

H o w d o e s the lien rank in relation to other claims against the t a x p a y e r ?

H o w m a y the lien be enforced?

H o w m a y the lien be removed?

1316. Mechanics

and

Local taxes revenues

and

R P T C (Sec. 56) other Only the real property tax

Property subject of the tax, and all those used in the o c c u p a t i o n , business in respect of w h i c h t h e c h a r g e is i m p o s e d ; and property rights therein.

Only the real property

Superior to all liens charges in favor private parties

or of

Superior to all other liens, mortgages, or encumbrances

By appropriate administrative or judicial action

Law silent. (It may be by seizure and sale under Sees. 73-83, RPTC; or by legal action)

L a w is silent, (rules on liens in general, including payment of the a m o u n t due will apply

Only by payment of the delinquent taxes and penalties.

procedure

on

subject to the tax

distraint

of

personal

property to e n f o r c e collection of delinquent local taxes: (Sec. 175) Answer. T h e procedure is s u m m a r y in nature which includes requirements on the seizure or confiscation of the taxpayer's assets in sufficient quantity to satisfy the tax liability, accounting of distraint goods, publication of the sale of distraint properties for 30 days, report of the sale to the Sanggunian, delivery to the purchaser of the certificate of sale, procedure of sale and disposition of the proceeds of the sale by application thereof to the delinquent tax and expenses of sale and the return of the balance to the owner of the property, redemption of property within one year from date of 769

sale, non-deprivation of the possession of said property by the owner with the right to receive the rentals/income during the period of redemption, and final deed to purchaser in case there is failure to redeem. Where the proceeds of the sale are insufficient to satisfy the claim, other property belonging to the taxpayer may again be distraint until the full amount due inclusive of surcharges, interests and expenses are collected. Specifically a) Seizure - Upon failure of the person owing any local tax, fee or charge, to pay the s a m e at the time required, the treasurer or his deputy may, upon written notice, seize or confiscate any personal property subject to the tax lien in sufficient quantity to satisfy the tax, fee or charge in question, together with any or all increments thereto incident to delinquency and e x p e n s e s of seizure. To this e n d , the treasurer or his deputy shall issue a duly authenticated certificate based upon the records of his office showing the fact of delinquency and the a m o u n t of the tax and penalty due. This shall serve as sufficient warrant for the distraint of personal property. Thereafter, the distraint personal property shall be sold at public auction. b) Accounting of distraint goods • T h e officer executing the distraint shall m a k e or c a u s e to be m a d e an accounting of the g o o d s or effects distraint, a copy of w h i c h is signed by himself shall be left either with the o w n e r or person from w h o s e possession the g o o d s or effects w e r e taken or at the dwelling or place of business of that person and with s o m e o n e of suitable a g e and discretion, to w h i c h list shall be a d d e d a statement of the a m o u n t d e m a n d e d and a note of the time and place of sale. c) Publication - Thereafter, t h e officer shall c a u s e a notification to be exhibited in not less than three (3) public places in the territory of the local g o v e r n m e n t w h e r e the distraint is m a d e . O n e place for the posting of the notice shall be at the office of the chief executive of the local g o v e r n m e n t in which the property is distraint, specifying t h e time and place of sale and the articles distraint. T h e time of sale shall not be less t h a n 20 d a y s after notice to t h e o w n e r or possessor of the property as specified a n d t h e publication or posting of the notice.

770

d) Release of the distraint property upon payment prior to sale (Right of Pre-emption) - If at any time prior to the c o n s u m m a t i o n of the sale all proper charges are paid to the officer conducting the sale, the g o o d s or effects distraint shall be restored to the owner. e) Procedure of sale • At the time and place fixed in the notice t h e officer shall sell the g o o d s or effects so distraint at public auction to the highest bidder for c a s h . Within five (5) d a y s after the sale, t h e treasurer shall m a k e a report of the proceedings in writing to t h e chief executive of the local government concerned. S h o u l d the property distraint be not disposed of within 120 d a y s f r o m the date of distraint, the s a m e shall be consider as sold to the local g o v e r n m e n t for the amount of the a s s e s s m e n t m a d e t h e r e o n by the C o m m i t t e e on Appraisal and to the extent of the s a m e amount, the tax delinquency shall be cancelled. (Referred to as forfeiture) Said C o m m i t t e e on Appraisal is c o m p o s e d of the city or municipal treasurer as chairperson with a representative of the C o m m i s s i o n on Audit and the city or municipal assessor as members. f) Disposition of proceeds • T h e proceeds of the sale shall be applied to satisfy the tax, together with the increments thereto incident to delinquency, and the e x p e n s e of the distraint and sale. A n y residue over and above what is required to pay the claim shall be returned to the owner of the property sold. T h e e x p e n s e s chargeable upon the seizure and sale shall be equivalent to the actual expense of seizure and preservation of the property pending the sale. No charge for the services shall be imposed. W h e n the proceeds of t h e sale are insufficient to satisfy the claim, other property may, in like manner be distraint until the full a m o u n t due, including all expenses and costs, is collected. 1317. P e r s o n a l property e x e m p t f r o m distraint a n d levy: Answer. a. Tools and the implements necessarily used by the delinquent taxpayer in his trade or employment;

b.

One horse, cow, carabao, or other beast of burden, such as the delinquent taxpayer may select, and necessarily used by him in his ordinary occupation;

c.

His necessary clothing, and that of all his family;

d.

Household furniture and utensils necessary for housekeeping and used for that purpose by the delinquent taxpayer, such as he may select, of a value not exceeding Php 10,000.00;

e.

Provisions, including crops, actually provided for individual or family use sufficient for 4 months;

f.

The professional libraries of doctors, engineers, lawyers and judges;

g.

O n e fishing boat and net, not e x c e e d i n g the total value of Php 10,000.00, by the lawful use of which a fisherman earns his livelihood, and

h.

A n y material or article forming part of a house or improvement of any real property.

1318. Prescriptive period to a s s e s s local t a x e s : A n s w e r . Local taxes, fees or charges shall be a s s e s s e d within five (5) years from the date they b e c o m e d u e . In c a s e of fraud or intent to evade the p a y m e n t of t a x e s , fees or c h a r g e s , the s a m e m a y be assessed within ten (10) years f r o m discovery of the fraud or intent to evade payment. 1319. Prescriptive period on collection of local taxes: A n s w e r . Local taxes, fees, or c h a r g e s m a y be collected within five (5) years from the date of a s s e s s m e n t by administrative or judicial action. No action for the collection of s u c h taxes, fees, or charges whether administrative or judicial shall be instituted after the expiration of such period without said a s s e s s m e n t having been made.

1320. May the prescriptive period local taxes be s u s p e n d e d ?

to

assess

and/or

collect

A n s w e r . T h e running of the periods of prescription to assess and/or collect local taxes shall be s u s p e n d e d for the time during which a)

the treasurer is legally prevented from the a s s e s s m e n t or collection of the tax;

b)

the t a x p a y e r requests for a reinvestigation and executes a w a i v e r in writing before the expiration of the period within which to a s s e s s or collect;

c)

the taxpayer is out of t h e country; and

d)

the t a x p a y e r c a n n o t be located in his given address.

1 3 2 1 . P r o t e s t a g a i n s t a n a s s e s s m e n t - Within 6 0 days from receipt of notice of a s s e s s m e n t , the t a x p a y e r m a y file a written protest with the local treasurer contesting the a s s e s s m e n t ; otherwise, the a s s e s s m e n t shall b e c o m e final and executory. N O T E : T h e appeal (a) from the decision of the Secretary of Justice or (b) involving disputing a s s e s s m e n t s of local treasurer is filed w i t h the regular court a n d now appealable to the Court of Tax Appeals. 1322. Is

a

petition for injunction

against collection

of local

t a x e s a r e m e d y a v a i l a b l e to a t a x p a y e r ? A n s w e r . Unlike the N I R C , the Local Tax Code does not specifically prohibit injunction agamst the collection of local taxes. The procedural rules m a y thus apply. This ancillary remedy may be resorted to if irreparable d a m a g e would be caused to the taxpayer by the collection of the tax and no other adequate remedy is available to him. (Physical Therapy Asso. vs. Manila, 101 Phil. 1142; Zaragoza vs. Alfonso, 46 Phil. 159) Injunction cannot be issued pending a case on the tax ordinance simply because it is alleged to be unconstitutional or invalid. Until so declared, the presumption is that it is valid and constitutional. (Valley Trading vs. CFI, March 4, 1989). R e m e d y - For taxpayer to pay the tax and thereafter claim a refund within the prescribed period. 773

1 3 2 3 . C l a i m f o r t a x r e f u n d or t a x c r e d i t - The taxpayer may file a written claim for refund or credit with the local treasurer within 2 years from the date of payment of the tax, fee or charge or from the date the taxpayer is entitled to a refund or credit. 1324. X files a c o m p l a i n t a s s a i l i n g t h e validity of t h e tax o r d i n a n c e a n d p r a y i n g f o r a t a x r e f u n d o f its p e r c e i v e d o v e r p a y m e n t s without protest. Will his claim prosper? Answer. Yes. X may file a complaint assailing the validity of the ordinance and praying for tax refund of its perceived overpayments without first filing a protest to the payment of taxes due under the ordinance. However, failure of X to interpose the requisite appeal to the Secretary of Justice is F A T A L to his complaint for a tax refund. (2003 case) N O T E : The local tax has to be contra-distinguished f r o m a real property tax which cannot he protested without payment. 1325. R e m e d i e s available to a t a x p a y e r under the Local Tax Code: Answer. A.

Administrative r e m e d i e s : 1. Prior

to Assessment -

a) Administrative appeal to the Secretary of Justice, and b) Action for declaratory relief w h e n applicable Declaratory relief is a r e m e d y o p e n to determine any question of construction or validity of a tax law a n d for the declaration of the taxpayer's liability thereunder. This remedy is available before the b r e a c h or violation of such tax law. 2. After

Assessment-

Within 60 d a y s f r o m receipt of the a s s e s s m e n t , the taxpayer m a y contest the a s s e s s m e n t by a written protest before the local treasurer, w h o shall d e c i d e the s a m e within 60 days f r o m date of filing of the dispute. If the decision is adverse to the interest of t h e taxpayer, the taxpayer may within 30 d a y s f r o m receipt thereof or from

t h e lapse of the 60-day period prescribed within which to a p p e a l with t h e court of c o m p e t e n t jurisdiction; otherwise t h e a s s e s s m e n t b e c o m e s conclusive and unappealable. W h e n an a s s e s s m e n t is seasonably disputed, the collection of the tax, fee or charge, subject matter of the a s s e s s m e n t , should be held in a b e y a n c e pending final determination thereof. 3. Before payment of the

tax:

a)

S u s p e n s i o n of the tax by Provincial or City Treasurer and by t h e Secretary of Finance.

b)

Formal protest a d d r e s s e d to the Secretary of Finance on four g r o u n d s (Sec. 4 5 , LTC)

c)

Formal query a d d r e s s e d to the Provincial or City Fiscal on g r o u n d s other t h a n the four.

d)

Judicial action in ordinary courts for (1) declaratory relief before breach or violation of the law or regulation, or (2) ask for injunction as an ancillary remedy.

4. After payment

of the

tax

Written claim for refund or credit addressed to the collecting officer - p a y m e n t need not be under protest (application of t h e principle of "Exhaustion of Administrative remedies" prior to court action) T h e taxpayer may, instead of filing a written protest, opt to pay the tax, fee or charge and then seek a refund thereof within the 2-year statute of limitation. T h e payment, if an assessment is issued, must be made before the lapse of the 60-day period from receipt thereof otherwise the assessment becomes final and executory and it may no longer thus be disputed. The written claim for refund itself may be filed with the court of competent jurisdiction within 2 years from payment of the amount due or from the time the taxpayer is entitled to a refund or credit. The filing of a written claim for refund with the local treasurer is a condition precedent for maintaining a court action. If the local treasurer does not act on the written claim for refund and the 2-year statute of limitation is about to expire, the taxpayer should forthwith initiate the court action for refund 775

and consider the treasurer's inaction as a denial of his claim for refund. Note that the Tax Code failed to specifically provide for a period of appeal in the event a decision is made by local treasurer concerned on the claim for refund, similar to that obtaining in the case of a denial on a written protest of an assessment. Thus, the Court may entertain the appeal so long as the case of refund is filed within the 2-year period and a written claim for refund or credit had earlier been submitted to the local treasurer. Under the Local Tax Code, the applicable statute of limitations for claims for refund, not having been specifically provided for by that law. COULD BE FILED WITHIN SIX (6) YEARS FROM THE PAYMENT THEREOF AS A CASE OF SOLUTIO IN DEBIT I. (Puyat & Sons vs. City of Manila, 7 SCRA 970, Proctor & Gamble vs. Mun. of Jagna, Dec. 28, 1979; Mun. ofOpon vs. Caltex Phil, 22 SCRA 755) The judicial action must be directed against the municipal corporation (local g o v e r n m e n t ) and not against the municipal officials, a j u d g m e n t against w h o m w o u l d not be enforceable against the local g o v e r n m e n t . (Tan vs. Dela Fuente, 90 Phil. 519) 5.

B.

An action against erring local officials w h o acted with malice or i n e x c u s a b l e n e g l i g e n c e .

Judicial r e m e d i e s : 1.

Declaratory relief - M a y be filed by the t a x p a y e r with the ordinary court before liability under the ordinance has attached. This relief shall not lie if the provisions of the ordinance are not doubtful or a m b i g u o u s and that payment of the tax during the p e n d e n c y of the c a s e has no effect on said case. After liability has attached under t h e tax ordinance, the only remedy is to pay the tax and after exhausting administrative remedies, sue for recovery in the ordinary court. (Santos vs. Aquino, 94 Phil. 65; Shell Co. vs. Mun. of Sipocot, 105 Phil. 1263)

2.

Injunction - As a general rule, injunction will not lie to restrain the collection of taxes, E X C E P T in cases of 776

irreparable injury. (Rafael vs. Kaminer, 25 Phil. 344; Zamora vs. Alfonso, 46 Phil. 159) This m a y be resorted to AS AN A N C I L L A R Y R E M E D Y in an action for (a) declaratory relief, or (b) for a n n u l m e n t of a tax ordinance, provided it be s h o w n that the collection of the tax pending the final resolution of the c a s e w o u l d c a u s e irreparable injury to the t a x p a y e r w h o has no other a d e q u a t e remedy in the ordinary c o u r s e of law. (Physical Therapy Org. vs. Mun. Board of Manila, 101 Phil. 1143; Pacific Com'l. Co. vs. Prov'l. Treasurer 52 Phil. 190.) Unlike the N I R C , the L T C d o e s not contain any specific provision prohibiting courts f r o m enjoining the collection of local t a x e s . (Valley Trading Co. vs. CFI of Isabela, March 31, 1989) 3. 4.

Mandamus; Action for tax refund (If action is indebiti, protest is not needed); and

5. Action

for annulment

of tax

based

on

solutio

ordinance.

In a judicial action before the ordinary court the action should be directed against the local government unit c o n c e r n e d and N O T t h e collection officer, unless it is a case for d a m a g e s or a criminal action for the illegal acts of such officers w h e n they are the o n e s intended to be held personally a n s w e r a b l e for such acts. (Tan vs. Dela Fuente, 90 Phil. 519) C.

Special r e m e d i e s such as personal appeal to a n d p e r s u a d i n g the authorities c o n c e r n e d or thru mass action or "people's people" m a y be resorted to.

1326. R e m e d i e s of a taxpayer under Sec. 187, L G C : (Appeal to the Secretary of Justice) Answer. Said provision requires that the dissatisfied taxpayer who questions the validity or legality of a tax ordinance must file his appeal to the Secretary of Justice within 30 days from the effectivity thereof. In case the Secretary decides the appeal, a period of 30 days is allowed for the aggrieved party to go to court. However, if the Secretary does not act thereon, after the lapse of 60 days, a party could already proceed to seek relief in court.

777

NOTE: These three (3) separate periods ("30-30-60") are given for compliance as a pre-requisite before seeking redress in a competent court. (Jardine Davies Insurance Brokers, Inc. vs. Aliposa) 1327. Define a tax period as u s e d in local t a x a t i o n : Answer. It is the time span within which a current tax obligation is in effect and collectible, usually coinciding with the calendar year and payable in quarterly installments. NOTE: Tax period does not apply to permit fees and public utility charges. 1328. W h e n are p e r m i t f e e s a n d utility c h a r g e s p a y a b l e ? Answer. Permit fees and utility charges are in the nature of payments to defray the e x p e n s e s incurred by the local unit for services rendered in the inspection or regulation of a particular business or activity, generally they have no time s p a n s but are payable immediately, after the rendition of t h e service. 1329. C a n the local legislative b o d y validly grant e x t e n s i o n of time of p a y m e n t of local taxes without penalty? A n s w e r . It may, for justifiable reason or c a u s e , extend the time for the payment of a tax, fee or c h a r g e without penalty for a period not exceeding six (6) m o n t h s . S u c h as the o c c u r r e n c e of flood, t y p h o o n , earthquake, volcano eruption or other calamity w h i c h may have recently ravaged t h e locality. 1330. W h o

may examine

books

of accounts

and

records

of

b u s i n e s s m e n for p u r p o s e s of local t a x e s ? A n s w e r . Under Sec. 171 of t h e L G C , only the treasurer of the local government unit imposing the tax, fee or c h a r g e , m a y e x a m i n e the books of accounts and pertinent records of b u s i n e s s m e n in order to ascertain, assess and collect the correct a m o u n t thereof. Consequently, no personnel in t h e Offices of the Provincial Governor or City or Municipal M a y o r m a y inspect records of businessmen unless duly deputized in writing by the local treasurer concerned.

778

1 3 3 1 . Is n o n - p a y m e n t of lease of public m a r k e t stall a criminal offense? A n s w e r . T h e n o n - p a y m e n t of monthly rentals by a lessee of a public market stall of a city or municipality is not a criminal offense. T h e s u r c h a r g e i m p o s e d for late or n o n - p a y m e n t thereof is not a penalty under criminal law but an additional a m o u n t a d d e d to the usual c h a r g e . It is more of an administrative sanction which should be collection only by a civil action. (Conde vs. Mamenta, Jr., 142 SCRA 500) 1332. Are public market vendors required to issue invoices or sales receipts? A n s w e r . Public market v e n d o r s selling exclusively domestic meat, fruits, v e g e t a b l e s , g a m e , poultry, fish and other domestic food products are e x e m p t f r o m t h e requirement of issuing sales invoices or receipts. H o w e v e r , the m o m e n t they sell products in addition to those mentioned they lose the benefit of t h e e x e m p t i o n . T h e y are required to k e e p books of accounts because they are, in proper c a s e s , subject to income tax and c o m m u n i t y development tax (cedula). TICKERS: 3

Each local g o v e r n m e n t unit m a y create its o w n sources of revenue and levy taxes, fees and charges, or other forms of revenue m e a s u r e s such as tolls, licenses fees, rentals and service charges consistent with the basic policy of local a u t o n o m y , which shall exclusively accrue to it.

3

Local g o v e r n m e n t units have a share in the proceeds of national internal revenue taxes.

3

Tax exemption privileges existing prior to 1 9 9 1 , except those provided in the Local C o d e itself, have been withdrawn.

3

Local taxation is legislative in nature, the power of taxation shall be exercised by the Sanggunian of the local government unit concerned through appropriate ordinance. (Bagatsing vs. Ramirez, 74 SCRA 306, Villegas vs. Hiu Chiong Tsai, 86 SCRA 270)

779

3

The tax powers of local government units are to be liberally construed but a DOUBT on the application of a tax ordinance shall be construed strictly against the Local government unit. o

Exception: - Tax exemptions, incentive or relief that shall be construed strictly against the grantee or taxpayer.

O

Doubts on the liability of a taxpayer under a valid tax ordinance are construed strictly against the local government unit.

O

Local government units and their officials are not exempt from liability for death or injury to person or persons or d a m a g e to property.

C

Unlike ordinary local ordinances or resolutions, the enactment of tax ordinances and revenue m e a s u r e s requires public hearings to be first conducted. T h e power to review and declare inconsistent with law, in w h o l e or in part, barangay ordinances by the Sanggunian B a y a n or Panlungsod and municipal ordinances by the Sanggunian Panlalawigan (whose decisions are final) is also applicable to tax ordinances. However, the law has withdrawn the review and suspension powers of local treasurers and the Secretary of Finance under the Local T a x C o d e .

O

All tax ordinances or revenue m e a s u r e s of local g o v e r n m e n t units existing upon the effectivity of t h e Local G o v e r n m e n t C o d e shall continue to be in force and effect unless a m e n d e d by the S a n g g u n i a n c o n c e r n e d , or inconsistent w i t h , or in violation of, the provisions of the Local G o v e r n m e n t C o d e .

3

It appears that it is the legislative intention to limit provinces and municipalities, respectively, to t h e imposition of taxes that the other may levy under its specific authority. Municipalities m a y levy taxes not otherwise levied by provinces, w h e r e a s , provinces are prohibited from levying taxes that municipalities m a y impose under the e n u m e r a t i o n of its specific authority.

3

L G U s are prohibited f r o m imposing taxes on the sale, barter or e x c h a n g e of agricultural and aquatic/marine products produced by farmer or f i s h e r m a n himself and his immediate family. However, the L G U s m a y impose a tax on persons e n g a g e d in the business or producing agricultural, marine and fresh-water products on a c o m m e r c i a l scale.

780

3

L G U is prohibited f r o m imposing taxes on the gross receipts of transportation contractors and persons engaged in the transportation of p a s s e n g e r s or freight by c o m m o n carriers but not on the operation or franchising of tricycles, the issuance of licenses or permits for the driving thereof.

3

Transfer of rights over mining claims is not subject to transfer taxes by the province or city.

3

T h e L G U s are without p o w e r to tax electric power c o m p a n i e s already subject to franchise tax unless their franchise allows the imposition of additional tax.

781

P A R T XIII

COMMUNITY DEVELOPMENT TAX This is a tax for being a resident and m e m b e r of a community. It used to be known as Residence tax or "Cedula". This tax is collectible by the city or municipal treasurer w h o can deputize the barangay treasurers in the collection thereof in their respective territorial jurisdiction. The cedula tax was the first individual tax imposed in the Philippines during the Spanish regime. It w a s abolished in 1937 but restored under C.A. No. 4 6 5 in the form of residence tax, now k n o w n as community development tax. 1333. Governing law on C o m m u n i t y Tax: Answer. Sec. 38 of the Local T a x C o d e g o v e r n s the levy, collection, and administration of the residence tax by the national government through the BIR as well as the rates and accrual of the proceeds thereof. 1334. Nature of C o m m u n i t y Tax: Answer. T h e c o m m u n i t y tax is essentially a poll or capitation tax. It is of a fixed a m o u n t i m p o s e d u p o n certain inhabitants of the Philippines "without regard to their property or on the occupation in which they may be e n g a g e d . " 1335. W h o are authorized to levy c o m m u n i t y tax? A n s w e r . Cities and Municipalities. 1336. C o m p o s i t i o n of a c o m m u n i t y tax: A n s w e r . Tax proper or the basic tax (Class A) a n d additional tax (Class B).

782

1337. W h o are the persons liable? Answer. (a) Every inhabitant of the Philippines 18 years of age or over w h o : (Class A and/or Class B) 1.

has b e e n regularly e m p l o y e d on a w a g e or salary basis for at least 30 consecutive w o r k i n g days during any calendar year; or

2.

is e n g a g e d in b u s i n e s s or o c c u p a t i o n ; or T h e business or o c c u p a t i o n need not be taxable under the N I R C .

3.

o w n s real property with an a g g r e g a t e a s s e s s e d value of Php 1,000.00 or m o r e ; or T h e o w n e r is the one liable although the property is held in usufruct by another.

4.

is required by law to file an income tax return. A non-resident alien is not an inhabitant. He is therefore, not subject to t h e tax w h e t h e r or not required by law to file an income tax return.

Inhabitant - m e a n s any p e r s o n , irrespective of his or her citizenship or nationality, w h o dwells or resides in the Philippines for a period exceeding three (3) months. In the case of h u s b a n d a n d wife, the additional tax imposed shall be based upon the total property owned by them and the total gross receipts or earnings derived by t h e m . (Sec. 157, LGC) (b) Corporations no matter how created or organized, whether domestic or resident foreign, engaged in or doing business in the Philippines, including joint stock company, partnership, joint account, association, or insurance companies, but excluding general professional partnerships and joint ventures for undertaking construction projects or engaging in energy operations under service contract with the government. (Class C of basic and C-1 for additional)

783

NOTE: Estates of deceased persons, being neither corporations nor individuals, A R E NOT subject to the tax, but the heirs must declare their proportionate shares of the income. 3

If the corporation has sales offices, branches or warehouses of establishments, the Community tax is imposed on its principal office.

(c) Optional (Class D) - is issued to any person or corporation not liable to the payment of the community tax but desiring to have a residence certificate upon payment of the basic tax. 1338. W h e n payable? Answer. It accrues on the first day of January of e a c h year that shall be paid on or before the last day of February of e a c h year. 3

If a person reaches the age of 18 years or otherwise loses the benefit of exemption on or before the last day of J u n e , he shall be liable for the c o m m u n i t y tax on the day he reaches 18 years of age or upon the day the e x e m p t i o n ends.

3

If a person reaches 18 years of a g e or loses the benefit of exemption on or before the last day of M a r c h , he shall have 20 days to pay the c o m m u n i t y tax without b e c o m i n g delinquent.

3

Persons w h o c o m e to reside in t h e Philippine or reach 18 years of age on or after July 1st of any year or w h o c e a s e to be e x e m p t e d on or after the s a m e date shall not be subject to the c o m m u n i t y tax for that year.

3

Corporations established a n d organized on or before t h e last day of J u n e shall be liable for the c o m m u n i t y tax for that year. W h e r e a s , corporations established a n d organized on or before the last day of M a r c h shall h a v e 20 d a y s within w h i c h to pay the community tax without becoming delinquent and corporations established a n d organized on or after July 1 shall not be subject to the c o m m u n i t y tax for that year.

3

If the tax is not paid within the time prescribed a b o v e , there shall be a d d e d to the unpaid a m o u n t an interest of 2 4 % per a n n u m from the d u e date until it is paid.

784

1339. A m o u n t or rate of c o m m u n i t y tax: Answer. 3

Individual - A basic tax of P h p 5.00 and an annual additional tax of Php 1.00 for every Php 1,000.00 of income regardless of w h e t h e r f r o m business, exercise of profession or from property that in no c a s e shall e x c e e d Php 5,000.00. T h e additional tax shall be based u p o n the total property o w n e d by both h u s b a n d and wife and the total gross receipts or earnings derived by t h e m .

3

Corporation - W h e t h e r d o m e s t i c or foreign, e n g a g e d in or doing business in t h e Philippines. Basic tax of P h p 500.00 and an a n n u a l additional tax which in no case shall exceed Php 10,000.00, in a c c o r d a n c e with Php 2.00 for every Php 5,000.00 worth of real property in the Philippines o w n e d by it during t h e preceding year based on the a s s e s s e d v a l u e of the real property and Php 2.00 for every Php 5,000.00 of gross receipts or earnings derived by it from its business in the Philippines during the preceding year.

3

Dividends received by a corporation f r o m another corporation shall be considered as part of the gross receipts or earnings of said corporation.

3

If the tax is not paid within the time prescribed, there shall be added to the unpaid a m o u n t an interest of 2 4 % per a n n u m from the d u e date until it is paid.

1340. Situs of community tax: A n s w e r . T h e community tax shall be paid in the place of residence of the individual, or in the place w h e r e the principal office of the juridical entity is located. 1341. Nature of c o m m u n i t y tax: Answer. It is a local tax for the following reasons 3

The participation by the BIR is only for the printing of the certificates and distribution thereof to municipal and city treasurers;

785

O

Only a small portion is remitted to the National Government merely to cover cost of printing and distribution of the community tax certificates

3

Collection is done by the city or municipal treasurer w h o can deputize barangay treasurers in collecting the tax;

3

Proceeds are allocated to the cities, municipalities barangays in the 5 0 % - 5 0 % proportion; and

3

The provisions on community tax are located in Sees. 156 164 of the Local Government C o d e of 1 9 9 1 .

and

1342. W h o is e x e m p t from c o m m u n i t y tax? Answer. a) Individuals below 18 years of age w h o do not have real property or are not e n g a g e d in business; b) Individuals less than 18 years of age although e m p l o y e d ; c) Non-profit corporations e) Diplomatic and consular representatives; e) Transient visitors w h e n their stay in t h e Philippines does not exceed three (3) m o n t h s . 1343. Community tax Certificate defined: A n s w e r . A c o m m u n i t y tax certificate shall be issued to every person or corporation u p o n p a y m e n t of the c o m m u n i t y tax. A community tax certificate m a y also be issued to any person or corporation not subject to the c o m m u n i t y tax u p o n p a y m e n t of the basic tax. 1344. Instances w h e n c o m m u n i t y tax certificate is required: Answer. a)

W h e n an individual subject to t h e c o m m u n i t y tax a c k n o w l e d g e s any d o c u m e n t before a notary public.

b)

W h e n he takes the oath of office upon election or appointment to any position in t h e g o v e r n m e n t service.

786

c)

W h e n he receives any license, certificate, or permit from any public authority.

d)

W h e n h e receives any m o n e y f r o m the public f u n d .

e)

W h e n he transacts other official business.

f)

W h e n he pays any tax or fee.

g)

W h e n he receives any salary or w a g e f r o m any person or corporation. T h e c o m m u n i t y tax certificate required shall be the one issued for t h e current year, e x c e p t for t h e period from January to April 15 e a c h year, in w h i c h c a s e , the certificate issued for the preceding years shall suffice.

787

PART XIV

REAL PROPERTY TAXATION 1345. State the f u n d a m e n t a l principles g o v e r n i n g real property taxation: Answer. a) Real property, whether taxable or exempt, shall be appraised at its current and fair market value. b) Real property shall be classified for a s s e s s m e n t purposes on the basis of its actual use. Actual use - Refers to the purpose for w h i c h the property is principally or predominantly utilized by the person in possession of the property. Illustration: "A" is a lessee of a real property belonging to the government. He uses it as mineral land; he can be a s s e s s e d real property tax e v e n if he is not the owner of said land or even if he does not have mining rights thereon b e c a u s e the rule for a s s e s s m e n t under the R P T C is "actual use". A private property o w n e r w h o leases his real property to a traditional e x e m p t e e is not e x e m p t f r o m real property tax even if said property is actually, directly or exclusively used by the " R E C " for its m a i n p u r p o s e , b e c a u s e the owner uses the property for c o m m e r c i a l purposes. Real property shall be a s s e s s e d on the basis of its actual use regardless of w h e r e located and w h o e v e r uses it. c) The appraisal, a s s e s s m e n t , levy and collection of real property tax shall not be let to any private p e r s o n ; a n d d)

The appraisal equitable.

and

assessment

of

real

property

shall

be

e) The goal of real property a s s e s s m e n t shall be the equitable distribution of the tax b u r d e n .

788

f) T h e appraisal of real property shall be uniform in each local political subdivision. g) Real property shall be a s s e s s e d on the basis of a uniform standard of value within e a c h local political subdivision. 1346. H o w are real properties t a x e d ? A n s w e r . Real properties shall be classified, valued and assessed o n t h e basis o f its A C T U A L U S E R E G A R D L E S S O F W H E R E THEY ARE LOCATED, WHOEVER OWNS IT AND WHOEVER U S E S IT, IS IN P O S E S S I O N , a n d O C C U P A T I O N OF IT. 3

A building actually u s e d for residential purposes by persons other t h a n the o w n e r on rented basis shall be classified and a s s e s s e d as residential based on its current level of assessment.

3

A purely residential building erected in a c o m m e r c i a l area - the land shall be a s s e s s e d on its c o m m e r c i a l value and the i m p r o v e m e n t on its a s s e s s e d value fixed on the basis of the a s s e s s m e n t level for residential land and vice-versa.

3

In c a s e the residential or purely c o m m e r c i a l building stands in a mixed residential-commercial area, the more predominant use of such land shall govern its classification and assessment level.

3

V a c a n t or idle land located in a purely residential or mixed residential-commercial area shall be classified as residential. However, if located in a purely commercial area, the same shall be classified as c o m m e r c i a l .

1347. Doctrine of Usage defined: Answer. Doctrine of Usage is the gauge used in determining taxability of real properties. Real properties are taxed according to how they are used and not on ownership. City ofBaauio

vs.

Busueao

(1980)

The taxpayer resisted the assessment on the real property which he acquired from the GSIS under a contract to sell on the theory that the property is still not fully paid and is still registered in the name of the GSIS (an entity with a statutory

789

real property tax exemption in its charter). The Supreme Court applied the Doctrine of Usage and held that since the property was already being used by a non-exempt taxpayer, it cannot be exempted from real property tax. The beneficial user of said property is liable. LRT Authority vs. (Oct. 12. 12000)

Central

Board

of Assessment

Appeals.

LRT resisted the assessment on the carriageways and terminal stations for real taxes upon the theory that such real properties are for public use similar in nature to public roads. The Supreme Court held that it w a s not for public use because only those w h o are riding the L R T use t h e m , hence, its carriageways and terminal stations are not exclusively for public use and in addition, there is no grant of real property tax exemption in the Charter of the LRT. 1348. H o w are real properties a p p r a i s e d ? Answer. All real properties, w h e t h e r taxable or exempt, shall be appraised at the current fair market v a l u e prevailing in the city w h e r e they are located. To establish the fair market value of real property, the City A s s e s s o r may s u m m o n the o w n e r s of real properties affected, as well as other w i t n e s s e s , for t h e purpose of getting information to base u p o n the real property's market value. 1349. Distinctions between "FAIR MARKET VALUE" and " A S S E S S E D V A L U E " for p u r p o s e s of the real property tax: Answer. Market value - "Is the money which the property will market allowing a r e a s o n a b l e with knowledge of all the uses it is capable of being u s e d . "

highest price estimated in terms of buy if e x p o s e d for sale in the o p e n time to find a purchaser w h o buys to w h i c h it is a d o p t e d a n d for which

"The price at w h i c h a willing seller w o u l d sell a n d a willing buyer would buy, neither being under a b n o r m a l pressure." "Fair market v a l u e " is d e t e r m i n e d by the declarant of the real property or by the Assessor, while the "assessed value" is determined by the application of the a s s e s s m e n t level to t h e "fair market value".

790

T h e "fair market value" is s u p p o s e d to be the actual value of the real property in the o p e n market; while the "assessed v a l u e " is merely a certain percentage of the "fair market value" d e p e n d i n g on the a s s e s s m e n t level of the real property in question. Assessment level - Is t h e percentage applied to t h e market value to determine t h e taxable or a s s e s s e d value of the property. 1350. What are the objectives of the Real Property Code? Answer. a) To increase local g o v e r n m e n t revenues f r o m the realty tax; b) To u p g r a d e a s s e s s m e n t procedures and processes; c) To bring about an equitable distribution of the tax burden. 1351. What is the scope of the Real Property Tax Code? A n s w e r . T h e C o d e ( P . D . N o . 4 6 4 , effective J u n e 1, 1974) governs the appraisal and a s s e s s m e n t of real property for purposes of taxation by provinces, cities and municipalities, inclusive of the levy, collection and administration the real property tax. 1352. Coverage of the Real Property Tax Code: Answer. a) A n n u a l ad v a l o r e m tax on real property; b) Special levies on said property such as: 1.

An additional 1% tax for the Special Educational Fund; (R.A. No. 5447) [Referred to as the "SEF" Tax] - the levy is made on an ad valorem basis as in the case of the basic tax. (RA 5447)

2. An additional 5% tax on idle lands (Referred to the "IL" Tax], likewise imposed on an ad valorem basis; Idle land shall include (a) agricultural lands suitable for cultivation, dairying, inland fishery, and other agricultural uses, 1/2 of which remain uncultivated or unimproved by the owner(s) thereof; (b) lands other than agricultural, located in the City or Municipality, more than 2,000 sq. m. 791

in area 1/2 of which remain owner(s) thereof; and (c) duly approved by proper which has been transferred 3.

unutilized or unimproved by the residential lots in subdivisions authorities, the ownership of to individual owners.

Special levy or assessment imposed by local or national governments on property especially benefited by certain infrastructure development to help defray a part, not exceeding 6 0 % of the cost thereof, including the cost of acquiring land and other real property in connection therewith. Special levy actually a tax.

or

special

a s s e s s m e n t which

is

not

In No. (3) a b o v e , the special levy shall not exceed 6 0 % of the actual cost of such projects and improvements, including the costs of acquiring the land and such other real property f r o m basic real property tax and the remainder of the land portions of which have b e e n donated to the local g o v e r n m e n t unit c o n c e r n e d for the construction of such projects or i m p r o v e m e n t s . In Nos. (1) a n d (2) a b o v e , it can only be levied by provinces, cities a n d municipalities within Metro Manila. Municipalities outside Metro Manila cannot impose the aforementioned taxes and levies, for No. (3), t h e s a m e may be i m p o s e d by provinces, cities, Metro Manila municipalities including municipalities outside the Metro Manila area. B a r a n g a y s c a n n o t i m p o s e real property taxes or special a s s e s s m e n t . N O T E : (a) Real property granted e x e m p t i o n f r o m real property tax shall also be e x e m p t e d f r o m the imposition of the Special Education Fund T a x of 1 % , but (b) E x e m p t i o n from real property tax does not include e x e m p t i o n f r o m special assessment. 1353. W h a t law g o v e r n s the real property t a x ? A n s w e r . T h e Real Property Tax is g o v e r n e d by the Real Property Tax C o d e enacted under P.D. 4 6 4 that took effect on J u n e 1, 1974.

792

1354. Is t h e i m p o s i t i o n of real p r o p e r t y tax a national tax or a local tax? A n s w e r . In the c a s e of Meralco Securities Industrial Corporation vs. Central Board of A s s e s s m e n t Appeals, it w a s held by the S u p r e m e Court that the imposition of real property tax is national based on t w o (2) g r o u n d s : a) the imposition has b e e n m a d e by the law-making body and later by t h e President of the Philippines; b) the imposition is m a d e t h r o u g h o u t t h e Philippines and not only in a particular political subdivision. 1355. W h a t is real property t a x a t i o n ? A n s w e r . It is taxation of real property. "Real Property" may include things that should generally be regarded as personal property. 1356. Real property tax defined: A n s w e r . It is a direct tax on the or other i m p r o v e m e n t s thereon payable regardless of w h e t h e r the the value may vary in a c c o r d a n c e

o w n e r s h i p of lands and buildings not specially exempted and is property is used or not, although with such factor.

T h e tax is usually single or indivisible although the land and building or i m p r o v e m e n t s erected thereon are assessed separately except w h e n the land and building or improvement belongs to separate o w n e r s . (Eusebio Villanueva, et. al., vs. City of lloilo, December 28, 1968) 3

This is a local tax.

3

It is a tax on property of a certain class located within a certain territory on a specified date in proportion to its value or in accordance with some other reasonable method of apportionment.

3

It is a fixed proportion of the assessed value of the property being taxed and requires the intervention of assessors.

3

It is collected or payable at appointed times and constitutes a superior lien on and is enforceable against the property subject to such taxation and not by imprisonment of the owner. 793

3

The policy of taxing real property is on the basis of actual use even if the user is not the owner. * Province of Nueva Ecija vs. Imperial Mining Co., Nov. 19, 1982

3

It is a tax in rem against the real property without personal liability therefore on the part of the owner thereof.

3

While properties o w n e d by the Republic of the Philippines or any of its political subdivision are exempt from real property taxes, said government o w n e d properties b e c o m e s taxable if the beneficial or actual use thereof is transferred for a consideration or otherwise to a taxable person. T h e law makes no distinction b e t w e e n property held in g o v e r n m e n t capacity and those possessed in a proprietary character, such as those acquired by the g o v e r n m e n t in execution sales, tax sales and escheats. (Board of A s s e s s m e n t A p p e a l s of Laguna vs. CTA, May 2 1 , 1963)

1357. W h a t is the p u r p o s e of the real property t a x ? A n s w e r . T h e function of real property tax is to raise revenue. It is levied by the province or city. Exceptions to this are the special levies on real property. 1358. Give the characteristics of real p r o p e r t y tax: Answer. a) It is a direct tax on the o w n e r s h i p of real property. T h e impact and incidence of taxation d e v o l v e s on t h e s a m e person. b) It is an ad valorem tax. V a l u e is the tax b a s e . Ad valorem tax - is a levy on real property d e t e r m i n e d on the basis of a fixed proportion of the value of t h e property. c) It is proportionate b e c a u s e the tax is calculated on the basis of a certain percentage of the value a s s e s s e d . d) It creates a single indivisible obligation. e) It is a local tax.

794

1359.

DEFINITION OF TERMS: •

Acquisition cost - For newly-acquired machinery not yet depreciated a n d appraised within the year of its purchase, refers to t h e actual cost of the machinery to its present owner plus the cost of transportation, handling and installation at the present site.

•

Actual use - This refers to t h e purpose for w h i c h the real property is principally or predominantly utilized by the person in possession thereof.

•

Ad Valorem tax - Is a levy on real property determined on the basis of a fixed proportion of the value of the property.

•

Agricultural land - A land d e v o t e d principally to the planting of trees, raising of crops, livestock and poultry, dairying, salt m a k i n g , inland fishing and similar aqua-cultural activities and other agricultural activities.

•

Appraisal - It is the act or process of determining the value of property as of a specific date for a specific purpose.

•

Assessment - It is t h e act or process of determining the value of property, or proportion thereof subject to tax, including the discovery, listing, classification and appraisal of properties.

•

Assessment level - It is the percentage applied to the fair market value to determine the taxation value of the property.

•

Assessed value - It is the fair market value of the real property multiplied by the a s s e s s m e n t level. It is synonymous to taxable value.

•

Commercial land - Land devoted primarily for the object of profit and is not classified as agricultural, industrial, mineral, timber, or residential land.

•

Depreciated value - Is t h e value remaining depreciations from the acquisition cost.

•

Economic life - Is the estimated period over which it is anticipated that a machinery or equipment may be profitably utilized.

795

after deducting

•

Fair Market Value - It is the price at which a property may be sold by a seller w h o is not compelled to sell and bought by a buyer who is not compelled to buy.

•

Improvement - Is a valuable addition made to a property or an amelioration in its condition, which is intended to enhance its value, beauty or utility or to adapt it for new or further purposes, amounting to more than a mere repair or replacement of parts involving capital expenditures and labor and normally requiring a building permit from the local government c o n c e r n e d .

•

Industrial land - It refers to land devoted to industry as capital investment.

•>

Levy - It means (a) an imposition of a tax, fee or charge; or (b) the seizure of property to satisfy a tax obligation.

•

Machinery - E m b r a c e s m a c h i n e s , equipment, mechanical contrivances, instruments, appliances or apparatus, w h i c h may or may not be attached, permanently or temporarily to the real property.

•

Mineral land - Is a land in w h i c h minerals, metallic or nonmetallic exist in sufficient quantity or g r a d e to justify the necessary expenditures to extract and utilize s u c h materials.

•

Reassessment - Is the assigning of new a s s e s s e d value to property, particularly real estate, as the result of a general, partial, or individual reappraisal of t h e property.

•

Remaining economic life - Is the period of time expressed in years f r o m the date of appraisal to t h e d a t e w h e n the machinery b e c o m e s valueless.

•

Residential land - L a n d principally d e v o t e d to habitation.

•

Tax assessed - T h e a n n u a l real estate tax imposable on the taxable real property without the penalties accruing thereto.

•>

Timber land - It refers to land with trees g r o w i n g on it.

1360. Give the nature a n d s c o p e of the local taxing p o w e r in real property t a x a t i o n : A n s w e r . T h e taxing power of local g o v e r n m e n t s in real property taxation is a delegated power. 796

3

Provinces, cities, and municipalities in the Metro Manila area do not only have the power to levy real estate taxes but they also fix real estate tax rates.

3

Municipalities a n d b a r a n g a y s are devoid of the power to levy real property taxes.

3

Provinces shall fix a uniform rate of basic real property tax applicable to their respective localities at the rate not exceeding 1 % of t h e a s s e s s e d value of real property; and in the case of a city or a municipality within t h e M e t r o Manila area at t h e rate not e x c e e d i n g 2% of the a s s e s s e d value of real property.

3

No public hearing shall be required before the enactment of a local tax ordinance levying the basic real property tax.

3

T a x e s on property are taxes a s s e s s e d on all property or on all property of a certain class located within a certain territory on a specified date in proportion to its value or in accordance with s o m e other r e a s o n a b l e m e t h o d of apportionment.

1 3 6 1 . P o w e r of the local g o v e r n m e n t to prescribe penalties for tax violation under the Real Property Tax Code: A n s w e r . Local g o v e r n m e n t s have the power to impose penalties for tax violations and that t h e penalty should not be less than Php 1,000.00 or more t h a n Php 5,000.00 if a fine and not less than 1 month or more t h a n 6 months if it is imprisonment. Barangays may prescribe as fine not less t h a n Php 100.00 or more than Php 1,000.00 T h e power to fix penalties applies only to province, cities, and municipalities in Metro Manila because it is only the Sanggunians of these local g o v e r n m e n t units that can levy real property taxes. Municipal and barangay Sanggunians are not e m p o w e r e d to levy said taxes and these units do not have anything to do with the imposition of penalties for realty tax violations. 1362. Is a real p r o p e r t y tax i m p o s a b l e u p o n e a c h of the coheirs on their undivided share of the property inherited from their parents? A n s w e r . Unless partition is effected, each co-heir cannot yet claim ownership over a definite portion of the inherited property, hence,

797

the undivided real property shall be declared for taxation purposes only as one property in the name of all the heirs. The affidavit of the heirs, could not be used as basis for issuing to each of them separate tax declarations covering their respective shares of the undivided real property inherited. 1363. W h a t kind of properties are subject to real property tax? A n s w e r . Only real property is subject to tax within the meaning of the Code, particularly: 3

Land, building, roads and constructions of all kinds adhered to the soil;

3

Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable;

3

Everything attached to an i m m o v a b l e in a fixed manner, in such a w a y that it cannot be separated therefrom without breaking the material or deterioration of the object;

3

Statutes, relics, paintings or other objects for use or ornamentation, placed in buildings or on land by the owner of the i m m o v a b l e in such a m a n n e r that it reveals the intention to attach t h e m permanently to the t e n e m e n t s ;

3

Machinery, receptacles, instrument or i m p l e m e n t s intended by the owner of the t e n e m e n t for an industry or for w o r k s which may be carried on in a building or on a piece of land, and which tend directly to meet the n e e d s of the said industry or works;

3

Machineries and industrial e q u i p m e n t a n d t h e like that are immobilized by destination.

3

A n i m a l h o u s e s , p i g e o n - h o u s e s , beehives, fish ponds or breeding places of similar nature, in c a s e their o w n e r has placed t h e m permanently attached to t h e land, and forming a permanent part of it; the a n i m a l s in these places are included;

3

Fertilizer actually used on a piece of land;

3

Mines, quarries, and slag d u m p s , while the matter thereof forms part of the b e d , a n d waters either running or stagnant;

798

3

D o c k s a n d structures w h i c h , t h o u g h floating, are intended by their nature and object to remain at fixed place on a river, lake, or coast.

3

Contracts for public w o r k s , and servitudes a n d other real rights over i m m o v a b l e property.

1364. W h a t kind of property tax?

real

properties

are

exempt

from

real

A n s w e r . Real property o w n e d by the Republic of the Philippines or any of its political subdivisions and any g o v e r n m e n t - o w n e d corporation so e x e m p t by its charter. This e x e m p t i o n , however, shall not apply to real property of t h e a b o v e - n a m e d entities the beneficial use of w h i c h has b e e n granted, for consideration or otherwise, to a taxable p e r s o n . (Testate Estate ofC.T. Lim vs. City of Manila, 182 SCRA 482) 3

Real properties o w n e d by G O C C acquired for resale to qualified persons are N O T e x e m p t f r o m realty taxes because they are not d e v o t e d for public use.

3

Real property o w n e d by the S S S is e x e m p t from realty taxes albeit the s a m e being devoted to private or proprietary purpose. R E A S O N : In e x e m p t i n g property o w n e d by the Republic of the Philippines or any of its political subdivision, the Real Property T a x C o d e m a k e s no distinction between property held in sovereign, g o v e r n m e n t a l or political capacity and those possessed in a private, proprietary or patrimonial character and w h e r e the law d o e s not distinguish, neither may the Court unless there are facts and circumstances clearly showing that the l a w m a k e r s intend the contrary. It is axiomatic that when public property is involved, exemption is the rule and taxation the exception. ( S S S vs. City ofBacolod, et. al., 7 SCRA 407)

3

Non-profit or religious cemeteries or public burial grounds;

3

Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, and all lands, buildings, and improvements, actually, directly and exclusively used for religious or charitable purposes;

3

Real property in any one city or municipality belonging to a single owner the entire assessed valuation of which is not in excess of Php 1,000. The property so exempt, however, shall

799

be assessed and records thereof kept as in other cases; (As amended by P.D. No. 1621) 3

Land acquired by grant, purchase or lease from the public domain for conversion into dairy farms for a period of 5 years from the time of such conversion;

3

Pasture and/or grazing land acquired by grant, purchase, or lease from the public d o m a i n , actually used for livestock production, for a period of 5 years beginning with the calendar year 1977; and acquisitions m a d e thereafter, the exemption will begin with the year of such acquisition. (Sec. 4 0 , P.D. No. 464 as a m e n d e d ) Under P.D. No. 1913, the a b o v e exemption shall include exemption from the additional 1% tax for Special Education Fund.

3

Machinery of a pioneer and the Board of Investments agriculture, manufacturing or years of the operation of the No. 1383)

preferred industry as certified by used or operated for industry, mining purposes, during the first 3 machinery. (As a m e n d e d by P.D.

Machinery shall embrace machines, equipment, mechanical contrivances, instruments, appliances and apparatuses, attached to the real estate. It shall include the physical facilities available for production, as well as the installation and appurtenant service facilities, together with all those not permanently attached to the real estate but are actually, directly a n d essentially u s e d to meet the needs of the particular industry, business, or w o r k s , w h i c h by their very nature and purpose are d e s i g n e d for or essential to manufacturing, c o m m e r c i a l , m i n i n g , industry or agricultural purposes. (Sec. 3-m, P.D. No. 4 6 4 as a m e n d e d by P.D. No. 1383) 3

Perennial trees and plants of e c o n o m i c value except w h e r e the land u p o n w h i c h they g r o w is planted principally to such growth.

3

The real property e x e m p t under other laws;

3

Properties o w n e d by non-stock or non-profit educational institutions, the total a s s e s s e d value of w h i c h d o e s not exceed Php 3,000, including those o w n e d by Educational Foundations 800

organized under R.A. No. 6 0 5 5 . T h e s e institutions are now e x e m p t f r o m realty tax a n d " e v e n I N C O M E T A X a n d C U S T O M S D U T I E S under t h e 1987 Constitution. 3

Property o w n e d by a franchise holder used solely in the business c o v e r e d by the franchise, the e x e m p t i o n does not extend to real property of the franchise holder that is being rented out.

3

All machineries a n d e q u i p m e n t that are actually, directly and exclusively u s e d by local w a t e r districts and G O C C e n g a g e d in the supply and distribution of water and/or generation and transmission of electric power.

3

All real property o w n e d by duly registered cooperatives as provided under RA 6 9 3 8 ;

3

M a c h i n e r y and e q u i p m e n t environmental protection.

used

for

pollution

control

and

Except for the a b o v e e n u m e r a t i o n s , any exemption from p a y m e n t of real property tax previously granted to, or presently enjoyed by, all persons, w h e t h e r natural or juridical, including all g o v e r n m e n t - o w n e d - o r - c o n t r o l l e d corporations are hereby w i t h d r a w n upon the effectivity of the Local Government Code. 1365. Do

local

governments

have the

p o w e r t o e x e m p t real

properties from taxation? A n s w e r . There is no provision in the Local G o v e r n m e n t Code that expressly e m p o w e r s local g o v e r n m e n t s to exempt real property from taxes. Sec. 234 e n u m e r a t e d the particular properties that are e x e m p t e d . T h u s , it follows by clear implication that the law has withheld from the L G U s the power to exempt. However, while L G U s do not have such power to e x e m p t properties from realty tax. they may e x e m p t idle lands from the additional 5% tax by reason of force majeure, civil disturbance, natural calamity or any cause or circumstances which physically or legally prevents the owner of the property or person having legal interest therein from utilizing, improving or cultivating the same. Furthermore, LGUs may grant condonation that actually partake the nature of tax exemptions, such as when there is a case of general failure of crops or substantial decrease in the price of agricultural or agri-based products or calamity within its respective area. 801

The local governments are bereft of this authority insofar as real taxes are concerned, unlike in the case of local taxes where the Local Government Code (LGC) expressly authorizes them to "grant tax exemptions, incentives, or reliefs under such terms and conditions as they may d e e m necessary". Thus, in real property taxation, exemption is limited only to those properties that are enumerated under the LGC. 1366. W h o exercises the p o w e r of r e m i s s i o n on real property taxes? W h e n is this power obtaining? A n s w e r . Under the R P T C , remission of real property tax may be done by: (a) the Sanggunian Panlalawigan or Panlungsod in case of: 1)

general failure of crops, or

2)

great decrease in the price of products, or

3)

similar w i d e s p r e a d disaster in any city or municipalities of a province.

municipality or

b)

the President of the Philippines if public interest so requires;

c)

the Secretary of Finance is granted special authority to formulate and prescribe s c h e m e of g r a d u a t e d p a y m e n t s of realty tax, and/or remedial m e a s u r e s that w o u l d e a s e the tax burden of property o w n e r s in special cases of e c o n o m i c dislocation or imbalance arising f r o m natural calamities. T h e exercise of this authority shall be u p o n direction or approval of the President.

1367. Classifications purposes:

of

real

properties

Answer. a) b) c) d) e)

Residential Agricultural Commercial Industrial Mineral

f)

Timber and forest land; a n d

g)

Special (church, hospital, o r p h a n a g e , etc.) 802

for

assessment

1368. W h a t are the special classes of real properties under the RPTC? Answer. a)

All kinds of lands, buildings and other improvements thereon, actually, directly and exclusively u s e d for religious, educational, cultural, recreational or scientific purposes,

b)

Hospitals not o w n e d and operated by the g o v e r n m e n t or by any of its instrumentalities.

c)

T h o s e o w n e d and used by local w a t e r districts; and

d)

Real properties o w n e d by g o v e r n m e n t o w n e d or controlled corporations rendering essential public services in the supply a n d distribution of w a t e r and/or generation a n d transmission of electric power.

1 3 6 9 . W h a t a r e t h e a s s e s s m e n t levels t o b e a p p l i e d t o t h e fair m a r k e t value of real properties for taxation p u r p o s e s ? Who fixes the assessment levels? - S a n g g u n i a n g Panlalawigan or P a n l u n g s o d of the place w h e r e the property is located. At what rates? At rates not exceeding the following: Classification

Land

Buildings and other Structures (FMV)

Description / Fair Market V a l u e Residential Commercial Agricultural Industrial < Mineral Timberland Not over 175K 1 7 5 K - n o t over 300K 300K - not over 500K 5 0 0 K - not over 750K 7 5 0 K - not over 1.0m 1.0M - not over 2.0M 2.0M - not over 5.0M 5.0M - not over 10.0M 10.0Million and above

803

Assessment levels 20% 50% 40% 50% 50% 20% 0% 10% 20% 25% 30% 35% 40% 50% 60%

Agricultural (FMV)

Commercial or Industrial (FMV)

Timberland

Machineries

Classification

Special classes of property:

Not over 300K 300K - not over 500K 500K - not over 750K 750K - not over 1 .OM 1.0M-not over2.0M 2.0 million and above Not over 300K 300K - not over 500K 500K - not over 750K 750K - not over - 1 .OM 1.0M-not over2.0M 2.0M - not over 5.0M 5.0M - not over 100M 10.0 million and above Not over 300K 300K - not over 5 0 0 K 500K - not over 7 5 0 K 7 5 0 K - n o t oveM.OM 1.0M - not o v e r 2 . 0 M 2.0 million and a b o v e Agricultural Residential Commercial Industrial Description / Fair M a r k e t V a l u e Cultural Scientific Hospital Local W a t e r Districts GOCC engaged in the supply and distribution of water and/or generation a n d transmission of electric power

1370. W h a t kind of real tax?

25% 30% 35% 40% 45% 50% 30% 35% 40% 50% 60% 70% 75% 80% 45% 50% 55% 60% 65% 70% 40% 50% 80% 80%

all machineries not land. p r o p e r t i e s a r e e x e m p t f r o m t h e idle

A d v e r s e peace and order conditions as certified by the Provincial C o m m a n d e r of the A r m Forces of the Philippines. However, if within 1 year u p o n restoration of the p e a c e and 804

~~

Assessment levels 15% 15% 15% 10% 10%

A n s w e r . T h e additional levy on idle lands of 5% shall not apply to property o w n e r s w h o are unable to improve, utilize or cultivate their lands due to any of the following c a u s e s : a)

~n

order in the locality as certified by the said officer, the said land r e m a i n s u n i m p r o v e d , unutilized or uncultivated, the additional tax provided shall be i m p o s e d . Financial losses of the o w n e r due to fire, flood, typhoon, e a r t h q u a k e and other causes of similar nature declared by t h e o w n e r in a s w o r n statement to be submitted to the Provincial, City or Municipal A s s e s s o r stating the ground(s) therefore, w h i c h shall be a c c o m p a n i e d by a certification from t h e proper a g e n c y of the local g o v e r n m e n t c o n c e r n e d . If the idle land is not improved to within 2 years f r o m the date of the o c c u r r e n c e of the loss, the idle land tax shall be imposed subject to the rules a n d regulations issued in connection therewith. Existing court litigation involving t h e land subject to the case is pending unless said land is not improved within 1 year after t h e final adjudication of the c a s e . Necessity to leave the land in a fallow state as certified by t h e Provincial, City or Municipal Agriculturist, or in their a b s e n c e by the Secretary of Agriculture or his duly authorized representatives, stating a m o n g others, the length of time within w h i c h the land shall be considered ready for production. If the idle land is not improved within one (1) year after t h e termination of such period of time, the idle land tax shall be i m p o s e d . Unfavorable physical factors such as rocky nature of ground, and uneven topography in case of agricultural land which render the land unsuitable for cultivation as certified by the Provincial, City or Municipal Agriculturist, or in their absence, by the Secretary of Agriculture or his duly authorized representatives. Acquired subdivision lots which remains idle due to the failure of the subdivision owner or developer to develop the said subdivision plan as determined by the assessor. If within 1 year from the time the subdivision is developed, the said lot remains unutilized or unimproved, the tax shall be imposed.

805

1 3 7 1 . W h o bears the b u r d e n of paying the real property tax? Answer. The real property tax shall be assessed in the name of the person owning or administering the property on which the tax is levied. O

To impose the real property tax on the subsequent owner which was neither the owner nor the beneficial user of the property during the designated periods would be contrary to law and unjust. [(Manila Electric Company vs. Barlis, 357 SCRA 833 (2001)]

O

A tax declaration in the name of a person w h o has no successional or administrative rights to a decedent's estate is null and void. [Cenido vs. Apacionado, 318 SCRA 388 (1999)]

1372. W h o bears the b u r d e n of t a x a t i o n w h e n real property is held in usufruct? Answer. Generally, the naked o w n e r is the o n e liable for the realty tax on real property held in usufruct; it is the usufructuary w h o may pay the tax which he can recover f r o m the o w n e r u p o n termination of the usufruct. 1373. What

are

the

duties

of

persons,

natural

or juridical,

o w n i n g or administering real property u n d e r the R P T C ? Answer. a)

To prepare and file with provincial or city assessor, a sworn statement declaring the true value (current fair market value) of their property o n c e every 3 years during the period from January 1 to J u n e 30 to start in 1980,

b)

To describe the property sufficient in detail to e n a b l e the assessor to identify the s a m e for a s s e s s m e n t purposes;

c)

To file a sworn statement on the true value of subject property within 60 days after t h e acquisition of s u c h property, or upon completion or o c c u p a n c y of t h e i m p r o v e m e n t , w h i c h e v e r date c o m e s earlier.

806

1374. W h a t is t h e duty of a b u y e r of real person making improvement thereon?

property or of a

A n s w e r . Every buyer of real property must m a k e a new declaration thereof. Failure to do so shall m a k e the a s s e s s m e n t in the n a m e of the previous o w n e r binding. (Tajonera vs. CA, 102 SCRA 467) In c a s e of i m p r o v e m e n t s introduce on real property - the owner thereof or his authorized representative shall file a sworn statement declaring t h e true value of subject property within 60 days after completion of the i m p r o v e m e n t or its o c c u p a n c y , whichever c o m e s first. 1375. W h a t is the c o n s e q u e n c e of failure or refusal of property owners to make such declaration within the prescribed time? A n s w e r . T h e provincial or city a s s e s s o r shall himself declare the property in t h e n a m e of the defaulting owner, if k n o w n , or against an u n k n o w n owner, and shall assess the property for taxation. 1376. Is t h e p a y m e n t of t h e real p r o p e r t y tax an e v i d e n c e of title of o w n e r s h i p ? A n s w e r . A s s e s s m e n t alone is of little value as proof of title to a property and mere tax declaration does not vest ownership of the property in the declarant. Neither tax receipts nor declaration of ownership for taxation purposes are evidence of ownership or of the right to possess realty w h e n not supported by other effective proofs. (Perez vs. Court of Appeals, 59 SCRA 15, Ferrer-Lopez vs. CA, 150 SCRA 393, Prov. of Camarines Sur vs. Dir. of Lands, 64 Phil. 600) 1377. W h a t

is

the

probative

value

of

a

property

tax

declaration? Answer. While by itself it is not an adequate proof of ownership, it may serve as sufficient basis for inferring possession. It proves that the holder has a claim of title over the property - aside from manifesting a sincere desire to obtain title thereto, they announce the holder's adverse claim against the state and other interested parties. (Olegario vs. Man, 608 SCRA 134)

807

1378. Is the possession of property tax declaration a n d tax receipts sufficient to p r o v e o w n e r s h i p of real p r o p e r t y ? Answer. Property tax declarations and tax receipts are good indicia of possession in the concept of an owner. The same must be accompanied by possession for a period sufficient for acquisitive prescription to set in; by themselves, tax declaration and tax receipts do not conclusively prove ownership of real property. (Encinares vs. Achero, 597 SCRA 34) 1379. A s s e s s m e n t defined: Answer. It is the act or process of determining the value of a property or proportion thereof, subject to the tax, including the discovery, listing and appraisal of properties. This must be distinguished from the w o r d " a s s e s s m e n t " under the N I R C . 1380. May the validity of an a s s e s s m e n t under the R P T C be questioned in the ordinary courts? Answer. entertain payment entertain

Sec. 64 of the R P T C provides that "no courts can any suit on the validity of the tax a s s e s s m e n t before of the tax under protest, thus, implying that it may so the question after the payment of the tax under protest".

1381. May the City Assessor amend fair schedules of real properties within jurisdiction?

market value its territorial

Answer. T h e City A s s e s s o r m a y r e c o m m e n d a m e n d m e n t s to correct errors in valuation in fair market schedules to the Sanggunian P a n l u n s o d . T h e S a n g g u n i a n P a n l u n s o d shall, by ordinance, act on the r e c o m m e n d a t i o n within 90 d a y s after receiving it. 1382. W h e n

is

appeal

to

the

Local

Board

of

Assessment

Appeals (LBAA) obtaining? A n s w e r . A n y o w n e r or person having legal interest in t h e property w h o is not satisfied with the action of t h e provincial, city or municipal assessor in the a s s e s s m e n t of his property may, within 60 days from the receipt of the written notice of a s s e s s m e n t , appeal to the L B A A of the province or city w h e r e the property is located by filing a petition under oath in the form prescribed for the

808

purpose, together with copies of tax declarations and such affidavits or d o c u m e n t s submitted in support of the appeal. Within 30 days from receipt of the L B A A ' s adverse decision, dissatisfied property o w n e r can appeal to the central Board of A s s e s s m e n t A p p e a l s w h o s e decisions is final and executory unless appealed. Within 15 d a y s f r o m receipt of the C B A A ' s adverse decision, and appeal m a y be n o w be m a d e before t h e Court of T a x Appeals, under the e x p a n s i o n jurisdiction of the C T A of RA No. 9282. 1383. W h a t is the composition of the L B A A ? A n s w e r . T h e " L B A A " shall be c o m p o s e d of three (3) m e m b e r s , as follows a) T h e Register of D e e d s , as chairperson b) T h e Provincial or City Auditor, as m e m b e r ; and c) T h e Provincial or City Engineer, as m e m b e r . T h e s e officials shall serve in the " L B A A " capacity without additional c o m p e n s a t i o n .

in an ex-officio

1384. W h a t are powers of the L B A A ? A n s w e r . T h e " L B A A " shall decide a p p e a l e d cases brought before it within 120 days f r o m the date of receipt of such appeal. In the exercise of its appellate jurisdiction, the Board shall have the power to s u m m o n witnesses, administer oaths, and conduct ocular inspection, take depositions and issue s u b p o e n a and subpoena duces tecum. 4

T h e proceedings of the Board shall be conducted solely for the purpose of ascertaining the truth without necessarily adhering to technical rules applicable i n j u d i c i a l proceedings. 1385. W h a t

is

the

composition

of

the

Assessment Appeals (CBAA)? A n s w e r . The " C B A A " shall be c o m p o s e d of a) Secretary of Finance, as Chairman; b) Secretary of Justice, as Member and

809

Central

Board

of

c) Secretary of Local Government and Community Development as member, all of w h o m shall serve without additional compensation. 1386. W h a t are the powers of the C B A A ? Answer. The Board shall assessment cases decided by s u m m o n witnesses, administer subpoena and subpoena duces

have jurisdiction over appealed the "LBAA". It has the power to oaths, take depositions, and issue tecum.

The decision of the Board shall b e c o m e final and executory after the lapse of 15 days from receipt of its decision by the appellant. Within 15 days, a petition for reconsideration may be filed. The R P T C does not provide for the review of the Board's decision by the S u p r e m e Court. T h u s , the only remedy available for seeking a review by the SC of the decision of the " C B A A " is the special civil action of certiorari. Under the e x p a n d e d jurisdiction of the CTA, decisions of the C B A A m a y n o w be reviewed by the CTA and subsequently to the S u p r e m e Court. (Caltex (Phils.) vs. CBAA, 5 SCRA 247) 1387. W h a t are the remedies of property o w n e r w h o d o e s not agree with the a s s e s s m e n t of his real p r o p e r t y by t h e Assessor? A n s w e r . A n y property o w n e r w h o is not satisfied with the action of the provincial or city assessor in t h e a s s e s s m e n t of his property may file an written a d m i n i s t r a t i v e protest with the local treasurer within thirty (30) d a y s from p a y m e n t of t h e tax with the provincial or city or municipal treasurer w h e r e the property is located w h o shall decide the protest within sixty (60) d a y s from receipt of the protest. Thereafter, he may, within sixty (60) d a y s f r o m date of receipt of the written notice of a s s e s s m e n t appeal to t h e Local Board of A s s e s s m e n t A p p e a l s ( L B A A ) of the province or city, by filing with it or with the municipal treasurer of the municipality w h e r e the property a s s e s s e d is situated w h o is duty b o u n d to transmit it to the "LBAA" a petition under oath stating the g r o u n d s of his a p p e a l and using the form prescribed for the p u r p o s e , together with copies of the tax declarations and s u c h affidavit or d o c u m e n t s submitted in support of the a p p e a l . T h e " L B A A " will decide the a p p e a l within 120 d a y s from the receipt of the a p p e a l . T h e decision r e n d e r e d must be based on substantial evidence presented at the hearing or at least contained

810

in the record or disclosed to the parties or s u c h relevant evidence as a r e a s o n a b l e m i n d might accept as a d e q u a t e to support the c o n c l u s i o n . If the decision of the " L B A A " is adverse to the claim of the taxpayer, t h e n he m a y file an a p p e a l to the Central Board of A s s e s s m e n t A p p e a l ( C B A A ) within thirty (30) d a y s from receipt of t h e decision of the " L B A A " by filing his appeal under oath with the Secretary of the " L B A A " stating therein the g r o u n d s and the reason for the a p p e a l , and attaching thereto any e v i d e n c e pertinent to the c a s e . A copy of t h e a p p e a l should also be furnished the "CBAA", thru the C h a i r m a n . Within t e n (10) d a y s f r o m receipt of the appeal, t h e secretary of t h e " L B A A " c o n c e r n e d shall forward the s a m e and all papers related thereto, to the " C B A A " , through the Chairman thereof. T h e said " C B A A " will decide the c a s e brought on appeal within twelve (12) m o n t h s f r o m date of receipt, which decision shall b e c o m e final a n d executory after the lapse of 15 days from the date of receipt of a copy of t h e decision by the appellant. If the t a x p a y e r is not still satisfied with the decision of the " C B A A " he may, within t h e r e g l a m e n t a r y period of thirty (30) days, file a petition for review with the C T A under Rule 4 3 , R R C . within thirty (30) d a y s f r o m receipt thereof (RA 9 2 8 2 , April 2 3 , 2004) and thereafter file a certiorari proceedings with the S C , as the case may be. 1 3 8 8 . W h a t i s t h e effect o f a n a p p e a l o n t h e p a y m e n t o f real property tax? A n s w e r . A p p e a l s on a s s e s s m e n t s of real property made shall not s u s p e n d the collection of the corresponding realty taxes on the property involved as a s s e s s e d by the provincial or city assessor, without prejudice to subsequent adjustment depending upon the o u t c o m e of the a p p e a l . 4

1389. W h e n are property taxes due and payable? A n s w e r . The real property tax for any year shall attach and b e c o m e due and payable on the first day of January and from the s a m e date said tax and all penalties subsequently accruing thereto shall constitute a lien upon the property subject to such tax. Illustration: If a real property is tax-exempt at the beginning of the year because its use at the time is confined actually, directly, and exclusively to religious, charitable or educational purposes the exemption covers the entire year even assuming that sometime

811

during the year the use of that property ceases to be for said purposes. Likewise, if at the beginning of that year, the property is taxable because at that particular point in time, the use is for a non-exempt purpose, not religious, educational and charitable ("REC"), the taxable status of said property continues for that entire year even if at certain time during the year it is used for " R E C " purposes. Property liens shall be superior to all other liens, mortgages, or encumbrances of any kind whatsoever and shall be enforceable against the property whether in the possession of the delinquent or any subsequent owner or possessor, and shall be extinguished only by the payment of the delinquent taxes and penalties. Illustrations: If a real property is transferred by a non-exempt person to an exempt person after January 1, there is still liability to pay the tax e v e n in the hands of e x e m p t person, the tax having accrued at the time of the transfer. If the transfer is m a d e of an e x e m p t property after the tax date (January 1), the property still remains e x e m p t for that year even in the hands of a n o n - e x e m p t person. (Institucion Teresiana vs. Board of Assessment Appeals, CTA Case No. 1110, April 1, 1963) 1390. M a y real p r o p e r t y t a x e s b e p a i d o n i n s t a l l m e n t ? A n s w e r . At the discretion of the taxpayer, real property taxes may be paid without penalty in four (4) equal installments. 1st on or before M a r c h 3 1 . 2 n d on or before J u n e 30 3rd on or before Sept. 30, a n d 4th o n o r before Dec. 3 1 . 3

Real property taxes paid in full on or before M a r c h 31 shall be given 2 0 % discount.

3

T h e date for the p a y m e n t of any other real property tax without interest shall be prescribed by the s a n g g u n i a n c o n c e r n e d .

3

Payments of real property taxes shall first be applied to prior years' delinquencies, interests, a n d penalties, if any, a n d only

812

after said delinquencies are settled credited for the current period. 1391. Is there tax discounts property tax?

for

m a y tax

advance

payments be

payment

of

real

A n s w e r . If t h e basic real property tax and the additional tax accruing to the S E F are paid in a d v a n c e in accordance with the prescribed s c h e d u l e of payment, the sanggunian concerned may grant a discount not e x c e e d i n g 2 0 % of the annual tax due. 1392. C a n p a y m e n t of real property t a x e s be effected thru the mails? A n s w e r . Remittances of p a y m e n t s sent through mail is allowed either in m o n e y order, c a s h or check covering the tax due from property o w n e r s provided t h e s a m e shall reach the treasurer's office on or before the close of the office hours on the last day for the p a y m e n t of the tax. If t h e receipt thereof is after due date it shall be considered delinquent and subject to the payment of the surcharges or statutory penalty. 1393. W h a t is t h e penalty for failure to pay real property tax within the period provided by law? A n s w e r . T h e taxpayer shall pay a penalty of 2% on the amount of the delinquent tax (installment due and not paid) for each month until the tax shall be fully paid. In no case shall the total penalty e x c e e d 2 4 % of the delinquent tax. 1394. State the restrictions upon the power of the Courts to impeach tax: Answer. a) No court shall entertain any suit assailing the validity of a tax assessed under the R P T C until the taxpayer shall have paid, under protest, the tax assessed against him. b)

No court shall declare any tax invalid by reason of irregularities or informalities in the proceedings of the officers charged with the assessment or collection of taxes or of failure to perform their duties within the specified time for their performance unless such irregularities, informalities, or failure shall have impaired the substantial rights of the taxpayer;

813

c)

No court shall declare any portion of the tax assessed under the provisions of the RPTC invalid except upon the condition that the taxpayer shall pay the just amount of the tax, as determined by the court in the pending proceedings.

1395. C o m p a r i s o n of taxpayer's right to claim tax refund/tax credit under the R P T C . L T C . NIRC a n d the T C C : Answer.

RPTC

LTC

NIRC

TCC

The Code expressly provides that no court shall entertain any suit assailing the validity of a tax assessed until the taxpayer shall have paid, under protest, the tax assessed against him.

The Code provides that any tax or fee paid pursuant to a protested ordinance shall be considered as having been paid under protest until final resolution of the issues raised.

The C o d e does not require protest for claims of tax refund or credit; a suit m a y be maintained in any court for the recovery of any internal revenue taxes or penalty alleged to have been erroneously or illegally collected, provided the doctrine of "Exhaustion" has been complied with.

The Code requires protest. Any taxpayer affected by a ruling or decision of the Collector on duties must first pay the duties determined and within 15 days thereafter, file a written protest setting forth his objections to the ruling in question.

1396. P R O T E S T A T T H E T I M E O F P A Y M E N T I S R E Q U I R E D T O PRESERVE

TAXPAYER'S

RIGHT

TO

CLAIM

TAX

REFUND/CREDIT UNDER THE RPTC. 1397. Is " p a y m e n t u n d e r protest" required if the real property tax w a s paid under a mistaken belief? A n s w e r . Protest is not required to claim a refund or credit w h e r e a taxpayer paid the realty tax under a mistaken belief that it is required by law b e c a u s e p a y m e n t in s u c h c a s e is m a d e through error or mistake, in the honest belief that taxpayer is liable, and therefore could not have b e e n m a d e under protest, but with complete voluntariness.

814

Under t h e principle of solution indebiti a tax paid through error m a y be recovered within a period of six (6) years. * R a m i e Textiles Inc. vs. H o n . Ismael Mathay, Sr., April 30, 1979 1398. Under the R P T C , protest is required before a written c l a i m for r e f u n d of real p r o p e r t y tax m a y be filed. W h a t is the exception to this rule? A n s w e r . P a y m e n t of a t a x p a y e r under mistaken belief or error or that he had no k n o w l e d g e of t h e fact that he is not covered by the imposition m a y ask for t h e refund of s u c h realty tax paid by mistake b e c a u s e he should not be held to suffer loss by his g o o d intention to c o m p l y with w h a t he believes is his legal obligation which such obligation d o e s not really exist. In addition, the g o v e r n m e n t may not enrich itself of the e x p e n s e of t h e taxpayer. 1399. Will

a

loss

or destruction

of property

subject to

real

p r o p e r t y t a x e s e x t i n g u i s h t h e liability t h e r e t o ? A n s w e r . No. Illustration: "X" o w n s 500 s q . m. of land bordering the sea. He has not paid the real property taxes due thereon for 4 years before the property w a s entirely eaten by the sea. X is still liable for the taxes that had already a c c r u e d and b e c o m e delinquent. T h e loss of the object of taxation is not one of the ways by w h i c h realty tax is remitted. 1400. W h a t

would

be

the

basis

of

"just

compensation"

in

c a s e s of g o v e r n m e n t expropriation of real property? A n s w e r . T h e basis for the determination of the just compensation in case of g o v e r n m e n t expropriation shall be the value declared by the owner in his sworn declaration or the assessed value of the s a m e property whichever is lower. 1 4 0 1 . T a x r e f u n d or t a x c r e d i t - The taxpayer may file a written claim for refund or credit for taxes and interest with the provincial or city treasurer within two (2) years from the date the taxpayer is entitled to such reduction or adjustment.

815

1402. What are the duties and responsibilities of the Secretary of Finance in matters of real p r o p e r t y t a x ? Answer. The Secretary of Finance shall exercise direct executive supervision over all assessment and treasury officials and personnel in the local governments. He shall be primarily responsible for the proper, efficient and effective administration of the real property tax, and shall: a)

Evolve a comprehensive system of real property appraisal that will ensure fair and realistic property valuations for taxation purposes;

b)

Establish uniform a s s e s s m e n t methods and procedures that will equalize property values in e a c h local political subdivision;

c)

Ensure that the ad valorem tax on real property shall be just, uniform and equitable;

d)

Adopt the necessary m e a s u r e s that will promote m a x i m u m tax collection efficiency at the local levels;

e)

Provide for the o p t i m u m utilization by the local g o v e r n m e n t s of the proceeds from the real property tax; and

f)

Formulate and adopt policies a n d procedures that will improve technical skills and develop reasonable standards of performance in the local a s s e s s m e n t and treasury services.

1403. W h a t are the President's special p o w e r s in matters of real property t a x a t i o n ? A n s w e r . In the interest of local a u t o n o m y and the general welfare and subject to the conditions and limitations herein prescribed, the President, upon r e c o m m e n d a t i o n of t h e Secretary of Finance, is e m p o w e r e d to take adjustments in the real property tax s y s t e m , as regards a)

The classification of real properties for taxation purposes;

b)

T h e frequency of general revisions of property valuation;

c)

T h e assessment levels or a s s e s s e d values of real properties; and

816

d)

T h e extent of e x e m p t i o n from real property tax and the rates of levy.

1404. Under w h a t conditions m a y the above-described powers?

President exercise the

Answer. a) W h e r e , in the light of e c o n o m i c , social and other relevant c h a n g e s , it b e c o m e s necessary to modify or adjust the classification of real properties, their a s s e s s m e n t levels and/or taxable v a l u e s on t h e basis of new concepts of essentiality and m o d e m a p p r o a c h e s to real property valuations; b)

W h e r e in v i e w of n e w social and e c o n o m i c conditions, it b e c o m e s imperative to c h a n g e real property assessment patterns for taxation purposes.

1405. W h a t are the limitations on the President's taxing power in matters involving real properties? Answer. a)

T h e m a x i m u m rates of levy fixed by the Code may be increased by not more t h a n 2% of the a s s e s s e d value of real property or reduced by not more than 1 % thereof;

b)

For any tax year, the existing a s s e s s m e n t level or levels may be increased or d e c r e a s e d by not more than 3 0 % ;

c)

As m a y be r e c o m m e n d e d by the Secretary of Finance on the basis of c h a n g e s in price levels, the period of general revision of property valuations for taxation purposes may be extended up to five (5) years or reduced to two (2) years.

d)

Before any recommendation is submitted to the President by the Secretary of Finance pursuant to the provisions of the R P T C , a public hearing shall first be held, whenever practicable, w h e r e interested parties shall be afforded a reasonable opportunity to be heard.

817

1406. W h a t are the procedures on the levy of the realty tax by the local S a n g g u n i a n or council? Answer. a) The ordinance fixing the rate of real property tax shall be enacted by the provincial, city or municipal board or council not later that the 15th day of September of the year next proceeding the year the tax shall begin to accrue. b)

Within 5 days after enactment, the board or council secretary shall forward the ordinance to the local chief executive for his approval and signature. If he considers any such ordinance prejudicial to the public welfare, he m a y veto it by signifying to the local board or council concerned his disapproval thereof in writing.

c)

The local board or council may, by a 2/3 of all its m e m b e r s and within 15 days from the date of receipt of a copy of the vetoed ordinance, re-pass the s a m e over the veto, in which case it shall be d e e m e d a p p r o v e d without the local chief executive's approval or signature. If the local chief executive fails to approve or veto the ordinance within 10 days after receipt of a copy thereof, it shall likewise be d e e m e d a p p r o v e d .

d)

The ordinance fixing the rate of real property tax shall remain in full force and effect unless a m e n d e d on or before S e p t e m b e r 15 of the year next preceding the o n e in w h i c h the a m e n d m e n t is to take effect.

1407. Are the government's imprescriptible?

remedies

in

local

taxation

A n s w e r . Both the LTC and the R P T C do not have any provision on prescription of the a s s e s s m e n t and collection of g o v e r n m e n t taxes and other revenues. T h e y are t h u s , imprescriptible, E X C E P T that: a)

T h e LTC does not prohibit the local g o v e r n m e n t from providing for prescription in its tax o r d i n a n c e s , and

b)

Under Sec. 25 of the R P T C , real properties declared for the first time cannot be a s s e s s e d for back taxes for more than 10 years. Sec. 270, of the L G C , provided for the Prescriptive Periods for Collection of realty taxes 818

T h e basic real property tax a n d other tax levied under the L G C shall be collected W I T H I N FIVE (5) Y E A R S from the date they b e c o m e d u e . No action for the collection of the tax whether administrative or judicial shall be instituted after the expiration of s u c h period, E x c e p t i o n : In c a s e of fraud or intent to evade p a y m e n t of the tax, s u c h action for collection m a y be instituted within 10 Y E A R S from t h e discovery of s u c h fraud or intent to evade payment. 1408. W h e n are the prescriptive period interrupted? A n s w e r . T h e period of prescription within w h i c h to collect shall be s u s p e n d e d for t h e time during w h i c h a.

T h e local treasurer is legally prevented from collecting the tax;

b.

T h e o w n e r of the property or t h e person having legal interest therein requests for reinvestigation and executes a waiver in writing before the expiration of t h e period within which to collect; a n d

c.

T h e o w n e r of the property or the person having legal interest therein is out of the country or otherwise cannot be located.

1409. W h a t are the g o v e r n m e n t ' s remedies in the collection of real p r o p e r t y t a x e s ? Answer. a) Administrative remedies 1.

Distraint of personal property of the taxpayer, and/or

2.

Sale of the delinquent real property of the taxpayer itself.

b) Judicial action that may be brought in any court of competent jurisdiction. 1410. W h a t is the p r o c e d u r e on levy of real property to enforce collection of delinquent local t a x e s ? (Sec. 176) Answer. After the expiration of the time required to pay the delinquent tax, fee, or charge, real property may be levied on or before, simultaneously or after the distraint of personal property belonging to the delinquent taxpayer. The provincial, city or municipal treasurers as the case may be shall prepare a duly 819

authenticated certificate showing the name of the taxpayer and the amount of the tax, fee or charge and penalty due from him. Said certificate shall operate with the force of a legal execution throughout the Philippines. Levy shall be effected by writing upon said certificate the description of the property upon which levy is m a d e . At the same time, written notice of the levy shall be mailed to or served upon (a) the assessor and (b) the Registrar of Deeds of the province or city where the property is located w h o shall annotate the levy on the tax declaration and certificate of title of the property respectively and the (c) delinquent taxpayer or if he be absent from the Philippines to (d) his agent or the (e) manager of the business in respect to which the liability arose, or if there be none to (f) the occupant of the property in question. In case the levy on real property is not issued before or simultaneously with the warrant of distraint on personal property and the personal property of the taxpayer is not sufficient to satisfy his delinquency, the provincial, city or municipal treasurer as the case may be shall within thirty (30) d a y s after the execution of the distraint proceed with the levy on the taxpayer's real property. A report on any levy shall within ten (10) d a y s after receipt of the warrant be submitted by the levying officer to the S a n g g u n i a n concerned. Within thirty (30) days after levy, t h e local treasurer shall proceed to publicly advertise for sale or auction the property or a usable portion thereof as m a y be necessary to satisfy the claim and cost of sale; such advertisement shall cover a period of at least thirty (30) days and it shall be effected by posting a notice by the main entrance of the municipal building or city hall, a n d in a public and conspicuous place in the barangay w h e r e the real property is located. T h e advertisement notice shall contain t h e a m o u n t of taxes, penalties and all increments incident thereto, t h e time and place of sale, n a m e of t a x p a y e r against w h o m t h e a m o u n t are levied and a short description of the property to be sold. W h e r e there is no bidder for the real property advertised for sale or if the highest bid is for an a m o u n t insufficient to pay the taxes, fees, or charges, surcharge, interests a n d costs the local treasurer conducting the sale shall p u r c h a s e t h e property in behalf of the local g o v e r n m e n t unit c o n c e r n e d to satisfy the claim (Forfeiture) and within t w o (2) days thereafter shall m a k e a report of his proceedings which shall be reflected u p o n t h e records of his office. It shall be the duty of the Registrar of D e e d s c o n c e r n e d 820

upon registration with his office of any declaration of forfeiture to transfer the title of the forfeited property to the local government unit c o n c e r n e d without the necessity of an order from a competent court. T h e S a n g g u n i a n c o n c e r n e d may, by ordinance duly a p p r o v e d , and u p o n notice of not less t h a n twenty (20) days, sell and dispose of t h e real property acquired by public auction. The proceeds of the sale shall accrue to the general fund of the local g o v e r n m e n t unit c o n c e r n e d . At any time before t h e date fixed for the sale, the taxpayer m a y stay t h e proceedings by paying the taxes, fees, charges, penalties a n d interests. (Right of P r e - e m p t i o n ) If the t a x p a y e r fails to settle the delinquency on time, the sale shall proceed and shall be held either at the main entrance of the provincial, city or municipal building, or on the property to be sold, or at any other place as d e t e r m i n e d by the local treasurer conducting the sale and specified in the notice of sale. Within thirty (30) d a y s after the sale the local treasurer or his deputy shall make a report of t h e sale to t h e s a n g g u n i a n c o n c e r n e d , and which shall form part of his records. After consultation with the sanggunian, the local treasurer shall m a k e and deliver to the purchaser a certificate of sale, s h o w i n g the proceedings of the sale, description of the property sold, n a m e of purchaser, a m o u n t involved. A n y excess in the proceeds of the sale over a n d a b o v e the a m o u n t due shall be turned over to the o w n e r of the property. Within one (1) year f r o m date of forfeiture, the taxpayer or any of his representatives may r e d e e m the property by paying to the local treasurer the full a m o u n t of the taxes inclusive of all increments, costs and e x p e n s e s of the sale, plus 2% interest per month from the date of purchase to the date of redemption. (Right of R e d e m p t i o n ) Such payment shall invalidate the certificate of sale issued to the purchaser and the owner shall b entitled to a certificate of redemption from the provincial, city of municipal treasurer or his deputy. If the property is not redeemed, the ownership thereof shall be fully vested on the local government unit concerned. T h e owner shall not be deprived of the possession of subject property and shall be entitled to the rentals and other income thereof until the expiration of the 1 year allowed for its redemption. In case the owner-taxpayer fails to redeem he property, the local treasurer shall; execute a deed of conveying to the purchaser so much of the property as has been sold, free from liens of any taxes, fees and charges, related surcharge, interests and penalties. 821

The deed shall concisely recite all the proceedings upon which the validity of the sale depends. 1 4 1 1 . W h o m a y exercise the Right of R e d e m p t i o n after sale? The redemption period of one (1) year is counted from the date of registration of the sale of the real property by either of the following 1. The delinquent taxpayer; 2.

His representative (an agent or, in case of taxpayer's death, his executor or administrator;

3.

In the absence of the taxpayer, any person holding a lien or claim over the property such as a mortgagee;

N O T E : The remedies by distraint and levy m a y be repeated as often as necessary until the full a m o u n t d u e , including all e x p e n s e s is collected. 1412. May the

local

government

avail

of criminal

action

to

enforce collection of local a n d real property t a x e s ? A n s w e r . Both the LTC and the R P T C do not provide for collection of taxes and revenues by criminal action. Criminal prosecution and the penalties provided under the t w o (2) c o d e s are persuasive means for collection of taxes. 1413. Briefly d e s c r i b e t h e m a n n e r of protesting special levies imposed by the Sangguniang Bayan? A n s w e r . Protest must be submitted within thirty (30) d a y s after the last publication of the o r d i n a n c e and a list of l a n d o w n e r s shall be included in the z o n e subject to the special levy. If no protest is filed within the prescribed time and conditions, t h e ordinance shall b e c o m e final a n d effective in all points after its approval. Said protest m a y be submitted to the s a n g g u n i a n b a y a n that proposed to impose t h e special levy. T h e protest must be signed by a majority of the l a n d o w n e r s affected, setting forth the address and the a r g u m e n t s against the i m p r o v e m e n t to bee m a d e or the special levy i m p o s e d . If the protest is d e n i e d , the l a n d o w n e r s m a y A P P E A L TO T H E P R O V I N C I A L B O A R D within thirty (30) d a y s f r o m the last 822

publication of the decision giving immediately the municipal council a written notice of a p p e a l . T h e decision of the provincial board on the a p p e a l shall be FINAL. (Sec. 52, R P T C ) 1414. W h a t is the m a n n e r of protesting special levies imposed by the Sangguniang Panlalawigan or Panlungsod? A n s w e r . S a m e as a b o v e . T h e decisions of said Sanggunians b e c o m e final 30 d a y s after the last publication. (Sec. 5 1 , RPTC) 1415. W h a t is the m a n n e r of protesting special levies imposed by the Secretary of Finance? A n s w e r . T h e majority of t h e l a n d o w n e r s affected m a y file a protest against t h e order of the Secretary within 60 days from the date of publication of t h e D e p a r t m e n t Order imposing the special levy. The Secretary's decision adversely affecting the property owners may be a p p e a l e d to the proper court. (Sec. 55, R P T C ) 1416. Comparative

remedies

of taxpayers

involving

different

prescriptive periods: Answer. A.

Q u e s t i o n i n g the tax o r d i n a n c e - under the LTC

Remedies

Prescriptive Periods

Formal protest - filed by taxpayer adversely affected with t h e Sec. of Finance thru the Provindial/City treasurer - on 4 grounds specified under Sec. 4 5 , LTC.

120 days after approval of the ordinance or its initial implementation

Formal query on legality of ordinance filed with the Provincial/City Fiscal on other than the 4 grounds under Sec. 45, LTC.

No time fixed in law for the filing

- appealable to Secretary of Justice thereafter appeal to the Courts.

Within 30 days from receipt of the decision

Action in declaratory

Before liability has attached.

ordinary relief to

court clarify,

for or 823

determine possible liability under a law, ordinance or regulation. B. Questioning the A s s e s s m e n t : No provision on assessment remedies, other than to make payment and claim for refund. Under the R P T C : Administrative r e m e d y - (a) Appeal of Assessor's assessment to Provincial or City Board of A s s e s s m e n t Appeals within 60 days from receipt of a s s e s s m e n t notice, (b) Appeal the decision of the L B A A to the C B A A within 30 days from receipt of the decision. C. C l a i m for R E F U N D / C R E D I T u n d e r t h e L T C :

Prescriptive Period

Remedies Administrative - Claim for refund filed with collecting office based on solutio indebeti

Six (6) years from payment

Judicial - Action for refund in the ordinary courts, after exhaustion of administrative remedies

Six (6) years f r o m p a y m e n t

Judicial - (a) A p p e a l to t h e C T A Division ( R A 9 2 8 2 )

a. 30 d a y s f r o m receipt of decision

(b) Motion for R e c o n . / or Motion for N e w Trial - En B a n c (RA 9282) Judicial - A p p e a l to S u p r e m e Court

b. 15 d a y s f r o m division to En Banc (RA 9282)

15 d a y s f r o m receipt of t h e decision

D. Claim for Refund/credit under the R P T C :

Remedies

Prescriptive Periods

Administrative - P a y m e n t must first be paid under protest (except

824

Upon payment

payment by mistake) Administrative - If protest is m a d e verbally, it must be confirmed in writing within

30 d a y s

Judicial - Claim for refund with collecting office a n d , after e x h a u s t i o n of administrative r e m e d i e s , with t h e ordinary court

6 years f r o m payment

E. Redemption, seizure and other cases under the LTC: Administrative r e m e d y - R e d e m p t i o n of property distraint must be m a d e before sale of the s a m e . F. Redemption, seizure and other cases under the RPTC:

Remedies

Prescriptive Periods

Administrative Redemption personal property under distraint

of

Before sale

Administrative - R e d e m p t i o n of real property sold for tax delinquency

1 year from registration of sale

- and redemption after acquisition by the g o v e r n m e n t for lack of adequate bidder

Before sale

; Administrative - Protest by majority of landowners affected by special municipal levy, filed with Sanggunian Bayan within and appeal Panlalawigan of Sanggunian Bayan

to

Sanggunian decision of

Administrative - Protest by majority of landowners affected by special levy of Province or City

1

30 days from last publication of the ordinance

30 days from last publication of the decision

30 days from last publication

• 825

Prescriptive Periods

Remedies Administrative Protest special levies imposed Secretary of Finance

against by the

Judicial - Action in ordinary court to contest validity of sale due to tax delinquency if claim is that it is void ab initio

60 days from publication Department Order

of

the

Imprescriptible

1417. H o w are the p r o c e e d s of real p r o p e r t y t a x e s a p p o r t i o n e d a m o n g the local g o v e r n m e n t units? Answer. (a) In the case of Provinces 1.

Province - 3 5 % shall accrue to the general f u n d ;

2.

Municipality - 4 0 % to the general fund municipality w h e r e the property is located; and

3.

Barangay - 2 5 % shall a c c r u e to the barangay w h e r e the property is located.

of

the

(b) In the case of cities: 1.

City - 7 0 % shall a c c r u e to the general fund of the city; and

2.

B a r a n g a y s - 3 0 % shall be distributed a m o n g the c o m p o n e n t b a r a n g a y s of the cities w h e r e t h e property is located in the following m a n n e r a)

5 0 % shall a c c r u e property is located;

to

the

b)

5 0 % shall a c c r u e equally barangays of the city.

barangay

to

all

where

the

component

(c) In the case of a municipality within the Metropolitan Manila Area: 1•

Metropolitan Manila Authority - 3 5 % shall accrue to the general fund of the Authority; 826

2.

Municipality - 3 5 % shall accrue to the general fund of t h e municipality w h e r e the property is located;

3.

B a r a n g a y s - 3 0 % shall be distributed a m o n g the c o m p o n e n t b a r a n g a y s of the municipality w h e r e the property is located in the following m a n n e r a) 5 0 % shall accrue to the barangay w h e r e the property is located and b)

5 0 % shall accrue equally to b a r a n g a y s of the municipality.

all

component

(d) T h e share of e a c h b a r a n g a y shall be released without need of any further action, directly to the barangay treasurer on a quarterly basis within 5 d a y s after t h e e n d of e a c h quarter and shall not be subject to a n y lien or hold back for whatever purpose. 1 4 1 8 . VELAYO

DOCTRINE

defined:

A n s w e r . W h e n the sale of property for delinquent tax is made by a person N O T A U T H O R I Z E D by law, t h e sale may be nullified except w h e n the title to the property has passed to a third person, w h o purchased the s a m e in value and in g o o d faith. (Velayo vs. Ordoveza, 102 Phil. 395, Heirs of Mariano V. Tajonera vs. Court of Appeals, March 27, 1981; Reyes vs. IAC, February 28, 1985) 1419. I M P O R T A N T C A S E S INVOLVING

REAL PROPERTY TAX

EXEMPTIONS: City of Baguio vs. Busuego, Sept.

18,

1980

G S I S m a y b e e x e m p t from realty tax under its charter, however if the beneficial use or actual possession thereof is granted for a consideration or otherwise to a taxable person, the property is taxable. Province

of Nueva November, 19,

Ecija 1982

vs.

Imperial

Mining

Co.,

IMC leased from the government mineral land with the right to explore and develop the same. The contract stipulates that IMC shall be liable for realty tax on buildings and other improvements but is silent on the tax on the mineral land itself.

827

IMC, even if only a lessee is liable. The policy of taxing real property is on the basis of actual use even if the user is not the owner. Sec. 234(a) of the RPTC provides that real property owned by the RP, or any of its political subdivisions, and any G O C C (so exempt by its charter) is exempt from tax, this exemption shall not apply to real property, the beneficial use of which has been granted for consideration or otherwise to a taxable person. S S S vs.

City ofBacolod,

115 SCRA 412

SSS is a government agency exercising ministrant or proprietary functions, its properties and assets are exempt from realty taxes because said properties possessed by the SSS although devoted to private or proprietary (providing disability, sickness, death, and old age benefits to non-government employees) are in fact o w n e d by the G o v e r n m e n t . Properties of Government whether exercising purely sovereign, political or constituent functions or only ministrant or proprietary functions are tax exempt. NOTE:

SSS, GSIS, CSC or any bureau o f the G o v e r n m e n t is N O T in the category of G O C C w h i c h is taxable unless e x p r e s s l y e x e m p t in its corporate charter.

NDC vs.

Province ofNueva Ecija,

125 SCRA

752

N D C is neither the G o v e r n m e n t of t h e Republic nor a branch or subdivision thereof but a G O C C that c a n n o t be said to exercise a sovereign function. T h u s , it cannot invoke the exemptions thereof b e c a u s e it is merely an agency for the performance of purely corporate, proprietary or business functions. It is therefore subject to real property taxes.

828

PROBLEM EXERCISES 1420. T h e local g o v e r n m e n t of X province learned that several b u s i n e s s c o m p a n i e s within the locality use pipelines to transport petroleum products to their dealers. M a y the local g o v e r n m e n t i m p o s e t a x e s on the gross receipts on petroleum companies that use said pipelines to transport petroleum to other localities a n d dealers? A n s w e r . In t h e c a s e of First Phil. Industrial Corporation vs. CA, December 29, 1998, T h e S u p r e m e Court held that pipeline operators are in t h e truest s e n s e of the w o r d c o m m o n carriers and are therefore e x e m p t f r o m the gross receipt tax imposed by the local g o v e r n m e n t . T h e r e f o r e , there are two reasons w h y the local imposition should be considered null and void, (a) Under the NIRC, t h e right to impose tax on the gross receipts of a c o m m o n carrier belongs to the national g o v e r n m e n t , and (b) The petroleum c o m p a n i e s that use pipelines are c o m m o n carriers transporting their g o o d s by land as defined under Sec. 133 of the Local Government Code. 1421. X was

a

lucky

installment

for

recipient a

of a

period

of

parcel 20

of

years

land by

sold the

on

local

government. W h e n X took possession of the property he received

a

notice

of

assessment

from

the

provincial

a s s e s s o r i n f o r m i n g h i m that he s h o u l d begin paying real property t a x e s . He p r o t e s t e d c o n t e n d i n g that he is not y e t t h e o w n e r o f s a i d p r o p e r t y b e c a u s e title shall o n l y b e transferred

to

him

upon

full

payment

of the

contract

p r i c e . Is X c o r r e c t ? A n s w e r . In the case of City of Baguio vs. Busuego, the S. C. applied the Doctrine of Usage and held that since the property w a s already being used by a non-exempt taxpayer, it cannot be exempted from real property tax. The beneficial user of said property is liable. 1422. X, a b u s i n e s s m a n by profession, leases from the g o v e r n m e n t a parcel of land that he uses as a w a r e h o u s e a n d parking area. T h e contract w a s for 20 y e a r s . U p o n p o s s e s s i o n of the real property he received an assessment notice from the City Treasurer d e m a n d i n g p a y m e n t of real property taxes. X protested 829

contending that he is not the owner thereof and therefor n o t l i a b l e . Is X c o r r e c t ? Answer. W h e n the beneficial use of a public property is transferred to a private individual said property becomes a taxable property and the person liable is the beneficial user of the said property. 1 4 2 3 . C i t e a t l e a s t f i v e (5) f u n d a m e n t a l p r i n c i p l e s g o v e r n i n g real p r o p e r t y t a x a t i o n t h a t are limitations on t h e t a x i n g p o w e r of the local g o v e r n m e n t s to i m p o s e real property taxes. Answer. a) appraisal of real properties must be based at the current fair marker value, b)

Classification of real property for a s s e s s m e n t must be on the basis of actual use of the real property;

c)

A s s e s s m e n t must be on the basis of uniform classification;

d)

Appraisal and a s s e s s m e n t must be equitable; and

e)

Appraisal, assessment, levy and collection shall not be let to private persons.

1424. X o w n s a big track of land w h e r e his s o n extracts stones, sand, gravel, earth and other quarry resources for sale. T h e provincial g o v e r n m e n t i m p o s e s tax on the extraction of said products. X protested. Is the province correct? A n s w e r . T h e province has no authority to impose taxes on stones, s a n d , gravel, earth and other quarry resources extracted f r o m private lands. (Province of Bulacan vs. CA, 299 SCRA 442 [1998]) 1425. Distinguish a Certificate of R e p u r c h a s e After Sale f r o m a Certificate of Sale: A n s w e r . T h e former is given to the delinquent taxpayer or his assign if he exercised his option to r e d e e m the property sold either to the highest bidder in the public auction, or to the province if there w a s no winning bidder, w h e r e a s , the latter is given to the winning bidder at the public auction or to the province if it decided to

830

purchase the property w h e n there w a s no other bidder or no satisfactory bid. (2003 case) 1426. X, r e c e i v e d a c o p y of t h e latest T a x D e c l a r a t i o n on his real p r o p e r t y f r o m the Office of the A s s e s s o r , X believes that there should be no increase in the assessed market v a l u e o n his realty b e c a u s e f o r t h e last 1 0 y e a r s h e h a s not introduced any additional improvement thereon, the h o u s e c o n s t r u c t e d w i t h i n t h e p r o p e r t y w h i c h h e a n d his family presently occupies is the s a m e house he inherited from this d e c e a s e d mother. W h a t remedies are available to X if the local g o v e r n m e n t e n f o r c e s real property tax collection b a s e d on the latest tax declaration. R e a s o n . A n s w e r . X is still required to pay real property tax under the latest a s s e s s e d market v a l u e of his property as stated in the tax declaration he received. W h e n e v e r the local assessor sends a notice to the o w n e r or lawful possessor of real property of its revised a s s e s s e d value, the property o w n e r w h o does not agree thereto must dispute s u c h a s s e s s m e n t within 60 days from receipt of notice. Thereafter, u p o n receipt of an adverse decision he may file an appeal before the Local Board of A s s e s s m e n t Appeals questioning the taxability and/or increase of the market value of real property. Failure on his part to question such assessment within the reglamentary period provided by law, the local g o v e r n m e n t ' s right to collect b e c o m e s absolute upon the expiration of such period with respect to that property. (1998 case) 1427. The taxpayer (LRT) resisted the assessment on the c a r r i a g e w a y s a n d terminal stations for realty taxes upon t h e t h e o r y that such' real properties are for public use similar in nature to public roads. Is the contention valid? (LRT Case) Answer. T h e court held that it w a s not for public use since only those w h o are riding the LRT use them and that there is no grant of real property tax exemption in the Charter of the LRT was provided. Unlike public roads that are open for use by everyone, the LRT is accessible only to those w h o pay the required fare. It is thus apparent that petitioner does not exist only solely for public service, and that the LRT carriageways and terminal stations are not exclusively for public use. Moreover, the charter of petitioner does not provide for any real estate tax exemption in its favor. Even 831

granting that the national government indeed owns the carriageways and terminal stations, the exemption would not apply because their beneficial use has been granted to petitioner (LTR), a taxable entity. 1428. C a n the local g o v e r n m e n t avail of the r e m e d y of distraint and levy of personal property s u c h as the issuance of warrants of garnishment over bank deposits of erring taxpayers? Answer. Yes. (Meralco vs. Barlis, May 18, 2001) 1429. Distinctions between p r o c e d u r e for refund of real property taxes based on unreasonableness of amounts collected and refund based on solution indebeti: Procedure for tax refund b a s e d on unreasonable collection excessive a s s e s s m e n t of real property taxes 1. Payment under protest at the time of payment or within 30 days thereafter is mandatory 2. Protest filed before the treasurer 3. Treasurer has 60 d a y s f r o m receipt to decide 4. Within 30 days from receipt of treasurer's adverse decision taxpayer may appeal before the LBAA or if the treasurer did not act on the protest within 60 d a y s from receipt of said protest, "T" m a y within 30 days file an appeal with the L B A A

P r o c e d u r e for tax refund b a s e d on solution indebiti - p a y m e n t by mistake 1. P a y m e n t under protest is required

not

2. Claim/application for refund is a d d r e s s to the treasurer 3. Treasurer decides within 60 days f r o m receipt of t h e written claim 4. Treasurer's denial w o u l d bring the case within the original jurisdiction of the R T C , t h e review being t h e initial judicial c o g n i z a n c e of the matter. (Yamane vs. BA Lepanto Condominium. Corp., Oct. 25, 2005)*

5. T h e L B A A has 120 d a y s f r o m receipt of the appeal to decide

5. T h e decision of the R T C is a p p e a l e d to the C T A (division) by w a y of a petition for review. (Rule 42, RRC)

6. Within 30 days from receipt by "T" of the adverse decision of the L B A A appeal to the C B A A

6.The division of the CTA-Division m a y be the subject of a review by t h e C T A - En Banc

832

7. T h e a d v e r s e decision of the C B A A m a y be a p p e a l e d to the C T A (En Banc) within 30 d a y s from receipt of said decision by w a y of petition for review. (Rule 4 3 , R R C )

7. T h e decision of the C T A - En Banc, may be appealed before the SC on pure question of law by w a y of Petition for Review on Certiorari within 15 days from receipt of the a d v e r s e decision.

8. T h e decision of a division of the C T A m a y be subjected to an MR or Motion for N e w Trial with C T A En Banc a n d thereafter an a p p e a l to the SC by m e a n s of Petition for Review on Certiorari on pure questions of law within 15 d a y s from receipt of the C T A ' s En B a n c a d v e r s e decision (Appeal to SC m a y be e x t e n d e d for a period of 30 days) * Sec. 195 of t h e L G C states that the r e m e d y of the taxpayer w h o s e protest is denied by t h e local treasurer is "to appeal with the court of c o m p e t e n t jurisdiction", labeling the said review as an exercise of appellate jurisdiction in not correct b e c a u s e the denial of t h e protest is N O T t h e j u d g m e n t or order of a lower court but a local g o v e r n m e n t official. 1430. D o e s the local g o v e r n m e n t have the p o w e r to impose a franchise

tax

on

a

business

enjoying

a

legislative

franchise? A n s w e r . Y e s . T h e local g o v e r n m e n t may impose a local franchise pursuant to the authority granted by the L G C that provides that, notwithstanding any e x e m p t i o n granted by law, the province/city m a y impose a franchise tax on all businesses enjoying a franchise. There w a s thus an implied repeal by the L G C of PD551 insofar as the latter imposes a 2% tax "in lieu of all taxes and assessments of whatever nature." The L G C did not violate the non-impairment clause of the Constitution, as the former w a s enacted in pursuance of the constitutional policy to ensure autonomy to local government. Likewise, local legislative bodies are granted direct authority by the Constitution to levy taxes. The Constitution also reserves to Congress the right to a m e n d , alter or repeal all franchises when the public interest so requires. But even without such reservation clause, franchise are subject to alterations through a reasonable

833

exercise of police power and the power to tax, both of which cannot be contracted away. (1999 case) 1 4 3 1 . X files a c o m p l a i n t assailing the validity of the tax o r d i n a n c e a n d p r a y i n g f o r a t a x r e f u n d o f its p e r c e i v e d o v e r p a y m e n t s without protest. Will his claim p r o s p e r ? Answer. Yes. X may file a complaint assailing the validity of the ordinance and praying for tax refund of its perceived overpayments without first filing a protest to the payment of taxes due under the ordinance. However, failure of X to interpose the requisite appeal to the Secretary of Justice is FATAL to his complaint for a tax refund. (2003 case) O

W h e n questioning the validity of a tax ordinance, the decision of the Secretary of Justice is mandatory under the Principle of Exhaustion of Administrative R e m e d y .

N O T E : The local tax has to be contra-distinguished from a real property tax which cannot he protested without payment. 1432. X

questions

appropriated market,

the

validity

money

for

of the

an

ordinance

construction

which of

a

has

public

including the validity of c o n t r a c t s e n t e r e d into

by the local g o v e r n m e n t for t h e o c c u p a n c y of stalls in the

said

public

publication

of

market, the

X

argues

ordinance

that

such

there

that

it

unfairly against t h o s e w h o w e r e

interested to

space

opportunity

but

were

deposits for the

not

given

the

market stalls. X's

was

no

operated lease

a

to

make

locus standi t o

bring

the suit w a s q u e s t i o n e d b e c a u s e he is not a party to the contract. Will the suit of X p r o s p e r ? A n s w e r . In a taxpayer's suit, t h e petitioner need not be a party to the contract b e t w e e n the g o v e r n m e n t and a private party to challenge its validity. However, he must clearly establish that such ordinance operated unfairly against t h o s e w h o w e r e not notified. X's unsubstantiated allegation that t h e public w a s not notified does not suffice to o v e r c o m e the p r e s u m p t i o n of regularity in the performance of official functions. T h e general rule for a taxpayer's suit is that: "Any taxpayer may impugn the validity of a tax m e a s u r e or the expenditure of public funds if he has locus standi or standing in court (a personal 834

a n d substantial interest in the case, such that the party has sustained or will sustain direct injury as a result of the challenged act" N O T E : In the recent case of Coconut Oil Refiners Association, Inc. vs. Torres, July 29, 2005, a taxpayer's suit may be allowed to prosper e v e n w h e r e there is no direct injury to the party claiming the right of judicial review w h e r e serious constitutional questions are involved. 1433. C a n t h e local g o v e r n m e n t ( p r o v i n c e a n d / o r city) i m p o s e a b u s i n e s s tax on entities e n j o y i n g a f r a n c h i s e ? A n s w e r . Y e s . T h e Local G o v e r n m e n t C o d e explicitly authorizes the province a n d cities notwithstanding "any e x e m p t i o n granted by any law or other special laws" to impose a tax on businesses enjoying a franchise. 1434. X, a d o m e s t i c c o n d o m i n i u m corporation is e n g a g e d in selling of real p r o p e r t y w i t h i n the city proper; it received a n a s s e s s m e n t f r o m t h e C i t y G o v e r n m e n t o f its u n p a i d local

business taxes.

X contends that

it is

not liable

b e c a u s e the b u s i n e s s of selling real property is e x e m p t f r o m local t a x a t i o n . Is X c o r r e c t ? A n s w e r . X is correct. While the power of the L G U s to impose taxes within their territorial jurisdiction is derived from the Constitution itself, w h i c h recognizes the power of these unit "to create their own resources of revenue and to levy taxes, fees and charges", such authority is subject to t h e guidelines and limitations as the Congress m a y p r o v i d e , ' c o n s i s t e n t with the basic policy of local authority. A m o n g the limitations set by the Congress in the Local G o v e r n m e n t C o d e , is that proviso which generally exempts condominium corporations from local business taxation, irrespective of any local ordinance that seeks to declare otherwise. (2005 case) 1435. T h e President a n d the local g o v e r n m e n t units both exercise the delegated p o w e r of taxation. Can they redelegate such authority? Answer. A delegated power cannot be further delegated.

835

1436. Are properties o w n e d by G O C C s subject to real property taxes? Answer. Yes. In the case of Mactan-Cebu Int'l. Airport Authority, the Supreme Court held that properties owned by G O C C s are subject to real property taxes "unless otherwise provided." The exemption from real property taxes under Sec. 234 of the RPTC specifically states that only real properties o w n e d by the Republic of the Philippines or any of its political subdivisions (local governments) are e x e m p t e d . 1 4 3 7 . A r e p o w e r p l a n t b a r g e s a n d its a c c e s s o r y e q u i p m e n t mounted on the barges subject to real property taxation? ( P r o v i n c e of B a t a n g a s et. al., v s . N a p o c o r , Feb. 16, 2007) Answer. Yes. T h e s e are intended by their nature and object to be immovable properties by destination, being in the nature of machinery and other implements intended by the o w n e r for an industry or work w h i c h may be carried on in a building or a piece of land and which tend directly to meet the needs of said industry or work. Further, subject accessories are m o u n t e d on the barges and attached to gas turbine power plants designated to generate electric power installed at a specific location with a character of permanency. 1438. Is the opinion of the Department of Finance that "power barges

are

government

not

real

thereby

properties"

binding

exempting

the

on

same

the from

local real

property taxation? Answer. No. A n opinion c a n n o t override the power o f taxation especially w h e n the opinion has no leg to stand o n . In several cases, the highest court held that m o v a b l e properties installed at a specific location with a character of p e r m a n e n c y w o u l d be considered real properties for purposes of real property tax in c o n s o n a n c e with the definition of real property under the Civil Code. 1439. "X", a local electric c o m p a n y w a s a s s e s s e d real property taxes on

its s t e e l t o w e r s ,

electric posts, transformers

a n d t r a n s m i s s i o n l i n e s t h a t i t i n s t a l l e d f o r its o p e r a t i o n . "X"

contends

that

the

said

836

properties

are

personal

properties a n d therefore not subject to real property tax Is "X" correct? A n s w e r . T h e C T A en banc held that the subject properties are now included in t h e t e r m machinery provided under Sec. 199 (0) of the L G C . Under the said provision, facilities which are permanently attached to real property that a r e actually, directly and exclusively used to meet the needs of the particular industry, business or activity are c o n s i d e r e d as machineries subject to real property tax. (Cotabato Electric Cooperative vs. CBAA, CTA EB Case No. 377 October 2, 2009) 1440. Is tax declaration or real property tax p a y m e n t s proof of o w n e r s h i p of real p r o p e r t y ? Answer. A tax declaration by itself is not sufficient to prove o w n e r s h i p of real property it m a y serve as sufficient basis for inferring possession and are considered g o o d indicia of possession in t h e concept of an o w n e r a n d p a y m e n t of taxes is not proof of ownership either, it is, at best, an indicium of possession in the concept of o w n e r s h i p b e c a u s e no o n e in his right mind would be paying taxes for a property that is not in his actual or constructive possession. 1 4 4 1 . Give a brief s u m m a r y of the REAL PROPERTY TAXATION:

taxpayer's

remedies

in

Answer. a)

Administrative protest - A taxpayer may file a written protest with the local treasurer within 30 days from payment of the tax with the provincial or city or municipal treasurer where the property is located w h o shall decide the protest within 60 days from receipt of the protest.

b)

A p p e a l to the Local Board of A s s e s s m e n t Appeals - Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city or municipal assessor in the assessment of his property may, within 60 days from the receipt of the written notice of assessment, appeal to the LBAA of the province or city where the property is located by filing a petition under oath in the form prescribed for the purpose, together with copies of tax declarations and such affidavits or documents submitted in support of the appeal. Within 30 days from receipt of the LBAA's adverse decision, dissatisfied property owner can appeal to the Central Board of 837

Assessment Appeals w h o s e decisions is final and executory unless appealed. Within 30 days from receipt of the CBAA's adverse decision and appeal may now be made before the Court of Tax Appeals, under the expanded jurisdiction of the CTA of RA No. 9282, April 23, 2004. C) Tax refund or tax credit - T h e taxpayer may file a written claim for refund or credit for taxes and interest with the provincial or city treasurer within two (2) years from the date the taxpayer is entitled to such reduction or adjustment. 1442. Is the p r e s e n c e of s q u a t t e r s or illegal settlers c o n s i d e r e d in determining real property v a l u a t i o n ? Answer. Their presence is not a factor in determining real property valuation as this would result in different valuation of lands located in the s a m e area, which will result in violation of the fundamental principle that property in the s a m e locality should be appraised uniformly. 1443. W h a t is the basis of just c o m p e n s a t i o n in case a private property is acquired by the government for public use? Answer. T h e basis shall be the current and market value declared by the owner or administrator, or s u c h market value as determined by the assessor, w h i c h e v e r is lower. 1444. H o w are vacant purposes?

lands

classified

a n d a s s e s s e d for tax

Answer. Vacant lands shall be classified, v a l u e d and a s s e s s e d like similar lands in the locality. E x a m p l e - If Lot N o . 1-A and 1-B are undeveloped vacant lots they must be classified and a s s e s s e d as "commercial lots" if the predominant use of t h e lots in the locality is c o m m e r c i a l or if they are located within a c o m m e r c i a l z o n e under the zoning ordinance. 1445. W h e n d o e s the tax on a n e w building c o m m e n c e ? Answer. A building wholly c o m p l e t e d , o r partly c o m p l e t e d but already occupied by t h e owner, will be subject to the real property tax beginning f r o m the year following its c o m p l e t i o n or habitation as evidenced by the Certificate of O c c u p a n c y issued by t h e building official c o n c e r n e d .

838

1446. A r e r o a d s built o n private l a n d s s u b j e c t t o real p r o p e r t y taxes? Answer. Roads taxable w h e n built the g o v e r n m e n t if for their o w n use Phil. 466)

are considered " i m p r o v e m e n t s " and therefore on private lands, or e v e n if the land is o w n e d by the roads are built by individuals or corporations or benefits. (Asiatic Petroleum Co., vs. Llanes, 49

1447. Are machinery and equipment taxable during the period of their non-use? A n s w e r . T h e y shall be taxable only w h e n they are actually, directly and essentially used to meet t h e needs of the particular industry, business or w o r k s . H e n c e , w h e n they are no longer actually used for their purpose by reason of closure or cessation of production, the s a m e should be transferred f r o m the Taxable Roll to the E x e m p t Roll and no longer subject to the payment of real property taxes during t h e period of n o n - u s e . 1448. Is amicable settlement of delinquent taxes and penalties allowed? A n s w e r . Y e s . C o m p r o m i s e settlement is allowed except when there is tax fraud or that the delinquency has already been decided by the Court. Local treasurers are allowed to enter into a compromise agreement with the taxpayers to liquidate delinquent taxes and penalties in installments, which may last up to 36 months, d e p e n d i n g upon the a m o u n t of total delinquencies involved.

839

PART XV

TARIFF AND CUSTOMS LAW The law governing tariff and customs duties is P.D. No. 1464, otherwise known as the Tariff and Customs Code of 1978, which consolidated and codified the tariff and customs laws in the Philippines. It superseded Republic Act No. 1937, the first Tariff and Customs Code, which was approved on June 2, 1957 and b e c a m e effective on July 1, 1957. The former Code w a s substantially a m e n d e d by P.D. No. 34 which took effect 30 days after its promulgation on October 27, 1972, except Section 104 thereof (rates of import duty) which took effect on January 1, 1973. The offices charged with the administration and enforcement of the law is the Tariff C o m m i s s i o n and the Bureau of C u s t o m s . 1 4 4 9 . C i t e t w o (2) c o n s t i t u t i o n a l p r o v i s i o n s a f f e c t i n g t a r i f f : Answer. a)

All appropriation revenue or tariff bills, bills authorizing increase of the public debt, bills of local application, and private bills shall originate exclusively in the H o u s e of Representatives, but t h e S e n a t e m a y propose or concur with a m e n d m e n t s . (Sec 2 4 , Art. V I , 1987 Constitution).

b)

The President shall have t h e p o w e r to veto any particular item or items in an appropriation, r e v e n u e , or tariff bill, but veto shall not affect the item or items to w h i c h he does not object. (Sec. 27(2), Art V I ; 1987 Constitution)

1450. General concept: The Tariff and C u s t o m s C o d e ( T C C ) is divided into t w o books, the first on Tariffs and the s e c o n d on C u s t o m s Duties. 3

It is actually a book of rates.

3

Import duty is different from Import tax. T h e import tax is imposed under the N I R C (in t h e form of V A T , percentage or excise tax), although it m a y be collected by the Bureau of C u s t o m s before the release of the g o o d s , t h e import duty, on the other h a n d , is i m p o s e d under the T C C .

840

O

All articles c o m i n g from or going abroad through the c u s t o m s e v e n if e x e m p t .

have to

pass

O

C u s t o m s duties cover both export and import duties, but the f o r m e r w e r e s u s p e n d e d by E. O. 26 (1986).

1451. C u s t o m s law defined: A n s w e r . T h e t e r m includes not only the provisions of the Tariff and C u s t o m s C o d e but also regulations m a d e pursuant thereto and all other laws and regulations that are subject to enforcement by the Bureau of C u s t o m s or otherwise within its jurisdiction like Bangko Sentral ng Pilipinas' circulars, w h i c h also h a v e the force and effect of law. (Sy vs. CB of the Phils., 4/30/76, Acting Collector of Customs vs. Caluag, 5/24/67) 1452. Distinguish "tariffs" f r o m " c u s t o m s " : A n s w e r . T h e two (2) are often used interchangeably. " T a r i f f d e n o t e s t h e lists or schedules of c o m m o d i t i e s with particular duties or c h a r g e s u p o n e a c h noted, w h e r e a s , "customs" originally denotes all "customary tolls or dues paid by merchants upon commodities on their w a y to a n d f r o m the market. 1453. M o d e r n C u s t o m s Tariffs defined: A n s w e r . A systematic a r r a n g e m e n t of customs duties levied on goods w h e n they cross the border of a political unit. It is an official list or schedule setting forth the several customs duties to be imposed on imports, exports of g o o d s in transit. 1454. W h e n are tariff a n d c u s t o m s laws a p p l i e d ? Answer. Only after importation has begun but before importation is terminated. 1455. W h o

has

the

power

to

subject

public

premises

to

customs jurisdiction? Answer. If necessary or desirable for customs purposes, the President of the Philippines, by executive order, may declare, subject to customs jurisdiction, any public wharf, landing place, street or land in any port of entry that are previously under the jurisdiction of the Bureau of Customs.

841

The President, upon the recommendation of the Commissioner and the Secretary of Finance, has the power to open and close a port of entry. 1456. W h a t is the F L E X I B L E T A R I F F C L A U S E ? (Sec. 401 of the TCC) Answer. The flexibility clause authorizes the President to: a)

increase, reduce or remove existing protective rates of import duty, including the necessary change in classification of goods or articles imported. (The existing rates may be increased or decreased to any level, one or several stages, but in no case shall the increased rate of import duty be higher than m a x i m u m of 1 0 0 % ad valorem;

b)

to establish import quota or ban imports of any commodity, as may be necessary; and

c)

to impose an additional duty on all imports not exceeding 1 0 % ad v a l o r e m , w h e n e v e r necessary; provided that upon period of investigations by the Tariff C o m m i s s i o n a n d r e c o m m e n d a t i o n of the N E D A , the President m a y c a u s e a gradual reduction of protection levels granted under the Tariff and C u s t o m s C o d e . Under the 1987 Constitution, t h e President is allowed to change the tariff rates in view of public interests, only while Congress is not in s e s s i o n . H o w e v e r , there must be public hearing. Further, he can modify t h e f o r m of duty but not reclassify an item from duty-free to dutiable, a n d vice-versa.

Sec. 401 (Flexibility Tariff Clause) T h e President is e m p o w e r e d to (a) increase, reduce or r e m o v e existing protective rates of import duty, provided that any increase in import duty shall not e x c e e d 1 0 0 % ad valorem, (b) to establish import quota or to ban imports of any c o m m o d i t y , and (c) to impose an additional duty on all imports not exceeding 1 0 % ad valorem.

842

S e c . 402 (Reciprocal T r a d e a g r e e m e n t provision) The President is allowed to modify duties and other import restrictions on products and other items with w h i c h the Philippines had entered into a trade a g r e e m e n t . This section is called the reciprocal ' trade a g r e e m e n t provision authorizing the President to enter into trade a g r e e m e n t with foreign countries on a reciprocal basis without need of submitting the results of such trade

T h e items subject to the increase or d e c r e a s e of import duties a n d the establishment of t h e import quota need not be subject of a trade agreement.

agreement ratification.

to

the

Congress

1457. W h y is it called the "Flexibility clause? A n s w e r . B e c a u s e it m a k e s the c u s t o m s tariff responsive or readily adjustable to the c h a n g i n g e c o n o m i c conditions within and outside the country. 1458. W h a t are the requisites in the exercise of the president's p o w e r of t a x a t i o n u n d e r the flexibility c l a u s e of the Tariff and Customs Code? Answer. a) T h e increase, reduction or r e m o v a l of existing protective tariffs or rates of duty are necessary in the interest of national e c o n o m y , general welfare and/or national defense; b)

T h e r e must be prior investigation by the Tariff C o m m i s s i o n and r e c o m m e n d a t i o n by the N E D A ;

c)

T h e President m a y reduce the existing rates of import duty by not lower than the basic rate of 1 0 % ad v a l o r e m ;

d)

A n y other impositions issued by the President under said section shall take effect only 30 d a y s after promulgation except in the imposition of additional duty not exceeding 1 0 % ad valorem that shall take effect at the discretion of the President.

1459. W h e n does the Bureau of Customs acquire exclusive jurisdiction over imported goods for purposes of enforcement of customs laws? Answer. The Bureau of Customs acquires exclusive jurisdiction over imported goods, for purposes of enforcement of the customs laws, from the m o m e n t the goods are actually in its possession or control, even if no warrant of seizure or detention had previously been issued by the Collector in connection with the seizure and forfeiture proceedings. (Ponce Enrile vs. Vinuya, 37 SCRA 381)

843

for

1460. W h e n does importation begin and w h e n does it end? Answer. Importation begins when the carrying vessel or aircraft enters the jurisdiction of the Philippines with the intention to unload therein. (General Travel Service, Ltd. vs. David, 18 SCRA 59, Viduya vs. Berdiago, 73 SCRA 553) Importation is deemed terminated/ended (a) upon payment of the duties, taxes and other charges due upon the articles, or secured to be paid, at a port of entry and (b) the legal permit for withdrawal shall have been granted, or in case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the customs. T h e duties, taxes and other fees must be paid in full. Thus, Importation begins from the time the carrying vessel or aircraft enters the Philippine territorial jurisdiction with the intention to unload therein and ends at the time the g o o d s are released or withdrawn from the c u s t o m s w a r e h o u s e u p o n payment of the customs duties or with legal permit to withdraw. (Viduya vs. Berdiago, 73 SCRA 553) In case said articles are free of duties, taxes and other charges, until they have legally left the jurisdiction of the C u s t o m s . Illustration: To import g o o d s , T secures a loan from Bank X, to cover a letter of credit (L/C) in favor of the exporter-seller. He is then m a d e to e x e c u t e a trust receipt by t h e bank for goods imported, conditioned on his obligation to apply the proceeds of the sale of the imported g o o d s to the bank loan. If the goods are in a bonded w a r e h o u s e , t h e c u s t o m s duties are paid as the g o o d s are w i t h d r a w n . S u p p o s e T w i t h d r a w s the g o o d s c o v e r e d by t h e trust receipt, sells t h e m , but does not turn over t h e p r o c e e d s . T h e n he is liable for estafa under the R P C a n d for a civil c a s e of collection for which the bank may apply a preliminary a t t a c h m e n t d u e to the fraud of T. T h e bank, as holder of the trust receipt, cannot attach the g o o d s on the w a r e h o u s e so as to prevent the importer f r o m further withdrawing the g o o d s in fraud of t h e bank, since t h e g o o d s are in the custody of the c u s t o m s . However, it can pay taxes and duties and withdraw the goods itself. A n y a t t a c h m e n t of the g o o d s while in the custody of the c u s t o m s is void. 844

No. 2. Six years ago, X bought an imported van from "Y". X used falsified d o c u m e n t s in effecting the release of the motor vehicle thus enabling him to pay lower import t a x e s . Acting u p o n report of its intelligence, the c u s t o m s agents seized the car while parked at the parking area of S M while X w a s then w a t c h i n g a movie inside the c i n e m a . Thereafter, an a s s e s s m e n t in the a m o u n t of Php 850K by w a y of unpaid c u s t o m s duties, surcharge and interest were slapped on X. X w e n t to the court questioning the seizure of his car since no warrant a p p e a r e d to have b e e n issued for the said imported motor vehicle. That he having purchased the s a m e six years a g o f r o m Y as e v i d e n c e d by a D e e d of Sale. He further argues that the right of the g o v e r n m e n t to collect said taxes has already prescribed. Rule on the validity of the seizure and X's contention. A n s w e r . T h e seizure is valid. T h e c u s t o m s agents have authority over seizure and forfeiture c a s e s involving imported goods. The regular courts do not have jurisdiction to take cognizance of cases involving seizure of imported g o o d s . T h e r e is no need of warrant under the given facts. In fact, t h e seizure is not unconstitutional b e c a u s e it w a s m a d e for purposes of enforcing collection of unpaid t a x e s . Notably, t h e collection of taxes is never unreasonable. X's s u b m i s s i o n that the right to collect c u s t o m s duties has prescribed is not correct b e c a u s e importation had not e n d e d . For articles subject to c u s t o m s duties, importation ends w h e n the regular permit for withdrawal shall have b e e n issued and the corresponding taxes thereto fully paid. Considering that falsified d o c u m e n t s were used importation w a s not yet e n d e d . T h u s , prescription period to collect has not toiled. 1 4 6 1 . Doctrine of " H O T P U R S U I T " in c u s t o m s law defined: A n s w e r . This refers to a situation w h e r e a vessel becomes subject to seizure by reason of an act done in the Philippine waters in violation of the tariff and customs laws, a pursuit of such vessel began within the jurisdictional waters may continue beyond the maritime zone, and the vessel may be seized on the high seas. N O T E : This Doctrine is applicable to imported article that may be subject to seizure for violation of the tariff and customs laws when the s a m e is being transported in the Philippines by land, water or air, and jurisdiction may be exerted over it at any place aforesaid as may be necessary for the due enforcement of the law.

845

1462. M a y articles arriving into our c o u n t r y be a l l o w e d to be exported? A n s w e r . The general rule is that articles arriving in our country are not permitted to be exported unless it shall appear by the bill of lading, invoice, manifest or other satisfactory evidence that the articles are destined for transshipment. 1463. W h a t are the functions of the Bureau of C u s t o m s ? A n s w e r . Powers and Jurisdiction: Primary

functions

-

a)

To assess and collect customs lawful duties, fees and charges, fines and penalties related to importation accruing under the tariff and c u s t o m s law;

b)

To prevent and suppress smuggling and other frauds in violation of the Tariff and C u s t o m s C o d e .

Secondary

functions

-

(a) To supervise and control entrance a n d clearance of vessels and aircraft in foreign c o m m e r c e ; (b) To enforce tariff and c u s t o m s laws and all other laws, rules and regulations relating to tariff a n d c u s t o m s administrations; (c) T h e supervision a n d control over t h e handling of foreign mails arriving in t h e Philippines, for the purpose of the collection of the lawful duty on the dutiable articles thus imported and the prevention of s m u g g l i n g through the m e d i u m of s u c h mails; (d) Supervision and control over all import and export cargoes, landed or stored in piers, airports, terminal facilities, including container yards and freight stations, for t h e protection of g o v e r n m e n t r e v e n u e ; and (e) Exclusive original jurisdiction on seizure a n d forfeiture cases under the tariff a n d c u s t o m s laws.

846

NOTE: O

T h e general supervision, control, and regulation of every matter that pertains to port facilities, port operations or port works are transferred and vested with the Philippine Ports Authority. (P D. No. 857)

O

Under Rep. Act No. 7 6 5 0 , a p p r o v e d on April 6, 1993, m a n d a t o r y requirement of ten percent (10%) examination of imported g o o d s w a s abolished. It repeals Section 1404 and a m e n d s Section 1401 and 1403 of the Tariff and Customs C o d e of t h e Philippines, as a m e n d e d . T h e Act addresses the problem of the u n d u e delay in the clearance and release of imported g o o d s . T o w a r d this e n d , it provides six (6) instances w h e n a n d w h e r e regular physical examination may b e e n f o r c e d , outside of w h i c h the Bureau of C u s t o m s is given the discretion w h i c h s h i p m e n t s can be released without physical e x a m i n a t i o n , s u c h as: a)

the g o v e r n m e n t surveyor's seal on the container has been t a m p e r e d with or b r o k e n or the container s h o w s signs of having b e e n o p e n e d or having its identity c h a n g e d .

b)

the container is leaking or d a m a g e d ;

c)

the shipment is covered by alert/hold order issued pursuant to existing orders;

d)

the number, weight, and nature of packages indicated in t h e c u s t o m s entry declaration and supporting documents differ from that in the manifest;

e)

the importers disagree with the findings as contained in the g o v e r n m e n t surveyor's report, or

f)

the articles are imported through airfreight where the Commissioner or Collector has knowledge that there is a variance between the declared and true quantity, measurement, weight, and tariff classification.

1464. W h o are the chief officials of the B u r e a u of C u s t o m s ? Answer. a) T h e Commissioner of Customs w h o is appointed by the President of the Philippines upon the recommendation of the Secretary of Finance. 847

b)

Five (5) Deputy Commissioners who are appointed by President of the Philippines upon the recommendation of the Commissioner of Customs.

1 4 6 5 . W h a t a r e t h e f i v e (5) n e w l y c r e a t e d o f f i c e s o f t h e B u r e a u of Customs headed by the five (5) Deputy Commissioners? Answer. a)

Customs Revenue Collection Monitoring Group

b)

Customs A s s e s s m e n t and Operation Coordinating Group.

c)

Intelligence and Enforcement Group

d)

Internal Administrative G r o u p

e)

M a n a g e m e n t Information System and Technology G r o u p .

1466. W h a t

is

the

territorial

jurisdiction

of

the

Bureau

of

Customs? A n s w e r . The Bureau of C u s t o m s has the right of supervision and police authority over all seas within the jurisdiction of the Philippines and over all coasts, ports, airports, harbors, bays, rivers and inland waters w h e t h e r navigable f r o m t h e sea or not. T h e Bureau exercises special surveillance to protect customs revenue and prevent s m u g g l i n g . This is c o n d u c t e d over the coast, beginning w h e n a vessel or aircraft enters Philippine territory until the articles have passed through t h e c u s t o m h o u s e after paying the duties or being given legal permit. W h e n a vessel b e c o m e s subject to seizure by reason of an act d o n e in Philippine waters in violation of the tariff and c u s t o m s laws, a pursuit of such vessel b e g u n within the jurisdictional w a t e r s may continue beyond the maritime z o n e , and t h e vessel m a y be seized on the high sea. (Right of Pursuit or Extra-territorial Jurisdiction) {llluh Asaoli vs. Commissioner, 2/28/69) To the end of preventing s m u g g l i n g , it is the right of a custom official to seize g o o d s that are suspected to have b e e n introduced into the country in violation of the revenue laws not only in his o w n district but also in any other district than his o w n .

848

T h u s , should a vessel loaded with untaxed motorcycles and electronics products leave the port of L i n g a y e n , Pangasinan bound to S t o . D o m i n g o , llocos Sur, t h e Collector of C u s t o m s of llocos Sur has the power to a p p r e h e n d the culprits responsible for smuggling and seize the untaxed goods. (Vierneza vs. Commissioner of Customs, 7/30/68) T h e B u r e a u of C u s t o m s shall, for c u s t o m s purposes, have exclusive control, direction and m a n a g e m e n t of c u s t o m h o u s e , w a r e h o u s e s , offices, w h a r v e s and other premises in the respective ports of entry in all c a s e s without prejudice to the general police powers of t h e City or municipality w h e r e i n such premises are situated. (Rigor vs. Rosales, October 23, 1982) 1467. How

does

the

customs

officials

exercise

jurisdiction

o v e r all f o r e i g n v e s s e l s c o m i n g into P h i l i p p i n e territorial sea? A n s w e r . T h e c u s t o m s officials exercise jurisdiction over foreign vessels by posting at least a c u s t o m s inspector and a customs guard on board e a c h s u c h vessel as long as it is anchored within Philippines territorial waters. 1468. Under the T C C w h o is the "Secretary" or "Department Head" referred to? A n s w e r . T h e Secretary of Finance. 1469. What

are

the

tax

cases

arising

under the

Tariff and

Customs Code? Answer. a) Protest cases or those w h e r e the importer questions the legality of the a s s e s s m e n t and collection of customs duties and other fees or charges (except the fixing of fine in seizure cases). T h e issue involved in these cases generally relates to the correctness of the appraisal and/or classification of imported goods; and b)

Seizure cases or those wherein goods or merchandise are ordered seized by customs authorities and made subject to the penalty of forfeiture or fine for violation of the customs law. Here, the issue involved is the legality of the importation of goods either because the goods are in themselves prohibited importations or their importations is effected contrary to law. 849

1 4 7 0 . I s t h e B u r e a u o f C u s t o m s s u b j e c t t o s u i t i n its o p e r a t i o n of the arrastre service? Answer. No. The Bureau of Customs, acting as part of t h e machinery of the National Government in the operation of the arrastre service, pursuant to express legislative mandate and as a necessary incident of its prime government function, is immune from suit, there being no statute to the contrary. (Mobil Phils. Exploration, Inc. vs. Customs Arrastre Service, 18 SCRA 1120) 1471. W h a t are the functions of the Tariff C o m m i s s i o n ? Answer. The Commission shall investigate: a)

the administration of and the fiscal and industrial effects of the country's tariff and customs laws;

b)

the relations between the rates of duty on raw materials and finished or partly finished products;

c)

the effects of ad valorem and specific duties and of c o m p o u n d specific and ad v a l o r e m duty;

d)

all questions relative to the a r r a n g e m e n t of schedules and classifications of articles under t h e tariff law;

e)

the tariff relations b e t w e e n t h e countries, c o m m e r c i a l treaties, etc.

f)

the v o l u m e of importation's c o m p a r e d with domestic production and c o n s u m p t i o n ;

g)

conditions, c a u s e s , a n d effects relating to foreign industries with those of the Philippines;

h)

in general, to investigate t h e operation of c u s t o m s and tariff laws and to submit report of its investigations; a n d

i)

the nature, composition and classification of articles for customs revenue a n d other related purposes w h i c h shall be furnished to the N E D A , Board of Investments, B a n g k o Sentral ng Pilipinas and the Secretary of Finance.

850

Philippines

and

foreign

competition

of

1472. W h o is authorized to m a k e ruling on classification of imported article not classified in the Tariff and C u s t o m s C o d e ?

commodity specifically

A n s w e r T h e Tariff C o m m i s s i o n u p o n the request by any interested party. A n y ruling, however, of the Tariff C o m m i s s i o n shall be binding u p o n t h e B u r e a u of C u s t o m s unless the Secretary of Finance rules otherwise. 1473. W h a t is the extent of the c u s t o m s officer's power to s e a r c h , seize a n d arrest u n d e r t h e tariff a n d c u s t o m s law? A n s w e r . C u s t o m s officials and a g e n t s can search any building or other places e x c e p t d w e l l i n g h o u s e s (specially if the articles involved are s u b j e c t to excise tax) and seize any discovered c o n t r a b a n d w h e n there are reasonable g r o u n d s to believe that they are stored a n d f o u n d in said place, to enforce the T C C , even without a search warrant. O

A dwelling h o u s e is o n e used for residence. However, a storage place or w a r e h o u s e does not b e c o m e a dwelling just b e c a u s e a w a t c h m a n lives in the place or his family stays there.

O

T h e seizure of g o o d s concealed to avoid the duties on them is not e m b r a c e d within the prohibition of this constitutional guarantee. (Chia vs. Collector, 26 September 1989,People vs. Hope, 17 November 1980;Viduya vs. Collector, 73 SCRA 553

O

This in effect is an exception to the constitutional guarantee against searches and seizures without warrants issued by a j u d g e u p o n probable cause, since historically, in the U.S. and England, such a search w a s excepted.

O

Only proper parties in interest can invoke the constitutional right against unlawful search and seizure.

3

Customs officials may seize vessels, aircrafts, cargoes, goods and animals w h e n subject to forfeiture or fine. (Pads vs. Pamaran, 56 SCRA 16, Nasiad vs. CTA, 61 SCRA 238; Papa vs. Mago, 22 SCRA 857; People vs. Lo Ho, January 21, 1991)

851

1474. What are the rule-making p o w e r s of the C o m m i s s i o n e r of Customs? Answer. a) The Commissioner shall, subject to the approval of the Secretary of Finance, promulgate all rules and regulations necessary to enforce the provisions of the Tariff and Customs Code. b)

He shall also cause the preparation and publication of a Customs Manual covering up-to-date rules and regulations and decisions of the Bureau of C u s t o m s .

c)

He has the power to designate any government official as customs inspector at coastwise port w h e r e no customs official or employee is regularly assigned. This designation of national, provincial or municipal official shall be m a d e with the consent of the proper Department Head of the official so designated. In addition to the regular functions of t h e C o m m i s s i o n e r of C u s t o m s , he shall submit an annual report to the President of the Philippines, matters related to: 1.

Quantity and value of the articles imported into the Philippines, and the corresponding c u s t o m s duties, taxes and other charges a s s e s s e d and collected on imported articles itemized in a c c o r d a n c e with the tariff headings and s u b h e a d i n g s as appearing in the liquidated c u s t o m s entries as provided by law.

2.

Percentage collection of the peso v a l u e of imports;

3.

Quantity and value of conditionally free importations.

4.

C u s t o m s valuation over and a b o v e letters of credit o p e n e d ;

5.

Quantity a n d value of tax-free imports;

6.

Quantity and value of articles exported f r o m the Philippines as well as the taxes and other c h a r g e s a s s e s s e d and collected on t h e m for t h e preceding year.

852

1475. W h a t are the supervisory authority of the Commissioner of Customs and the Secretary of Finance? Answer. a) In cases involving a s s e s s m e n t of duties - If in any case involving the a s s e s s m e n t of duties, the Collector renders a decision it shall automatically be elevated to, and reviewed by the C o m m i s s i o n e r ; and if the Collector's decision would be affirmed by the C o m m i s s i o n e r , s u c h decision shall be automatically elevated to, and finally reviewed by the Secretary of Finance. However, if within 30 d a y s f r o m receipt of the record of the case the C o m m i s s i o n e r or by the Secretary of Finance, as the c a s e m a y b e , no decision is rendered by either of t h e m , the decision under review shall b e c o m e final and executory. A n y party aggrieved by either the decision of the C o m m i s s i o n e r or of the Secretary of Finance may appeal to the C T A within 30 d a y s f r o m receipt of a copy of such decision. Except as provided a b o v e , the supervisory authority of the Secretary of Finance over t h e Bureau of C u s t o m s does not extend to the administrative review of the ruling of the C o m m i s s i o n e r in matters a p p e a l e d to the CTA. b)

in seizure cases - Supervisory authority may be exercised by the C o m m i s s i o n e r while the case is pending in the Office of the Collector of C u s t o m s a n d before the decision of the Collector b e c o m e s final. (Sampaguita Shoe and Slipper Factory vs. Commissioner of Customs, 102 Phil. 350, Mon vs. Jacinto, 93 Phil. 1093)

1476. May

the

legality

Commissioner of

conditions

an

of

importation

prescribed

by

Customs or

law

determine

ascertain for

its

the

whether

the

importation

has

been complied with? A n s w e r . Under the Tariff and C u s t o m s Code, the Commissioner of Customs has jurisdiction to determine the legality of an importation or ascertain whether the conditions prescribed by law for an importation have been complied with. (Commr. of Customs vs. Cloribel, 20 SCRA 183) 1477. May the Commissioner of C u s t o m s order the seizure of u n t a x e d g o o d s w i t h o u t being liable for usurpation of judicial functions?

853

Answer. The Commissioner of Customs may order seizure of untaxed goods without being liable for usurpation of judicial function. (Pads vs. Pamaran, 56 SCRA 16) 1478. W h o are conferred police authority to effect searches, seizures a n d arrest u n d e r t h e c u s t o m s a n d tariff l a w s ? Answer. a) Officials of the Bureau of Customs, district collectors, deputy collectors, police officers, agents, inspectors and guards. b)

Officers of the Philippine navy and other m e m b e r s of the A r m e d Forces and national law enforcement agencies when authorized by the Commissioner.

c)

Officials of the BIR on all cases falling within the regular performance of their duties, w h e n the payment of internal revenue taxes is involved.

d)

Officers generally e m p o w e r e d by law to effect arrests, and execute processes of courts w h e n acting under the direction of the Collector.

The a b o v e do not need a warrant to m a k e searches, seizures and arrests, owing to the e x p r e s s e d m a n d a t e and authority granted to them in the performance of their functions as provided under the Tariff and C u s t o m s C o d e . 1479. Where such authority m a y be exercised? Answer. It may be exercised at any place within the jurisdiction of the Bureau of C u s t o m s . 1480. W h a t particular powers police authority in the Customs Laws?

may be exercised under such e n f o r c e m e n t of the Tariff and

Answer. a)

He may require the assistance of any police officer.

b)

He may enter and s e a r c h any enclosure.

c)

He may search vessel or aircraft and conveyed therein.

854

persons or articles

d)

He m a y search vehicles, beasts and persons

e)

He m a y s e a r c h persons arriving f r o m foreign countries.

The search of a dwelling house in Customs Law mav be effected only upon warrant issued bv a judge of the court or such other responsible officers as maybe authorized by law. 1 4 8 1 . W h o h a s the authority to designate airport of entry for civil aircraft arriving in t h e P h i l i p p i n e s ? A n s w e r . T h e Secretary of Finance u p o n the r e c o m m e n d a t i o n of t h e C o m m i s s i o n e r of C u s t o m s and the Director of the Civil Aeronautics Administration. 1482. W h a t are the rules regarding arrivals of aircrafts in the Philippines f r o m any foreign port or place? A n s w e r . They a r e required to m a k e their first landing International Airport of Entry except in the following cases -

at

a)

E m e r g e n c y or forced landing.

b)

W h e n permission to land e l s e w h e r e other than international airport of entry is first obtained f r o m the Commissioner.

1483. On the Collector of Customs: 9

T h e Collector of C u s t o m s has discretionary authority to REMIT the a s s e s s m e n t and collection of duties, taxes and other charges w h e n the aggregate a m o u n t of the duties, taxes and other charges is less than Php 10.00.

O

T h e Collector m a y dispense with the seizure of articles for violation of the tariff customs laws if the value of articles to be seized is less than Php 10.00 E X C E P T , if the article is prohibited or in violation of the tariff and customs laws appears to be intentional or habitual.

3

The Collector of Customs has rule-making power pursuant to Sec. 711 of the T C C , which provides that he may exercise such power of prescribing local administrative regulations provided they are not inconsistent with law or the general bureau regulations and must be subject to the approval of the Commissioner of Customs. 855

O

The Deputy Collector shall temporarily discharge the duties of the Collector of Customs in case the latter is absent, disabled, or vacancy of his office.

3

Where no deputy collector is available, any official to serve in such contingency maybe designated in writing by the Collector from his own force.

3

The District Collector, Deputy Collector and other customs officials acting in such capacities are required to keep true, correct and permanent record of their official transactions and to submit the s a m e to the inspection of authorized officials at all time, and to turn over all records and official papers to their successor or other authorized official.

3

Decision of the Collector of C u s t o m s is not appealable to the Court of Tax Appeals. T h e s a m e m a y be appealed to the Commissioner of C u s t o m s . (Seneres vs. Frias, 39 SCRA 533, Collector of Customs vs. Torres, 45 SCRA 272)

1484. W h a t are the duties of the Collector over importation of articles? Answer. a) He shall cause customhouse.

the

entry

of all

imported

articles

at the

b)

He shall cause all such articles to be appraised and classified.

c)

He shall c a u s e all a s s e s s m e n t and collection of the duties, taxes and other charges d u e on t h e imported articles.

d)

He shall hold possession of all imported articles u p o n which duties, taxes and other c h a r g e s have not b e e n paid or secured to be paid, and shall dispose of t h e s a m e in a c c o r d a n c e with law.

1485. W h a t is the duty of the Collector in so far as dutiable value of articles entering his port of responsibility is concerned? A n s w e r . Upon the written application of t h e o w n e r or agent of imported goods, the Collector shall furnish any importer, the latest information in his possession as to the dutiable value of articles entered at his port. T h e information is given only if the Collector is

856

satisfied that the importer acted in g o o d faith and unable to obtain proper information as to the dutiable value of the subject articles. T h e information given by the Collector is in no sense an appraisal or binding u p o n the Collector's action on appraisal. 1486. Matters that a Collector is required to immediately report to the C o m m i s s i o n e r under the Tariff C o d e : Answer. a) Prospective or newly b e g u n litigations concerning his district relating to the c u s t o m s service. b)

All transactions in the port and district that shall be contained in a regular monthly report in such f o r m and detail as may be required by the C o m m i s s i o n e r of C u s t o m s .

1 4 8 7 . A r e all i m p o r t e d a r t i c l e s s u b j e c t t o c u s t o m s d u t y ? A n s w e r . All imported articles, w h e n imported from any foreign country into the Philippines, are subject to duty upon each importation, e v e n t h o u g h previously exported f r o m the Philippines, e x c e p t as otherwise provided in the Tariff and C u s t o m s C o d e or in other laws. 1488. W h a t articles are under the jurisdiction of the T C C : Answer. a) All articles subject to duty, or b)

Prohibited from being imported (Prohibited importation); or

c)

Conditionally-free from tariff and c u s t o m s duties (conditionallyfree importation); and

d)

Free from tariff and customs duties (duty-free) Imported goods must be entered in a customhouse at their port of entry otherwise they shall be considered as contraband and the importer is liable for smuggling. (Sec. 1 0 1 , TCC)

857

1489. Distinguish absolutely free conditionally free importation: Answer. Absolutely Free Importation Articles exempt from duty without any condition.

importation

from

Conditionally Free Importation ~~ Articles exempt from duty only uporT compliance with the formalities prescribed or with the regulations promulgated in connection with the importation.

1490. W h a t is the effect of violation of circulars

in case of

importation of articles not in the prohibited importation list? Answer. While goods imported in violation of the circulars may not be considered "merchandise of prohibited importation", they nevertheless fall within the other category of merchandise imported "contrary to law", because regulations issued pursuant to "customs laws" form part thereof, so that violation of the said regulations can properly be regarded as c o m i n g within the purview of law. (F. Sare Enterprises vs. Commissioner of Customs, 29 SCRA 112.) 1491. W h a t are the articles of prohibited importations? Answer. Contrabands - Articles exportation.

o f prohibited

importation

a)

Dynamite, a m m u n i t i o n , explosive, firearms except w h e n authorized by law; (absolute)

b)

Written or printed article advocating or inciting treason, rebellion, subversion, insurrection or sedition against the Government, or forcible resistance to any law of the Philippines; (absolute)

c)

O b s c e n e or immoral articles or objects; (absolute)

d)

Drugs or substances preventing producing unlawful abortion;

e)

Gambling outfits or paraphernalia; (qualified)

f)

Lottery and s w e e p s t a k e s tickets except if authorized by our Government; 858

human

and

or

weapons,

conception

or

g)

Articles manufactured holly or partially of g o l d , silver, etc. not s h o w i n g their actual fineness;

h)

Adulterated or misbranded foods or drugs;

i)

O p i u m , marijuana a n d similar drugs or narcotics or synthetic drugs declared habit forming or preparation thereof unless authorized by law; (absolutely, but if for medical purposes, then qualified)

j)

O p i u m pipes and part thereof; and

k)

All other articles, importation of w h i c h is prohibited by law.

N O T E : Prohibited importations are subject to forfeiture whether the importation is direct or indirect such as w h e n the shipper and t h e c o n s i g n e e are o n e a n d t h e s a m e p e r s o n . (Ute Paterok vs. Bu. of Customs, 193 SCRA 132) O

U n d e r RA 1125, c a s e s involving forfeiture of articles of prohibited

importation are N O T cognizable by the CTA

b e c a u s e t h e s e c a s e s d o not i n v o l v e liability for c u s t o m s duties

or other

money

charges.

However,

under Sec.

2 4 0 2 o f t h e T C C , w h i c h w a s e n a c t e d t h r e e (3) y e a r s a f t e r RA 1125, it expressly confers upon the C T A jurisdiction over appeals in seizure cases. Thus, there seems to be no doubt as to the jurisdiction of said appellate court over such cases. 1492. W h a t

is

the

extent

of

the

phrase

"merchandise

of

prohibited importation? ' A n s w e r . T h e term "merchandise of prohibited exportation" use in the Administrative C o d e is broad to e m b r a c e not only those already declared prohibited at the time of its adoption but also goods, commodities or articles that may be the subject of activities undertaken in violation of subsequent laws. (Geotina vs. CTA, 40 SCRA 362) 1493. W h a t articles are free of import duties? A n s w e r . The Code enumerates the articles that shall be exempt from the payment of import duties upon compliance with the formalities prescribed in, or with the regulations prescribed by the 859

Commissioner of Customs with the approval of the Secretary of Finance, such as: a)

Animals and plants for experimental, scientific, breeding and national defense purposes;

b)

Aquatic products gathered by Philippine vessels;

c)

Samples of commodities of small quantity; Physician's samples not for sale;

d)

Articles necessary for the take-off and landing of aircrafts as well as for safe navigation of vessels;

e)

Articles for repair;

f)

Medals, badges and caps bestowed as trophies or prizes;

g)

Articles used for public expositions;

h)

Historical and technical books under certain conditions;

i)

Personal effects of returning residents previously exported from the Philippines, or bought abroad and brought into the country within 90 d a y s before or after arrival;

j)

Personal effects of tourist n e e d e d by their comfort; (Cars are not personal effects)

k)

T h o s e granted to international institutions or agencies, associations or organizations entitled to e x e m p t i o n pursuant to treaties, a g r e e m e n t s or special laws; (e.g. A D B officials can bring cars tax free, so long as not sold locally, if sold locally, the import tax will be i m p o s e d ) .

I)

Articles brought into the country for p r o c e s s i n g , but to be ree x p o r t e d ; (e.g. Export Processing Z o n e )

profession

or

m) T h o s e granted to g o v e r n m e n t agencies, instrumentalities or G O C C with existing contracts, a g r e e m e n t s or obligations (requiring such e x e m p t i o n ) with foreign countries; n)

T h o s e granted by the President u p o n the r e c o m m e n d a t i o n of N E D A in the interest of national e c o n o m i c d e v e l o p m e n t ;

o)

Bibles,

missals,

prayer

books, 860

Koran,

ahadith

and

other

religious b o o k s of similar nature and h y m n a l a n d h y m n s for religious uses.

extracts

therefrom,

1494. W h e n shall imported articles be subject to the regular physical examination under the customs law? Answer. a) W h e n the g o v e r n m e n t surveyor's seal on the container has b e e n t a m p e r e d with or broken or the container shows signs of having b e e n o p e n e d or having its identity c h a n g e d . b)

W h e n t h e container is leaking or d a m a g e d .

c)

W h e n t h e n u m b e r entry declaration and supporting documents differ f r o m that in t h e manifest.

d)

W h e n the s h i p m e n t is covered by alert hold order issued pursuant to existing orders.

e)

W h e n the importer disagrees with the findings as contained in t h e g o v e r n m e n t surveyor's report, or

f)

W h e n t h e articles are imported through airfreight where the C o m m i s s i o n e r of C u s t o m s or the Collector of Customs has k n o w l e d g e that there is a variance between the declared and true quantity, m e a s u r e m e n t , weight and tariff classification.

1495. T w o

kind of liquidation of duties

under the Tariff and

Customs Code? Answer. a) Tentative liquidation - It is subject to future and final readjustment and settlement within a period of six (6) months from date of tentative liquidation. b)

Final liquidation - W h e n articles have been entered and passed free of duty or final adjustments of duties made with subsequent delivery, such entry and passage free of duty or settlement of duties will, after the expiration of one (1) year from the date of final payment of duties, in the absence of fraud or protest be final and conclusive upon all parties.

861

1496. How is liquidation of duties in c u s t o m s law effected? Answer. If the Collector shall approve the returns of the appraiser and the report of the weights, gauge or quantity, the liquidation shall be made on the face of the entry showing the particulars thereof, initialed by the customs assessor, approved by the Chief Customs Assessor, and recorded in the record of liquidation. 1497. W h o are the o w n e r s of i m p o r t e d articles? Answer. All articles imported into the Philippines shall be held t o be the property of the: a)

person to w h o m the s a m e are c o n s i g n e d ; and

b)

the holder of a bill of lading duly indorsed by the consignee therein n a m e d , or if consigned to order, by the consignor, shall be d e e m e d the consignee thereof. the underwriters of a b a n d o n e d articles and

c) d)

the salvors of articles saved f r o m a w r e c k at sea, along a coast or any area of the Philippines m a y be regarded as the consignees.

1498. To w h o m TCC?

is "Person"

referring to for purposes of the

Answer. a) An individual, or b) A corporation or c o m p a n y , or c) A partnership, or d) An association or any other kind of organization. 1499. May the imported goods be allowed delivery to another person upon order of the importer? Answer. Yes. T h e importer o n record m a y authorize delivery to another person by writing u p o n the f a c e of the w a r e h o u s e withdrawal entry his orders to that effect. The delivery of the article to another person does not relieve the importer and his c a s h deposit, irrevocable domestic letter of 862

credit, bank g u a r a n t e e or b o n d from liability for the payment of duties, taxes a n d other charges due t h e r e o n . U N L E S S , the person to w h o m delivery w a s authorized a s s u m e s such liability by c o m p l y i n g with the requirements provided under the Tariff and Customs Code. 1500. W h a t is t h e n a t u r e of t h e liability of i m p o r t e r for c u s t o m s duties, fees and charges? A n s w e r . Unless otherwise relieved by laws and/or regulations, the liability for duties, t a x e s , f e e s and other charges attaching on importation constitutes a personal debt d u e from the importer to the g o v e r n m e n t that can be discharged only by payment in full of said duties a n d c h a r g e s . It also constitutes a lien upon the articles imported w h i c h m a y be enforced while s u c h articles are in custody or subject to the control of t h e g o v e r n m e n t . T h e liability of the importer for c u s t o m s duties is considered a personal debt to the g o v e r n m e n t unless relieved by laws or regulations. This liability shall be fully extinguished upon full p a y m e n t of all duties, t a x e s , fees and other charges legally accruing to the importation. 1 5 0 1 . Export tariff d e f i n e d : A n s w e r . It is the duty i m p o s e d for bringing out goods from the territory of the Philippines. At present, by virtue of E. O. No. 26 (1986), all export taxes, except on logs have been suspended. 1 5 0 2 . I m p o r t tariff d e f i n e d ? A n s w e r . It is imposed on articles imported from a foreign country, even though previously exported from the Philippines, unless e x e m p t e d by law. (Viduya vs. Berdiago, 73 SCRA 553) 1503. W h a t are the different kinds/classifications of customs duties? Answer. As to determination of amount, customs duties may be: A)

Ordinary or regular which are imposed and collected merely as a source of revenue, namely: 1.

Ad valorem - the duty is based on the market value or price of the imported article. 863

The imported articles are appraised by appraisers of the port w h o shall be responsible to the Collector of such port for the correct appraisal of the articles imported into the Philippines. (Commr. vs. Procter & Gamble, Jan. 11, 1989, Commr. vs. CTA, 21 May 1988) 2.

3.

4.

Specific - the duty is based on the weight, head, number or volume or some standard of measurement of the imported article. (Commr. vs. Delgado Shipping, 184 SCRA 579) P.D. 34 drastically a m e n d e d the Tariff and Customs Code and it now provides for percentage on imported articles, ad valorem. Alternating duties - are those imposed on the basis of either the weight or volume or the value of the imported articles (specific or ad valorem), whichever is higher. C o m p o u n d c u s t o m s duties are those w h i c h are imposed based on both the weight and v o l u m e a n d the value of the imported articles.

As to dutiable articles, c u s t o m s duties m a y be: B) Special duties consisting of: 1.

D u m p i n g duties - w h i c h are i m p o s e d in addition to regular duties in order to offset any d i s a d v a n t a g e to local industry brought about by exportation to the Philippines of items at a price less than its fair market v a l u e ; T h e duty is equal to the difference b e t w e e n the actual purchase price a n d the fair v a l u e of the article as determined in the d u m p i n g decision of t h e Secretary of Finance, (now Secretary of T r a d e a n d Industry). T h e imposition of d u m p i n g duty is d e t e r m i n e d by the Secretary of Finance u p o n prior investigation by the Tariff Commission.

2.

Countervailing duty - is o n e d e s i g n e d to offset any foreign subsidy granted to g o o d s exported to t h e Philippines to the prejudice of our local industries; T h e duty is equal to the ascertained or estimated a m o u n t of the bounty or subsidy given. T h e Secretary of 864

Finance (now Secretary of Agriculture) investigation and report of the Tariff d e t e r m i n e s the countervailing duty.

upon prior Commission

3. Marking duty (5%) - w h i c h is an additional duty imposed for improper marking of imported articles and their containers, for t h e purpose of preventing deception of consumers. T h e purpose is to prevent deception of customers and t h e rate is 5% ad v a l o r e m . T h e articles will be d e e m e d a b a n d o n e d u p o n failure to mark t h e m within 30 days from notice. 4.

Discriminatory or retaliatory duty - is one which is imposed by t h e President under Sec. 304 of the Tariff and Customs C o d e not in e x c e s s of 1 0 0 % of existing rates, designed to offset a n y foreign discrimination against our local c o m m e r c e , it is an addition to regular c u s t o m s duties. In c a s e of c o n t i n u e d discrimination the articles coming f r o m such foreign country m a y be b a n n e d .

5.

Duty - i m p o s e d under the flexible tariff clause Section 401 of t h e Tariff a n d C u s t o m s C o d e .

under

In the interest of national e c o n o m y , general welfare and/or national security, and subject to the limitations herein prescribed, the President, upon the r e c o m m e n d a t i o n of N E D A , is hereby e m p o w e r e d a) to increase, reduce or r e m o v e existing protective rates of import duty; ' b) to establish import guota or to ban imports of any commodity, as may be necessary; and c)

to impose an additional duty exceeding 1 0 % ad valorem.

865

on

all

imports

not

1504. Distinctions importation: Answer. Dumping Duty Imposed upon foreign goods with value lower than their F M V to t h e detriment of local products

Nature

Amount or Rate

Imposing authority

Difference between the actual price and the normal value of the article Special Committee on Anti-Dumping ( C o m p o s e d of the Sec. of Finance as Chairman; M e m b e r s : Sec. of Department of Trade & industry and either the Sec. of Agriculture if article in question is agri. products or the Sec. of Labor if non-agri.

1505. Briefly d i s c u s s taxes/duties:

among the

different special

Countervailing Duty Imposed upon foreign goods enjoying subsidy thus allowing t h e m to sell at lower prices to the detriment of local products similarly situated

Marking Duty Imposed upon those not properly marked as to place of origin of the goods

Equivalent to the bounty, subsidy or subvention

5% valorem articles

Secretary Finance

Commissioner of C u s t o m s

the

of

procedures

in

the

ad of

levies

Discriminatory^ Duty Imposed uporT goods coming from countries that discriminate against Philippine Products.

A n y amount noT exceeding 100% as valorem of the subject articles

President of the Philippines

imposition

Answer. a) Declaration by the importer of the importation, m a d e in: 866

on

of

1) Import entry - if c o m m e r c i a l quantity 2) Informal Import Entry - if articles have a dutiable value of P h p 500 or less, or if g o o d s are personal effects for personal use. b) Examination of g o o d s c) A p p r a i s a l : 1) If ad v a l o r e m - valuation 2) If specific - just weight, m e a s u r e or count d) Classification e)

A s s e s s m e n t o f taxes

f) Liquidation of import entry - p a y m e n t of tax 1) Final liquidation 2) Provisional liquidation - liability not ascertained but must be liquidated in six (6) months. 1506. How are customs duties paid? Answer. C u s t o m s duties are payable upon withdrawal from the c u s t o m h o u s e and based on import entries prepared, whether formal or informal by: a) Tentative liquidation subject to readjustment; and b) Final liquidation. If proper protest is filed and found meritorious, the entry may be ordered re-liquidated by the Collector of Customs. 1507. W h a t is the effective rate or rates of import duty: Answer. Imported articles shall be subject t o the rate or rates of import duty existing at the time of entry, or withdrawal from the warehouse, in the Philippines, for consumption.

867

On articles abandoned or forfeited to or seized by the Government, and then sold at public auction, the rates of duty and tariff imposed on the date of the auction shall apply provided that duty based on the weight, volume and quantity of articles shall be levied and collected on the weight, volume and quantity at the time of their entry into the warehouse or at the date of abandonment, forfeiture and/or seizure. The value and prices of imported articles in foreign currency of the Philippines shall be converted into the currency of the Philippines at the current rate of e x c h a n g e or value specified or published, from time to time, by the Bangko Sentral ng Pilipinas of the Philippines. (CIR vs. Tanjuatco, December 27, 1980) The basis of dutiable value is the fair market value of the goods. 1508. What other charges or fees are payable under the T C C ? Answer. a)

Harbor fee - it is payable by the o w n e r or operator of a vessel for entrance into or departure f r o m a port of entry in the Philippines. Rationale for the imposition of harbor fees: A vessel ordinarily enters a harbor a n d lays anchor or moors in a port to load, or unload or both a n d in doing so, the vessel derives benefits from port facilities maintained by the G o v e r n m e n t , hence, they are m a d e to contribute a share in said G o v e r n m e n t undertaking by p a y m e n t of berthing charges a n d harbor f e e s .

b) Wharfage due - w h i c h is a s s e s s e d against t h e cargo of a vessel e n g a g e d in foreign trade b a s e d on t h e quantity, weight or m e a s u r e received and/or d i s c h a r g e d by s u c h v e s s e l ; 1.

the owner, c o n s i g n e e or agent of the article is the one liable to pay the c h a r g e a b o v e ;

2.

wharfage dues are payable w h e t h e r or not the wharf used in unloading is privately o w n e d or o w n e d by the G o v e r n m e n t , such d u e s being a s s e s s e d against the cargo.

3.

it partakes of the nature of a tax that is collected by the 868

G o v e r n m e n t to support its operation of the customs service. (Associated Sugar, Inc. et. al., vs. Commissioner of Customs, 25 November, 1982)

How are exemptions from wharfage dues construed? A n s w e r . Considering that w h a r f a g e dues are specifically allotted by law for the special Port W o r k s Fund and that e x e m p t i o n s are regarded as in derogation of sovereign authority and of c o m m o n right a n d are construed in strictissimi juris against the person or entity claiming e x e m p t i o n , the e x e m p t i o n of Caltex for c u s t o m s duties is construed not to include e x e m p t i o n from w h a r f a g e dues. (Phil. Iron Mines, Inc. vs. Commissioner of Customs, 30 SCRA 60, Victorias Milling Co. Inc., vs. Auditor General, 116 Phil. 1139) c)

Berthing c h a r g e - a s s e s s e d against a vessel for mooring or berthing at the pier, wharf, etc., at any part of the Philippines; the m o m e n t a vessel has c o m e within any slip, channel, basin, river or canal under the jurisdiction of any port in the Philippines, it b e c o m e s subject to berthing or mooring charges. T h e o w n e r or operator of the vessel pays the charge above. N O T E : T h e g o v e r n m e n t ' s right to collect berthing charges is not planted u p o n the condition that the pier be publicly o w n e d , likewise m e r c h a n d i s e imported or exported loaded in/from a private wharf m a y still be covered by wharfage dues. (Luzon Stevedoring Corporation vs. CTA, 18 SCRA 436, Procter & Gamble, PMC vs. Commissioner of Customs, 19 SCRA 883)

d)

Storage c h a r g e - a s s e s s e d on articles for storage in customs cargo sheds and w a r e h o u s e s of the government; Storage charge Defined: It is the amount which the owner, consignee, or agent of either article or baggage has to pay for the temporary handling, storage and custody of the imported or exported article or the baggage of the passenger.

e)

Arrastre charge - which the owner of article or baggage has to pay for the handling, receiving and custody of such imported or exported article;

869

Arrastre

charge

defined:

It is the amount which the owner, consignee, or agent of either article or baggage has to pay for the handling, receiving and custody of the imported or exported article or the baggage of the passenger. f)

Tonnage due - paid by the owner or operator of a vessel engaged in foreign trade coming to the Philippines from a foreign port or going to foreign port from the Philippines, based on the net tonnage of the vessel or weight of the article discharged or laden. Tonnage

dues

defined:

It is the a m o u n t paid by the owner agent, operator or master of a vessel e n g a g e d in foreign trade coming to the Philippines based on the net t o n n a g e of the vessel or weight of the articles discharged or laden. g)

Other fees and c h a r g e s - charged and collected for services rendered and d o c u m e n t a t i o n issued by the Bureau of C u s t o m s . Examples: 1. Certificate of Philippine registry 2. Coastwise license 3. Others

1 5 0 9 . D r a w b a c k d e f i n e d - It is a d e v i c e w h e r e b y g o o d s affected by taxes are re-exported as if they are not taxed at all. It refers to duties or taxes paid back or remitted by the G o v e r n m e n t on the exportation of that on w h i c h they w e r e levied. Under the T C C , d r a w b a c k s also refer to refund of duties on imported fuel used for p r o p u l s i o n of v e s s e l s . 1510. Prescription under the T C C : A n s w e r . T h e T C C does not e x p r e s s any general statute of limitation, it provided, however, that " w h e n articles have entered and passed free of duty or final adjustment of duties m a d e with subsequent delivery, such entry and p a s s a g e free of duty or settlement of duties will after the expiration of o n e (1) year, from the date of final payment of duties, in the a b s e n t of fraud or protest, be final and conclusive u p o n all parties. This limitation does not apply to liquidations that are tentative. 870

H e n c e , o n e (1) year after final liquidation, the matter can no longer be r e o p e n e d except only in two cases: 1. protest is m a d e meanwhile 2. taxpayer is guilty of fraud N O T E : If the tax is paid in installments, the liquidation is deemed final for the purpose of c o m p u t i n g the prescriptive period from t h e last installment. [Ramos vs. Pamaran, 60 SCRA 327) N O T E : T h e Tariff a n d C u s t o m s C o d e , unlike the N L R C , does not provide for any statute of limitations on penal offenses c o m m i t t e d under it, in such and other cases, the prescriptive periods prescribed for the violation of penal statutes in general. T h e periods vary d e p e n d i n g on the penalty imposed by law. 1511. What

are

the

penalties

in

case

of

violation

of

the

provisions of the T C C ? Answer. a) If g o o d s have b e e n forfeited for violation of the Tariff and C u s t o m s C o d e , t h e importer thereof m a y still be held criminally liable; b)

G o o d s imported without license as required by the circulars of the B a n g k o Sentral ng Pilipinas may be forfeited under the Tariff and C u s t o m s C o d e ; Importations m a d e without the necessary import license and the release certificates issued by the Bangko Sentral Ng Pilipinas or its authorized agent bank in the prescribed form falls within the class of merchandise of prohibited importation or merchandise the importation of which is effected contrary to law, thus, the Commissioner of Customs may seize and order forfeiture. (P. Sare Enterprises vs. Commissioner of Customs, 29 SCRA 112)

c)

Undervalued goods can be forfeited;

d)

Conviction of the importer does not preclude valid imposition of administrative fines; N o t e : The imposition of administrative fine is not subject to protest. 871

e) Forfeiture may be waived by the Collector of Customs w h o may instead impose a fine; f)

The imposition of dumping duty by the Commissioner of Customs is appealable to the Court of Tax Appeals;

g) Administrative penalties under the Tariff and Customs Code consist of surcharges, fines and forfeitures. 1 5 1 2 . S m u g g l i n g d e f i n e d - It is an act of any person w h o shall fraudulently import or bring into the Philippines, or assist in so doing, any article, contrary to law, or shall receive, conceal, buy, sell or in any manner facilitate the transportation, concealment, or sale of such article after importation, knowing the s a m e to have been imported contrary to law. Under Republic Act 5173, smuggling or prevent smuggling Coastguard.

the main duty to suppress is lodged with the Philippine

1513. W h e n is s m u g g l i n g c o m m i t t e d ? Answer. It is committed w h e n a person (a) fraudulently imports or brings into the Philippines or assists in transporting or bringing into the Philippines any article contrary to law, or (b) receives, conceals, buys, sells or in any m a n n e r facilitates the transportation, concealment or sale of such articles after importation knowing the s a m e to have been imported contrary to law. (Rodriguez vs. CA) 1514. Foreign Port defined: A n s w e r . A port or place outside the jurisdiction of the Philippines. 1515. Principal Port of Entry defined: A n s w e r . W h i c h is the chief a n d p e r m a n e n t port of entry of the collection district wherein it is situated and is the p e r m a n e n t station of the Collector of such port. Sub-port of Entry - It is a port under the administrative jurisdiction of the Collector of the Principal Port of Entry of t h e District.

872

1516.

Port of entry defined: A n s w e r . It is a domestic port o p e n to both foreign and coastwise trade. It shall include "airport of entry". This term shall refer to both Entry

point

of imported

articles:

All imported articles or g o o d s w h e t h e r subject to duty or otherwise, c o m i n g into the Philippines shall be entered through a c u s t o m h o u s e at the port of entry. T h e C o m m i s s i o n e r of C u s t o m s has the authority to change t h e limits of a collection district u p o n the approval of the Secretary of Finance. 1517. Coastwise ports defined: A n s w e r . T h e s e are d o m e s t i c ports as are o p e n to coastwise trade only, w h i c h include all ports, harbors and places not ports of entry. 1518. Cargo manifest defined: A n s w e r . Is a d o c u m e n t required by law specifying the cargoes on broad a v e s s e l , their marks, n u m b e r s , quantity and description of the packages and the n a m e s of the consignees thereof. It shall include the port of departure and t h e port of delivery. This cargo manifest is required in coastwise trade for cargo and passengers transported f r o m one place or port in the Philippines to another only w h e n o n e or both of such places is a port of entry. However, this cargo manifest is not required for cargo and passengers transported from a coastwise port to another coastwise port because neither of the aforesaid ports is a port of entry. O

T h e general rule is that after entry of vessel no cargo manifest thereof shall be changed or altered E X C E P T , in the following cases1.

By a m e n d m e n t by the master, consignee or agent thereof, under oath and attached to the original manifest.

2.

W h e n the invoice and/or entry covering an importation shall not have been received and recorded in the Office of the Appraiser. 873

5

No amendment of a cargo manifest shall be allowed when the preceding invoice and/or entry shall have been received and recorded in the Office of the Appraiser, E X C E P T when it is obvious that a clerical error or any discrepancy has been committed in the preparation of the manifest without any fraudulent intent, discovery of which would not have been made until after examination of the importation has been completed.

Z>

If the cargo manifest is originally written in a language other than the official language of the Philippines, the s a m e and each copy thereof shall be a c c o m p a n i e d by a translation into the official language of the Philippines, i.e. in Filipino and until otherwise provided by law, in English.

1 5 1 9 . D i s t i n c t i o n s b e t w e e n a c a r g o m a n i f e s t a n d bill o f l a d i n g : Answer. C a r g o Manifest It is a declaration of the entire cargo The object of a manifest is to facilitate the labors of the customs authorities and to prevent the unlawful entry of goods into the country. O

Bill of L a d i n g It is a declaration of a specific part of the cargo This is prepared as a matter of business convenience based exclusively on a contract and d e s i g n e d to protect the importer or consignee.

This is likewise applicable to cargo manifest of aircraft w h i c h shall not be c h a n g e d or altered after entry of t h e aircraft into Philippine territorial jurisdiction, E X C E P T 1.

By a m e n d m e n t by the p i l o t - i n - c o m m a n d or authorized agent thereof under oath and attached to the original manifest.

2.

W h e n the invoice and/or entry covering an importation shall not have been received and recorded in t h e Office of the Appraiser. O n c e the cargo manifest shall h a v e b e e n received and recorded in the said office, no a m e n d m e n t shall be allowed E X C E P T w h e n a clerical error or any discrepancy has been committed in the preparation of the manifest without any fraudulent intent, discovery of w h i c h could not have b e e n made until after e x a m i n a t i o n of the importation has b e e n c o m p l e t e d .

874

1520. Transit cargo defined: A n s w e r . It is an article at any port from another port or place noted in the carrier's manifest and destined for transshipment to another local port or to a foreign port. 1521. W h o are authorized customs law?

to

make

import

entry

under

the

Answer. a) T h e importer as a holder of the bill of lading. b)

A duly licensed c u s t o m s broker w h e n so authorized by the holder of the bill of lading.

c)

An attorney-in-fact as e m p o w e r e d by the holder of the bill of lading. S h o u l d the import entry be coursed thru (b) and (c) a b o v e , the importer shall himself be required to declare under oath and under the penalties of falsification or perjury that the declarations and statements contained in the entry are true and correct. S u c h statement under oath by the importer shall be a prima facie evidence of his knowledge and consent thereto should the importation be found unlawful.

1522. What

is

the

rule

regarding

description

of articles

in

import entry? A n s w e r . All imported articles must be described in sufficient detail to enable t h e m to be identified both for tariff classification and statistical purposes. 1523. W h a t is the m e a n i n g of "entry" in the Tariff C o d e ? Answer. It has a triple meaning a)

the documents filed at the customs house,

b)

the submission and acceptance of the documents, and

c)

the procedure of passing goods through the customs house.

875

1524. C u s t o m s ' requirement as to the entry d o c u m e n t s : Answer. Under the relevant provisions if the T C C , both the Import Entry Declaration (IED) and the Import Entry and Internal Revenue Declaration (IEIRD) should be filed within 30 days from the date of discharge of the last package from the vessel or aircraft, otherwise, the Bureau of Customs will d e e m the imported goods impliedly abandoned. 1525. Within what period s h o u l d imported articles be entered and claimed under customs law? Answer. The imported articles shall be entered within thirty (30) days that is non-extendible, from the date of discharge of the last package from the vessel or aircraft, and shall be claimed within fifteen (15) days that is also non-extendible f r o m the date of posting of the notice to claim in conspicuous places in the Bureau of Customs. 1526. " D i s c h a r g e of the last p a c k a g e " d e f i n e d : Answer. It is the completion of the unloading of the shipment from the international carrier in the case of direct discharge or from the domestic carrier in case of a transshipped cargo. 1527. W h a t is t h e effect of failure to file an entry of i m p o r t e d articles within 30 d a y s as prescribed by the c u s t o m s law? A n s w e r . T h e articles shall be d e e m e d a b a n d o n e d and shall be subject to sale. 1 5 2 8 . D i s t i n g u i s h t h e t w o (2) k i n d s o f i m p o r t e n t r y ? Answer Formal Entry This is used to clear from customs custody commercial shipments and the f o r m itself is filled out by the importer himself or his broker.

Informal Entry It is used to clear from customs custody b a g g a g e a c c o m p a n i e d by p a s s e n g e r s , s h i p m e n t s of parcels through the mails and through the international airport with a dutiable value of Php 2K or less, a n d it is filled out by the c u s t o m s e x a m i n e r himself for the o w n e r or a d d r e s s e e of the parcel. 876

1529. E x a m p l e s of importations that are cleared on an informal entry: Answer. a) Articles of c o m m e r c i a l nature intended for sale, barter or hire, the dutiable value of w h i c h is P h p 10,000.00. b)

Personal and household effects, and

c)

Articles not in c o m m e r c i a l quantity imported in passenger's b a g g a g e , mail or otherwise for personal use.

1530. W h a t importations are not subject to formal or informal entry? Answer. a) T h o s e intended for official use of foreign embassies, legation and other a g e n c i e s of foreign g o v e r n m e n t ; provided the Principle of Reciprocity is applicable. b)

T h o s e imported for personal use or family use of the members a n d attaches' of foreign e m b a s s i e s , legations, consular officers and other representatives of foreign government; provided the Principle of Reciprocity is recognized.

This privilege m a y be granted only upon specific instructions of the Secretary of Finance in e a c h instance that will be issued only upon request of the D e p a r t m e n t of Foreign Affairs. 1 5 3 1 . Split entry defined: A n s w e r . This happens w h e n import entries of articles covered by one bill of lading are m a d e simultaneously for both consumption and w a r e h o u s i n g . 1532. Pratique defined: Answer. This is a certificate issued by the Bureau of Quarantine to a vessel coming from a foreign port or place outside of the Philippines before such vessel is permitted to make entry.

877

1533. Coastwise trade defined: Answer. In the case of Commissioner of Customs vs. Borres, 1056 Phil. 625, it was maintained that "coastwise trade" and "inter-island trade" are not only confined to carriage for hire of passengers and/or merchandise on board vessels between ports and places in the Philippines. They shall also include vessels engaged in deep sea fishing which carry their catch to a port to sell. 1534. W h a t is the duty of vessels e n g a g e d u p o n arrival in the Philippines?

in foreign trade

Answer. Vessels e n g a g e d in foreign trade are obliged to report and enter at Ports of Entry only, E X C E P T as otherwise specially allowed. O

W a r vessel belonging to a foreign g o v e r n m e n t is not required to report and enters upon arrival in the Philippines pursuant to international comity unless they are also e n g a g e d in the transportation of articles in the w a y of trade.

3

The general rule on boarding or leaving a vessel is that - No person is allowed to board or leave a vessel e n g a g e d in foreign trade upon arrival at a port of entry without permission of the customs official in charge E X C E P T the pilot, c o n s u l , quarantine official, c u s t o m s official or other duly authorized persons.

1535. What is the prohibition i m p o s e d against any tugboat, r o w b o a t or other craft to loiter near or a l o n g side a vessel e n g a g e in foreign trade u p o n the arrival at a port of entry? A n s w e r . It is unlawful for any tugboat, rowboat or other craft without the permission of c u s t o m s officials to loiter near or alongside aforesaid vessel and takes any p e r s o n aboard thereon or takes any person t h e r e f r o m . Unauthorized tugboat, r o w b o a t or other craft is required to keep away from aforesaid vessel at a distance of not less than 50 meters.

878

1536. W h a t is t h e rule on board any vessel?

overstaying

imported

articles

on

A n s w e r . T h e overstaying imported articles on board any vessel m a y be u n l a d e n by c u s t o m s authorities and stored at the expense of the vessel after the expiration of the time for unloading thereof. This a b o v e rule of disposal a d m i t s certain exception, such as a) b) c) d) e) f) g) h) 1537. W h a t

If t h e overstaying articles are reported for transshipment to another port. Port congestion Strike Riots Civil c o m m o t i o n Failure of vessel's g e a r Bad w e a t h e r Other similar c a u s e s . is the

duty of the

master of vessel

in

case

of

entrance of vessel through necessity? A n s w e r . T h e master shall, within 24 hours after arrival, make a protest under oath and state the causes or circumstances of such necessity T h e requisite protest must be filed with the proper Collector of C u s t o m s of the port w h e r e the vessel has entered. 1538. W h a t is the duty of the m a s t e r of vessel in case any part o f t h e c a r g o w a s u n l a d e n d u e t o n e c e s s i t y o r lost b y casualty? A n s w e r . Within 24 hours after arrival, the master shall make report to the Collector of such fact of unlading w h o upon satisfactory proof may approve the s a m e , and the unlading shall be considered lawful. 1539. Are vessels entering the country due to stress weather or other necessities subject to port charges?

of

Answer. No port charges are collected on vessels entering through stress of weather or due to other necessities.

879

1540. What are considered "remains" of a w r e c k e d vessel? Answer. The hull and rigging of the vessel including sea stores, articles or equipment such as sails, ropes, chains anchors and others. Remains, parts or equipment of Philippine vessel wrecked either in Philippine or foreign waters are N O T S U B J E C T to duty. Whereas, D E R E L I C T S and A R T I C L E S S A L V A G E D from foreign vessels or aircraft picked up at sea or taken from wreck is prima facie dutiable and may be entered for consumption or warehousing. 1541. W h e n vessels are considered warlike under the customs law? Answer. a) W h e n the vessel is of c o m m e r c i a l registry. b) W h e n it is manifestly built for warlike purpose. c)

W h e n it is about to depart f r o m the Philippines with a cargo consisting principally of a r m s and munitions.

d)

W h e n it has on board the n u m b e r of m e n that renders it probable that s u c h vessel is intended to c o m m i t hostilities upon the subjects, citizens or property of any foreign state with w h o m the Philippines is at peace.

1542. What is the duty of the Collector of C u s t o m over warlike vessel under the T C C ? A n s w e r . It shall be his duty to detain said vessel until t h e decision of the President of the Philippines is obtained or until the o w n e r of said vessel gives a b o n d or security, in d o u b l e t h e value of the vessel and c a r g o , that the vessel will not be so e m p l o y e d , to commit hostile acts u p o n any foreign state or people with w h o m the Philippines is at peace. 1543. Appraised value defined: A n s w e r . A p p r a i s e d value for the p u r p o s e of determining the proper amount of the c a s h bond necessary for release of article under seizure includes the dutiable value of the article plus duties, taxes and other c u s t o m s charges. 880

1544. Transactional value defined: A n s w e r . It is the price actually paid or payable for the goods w h e n sold for export to the Philippines. It includes t h e invoice value of the article plus freight, insurance, costs, e x p e n s e s and other necessary e x p e n s e s that is used as basis for the determination of dutiable value. This replaces t h e valuation of g o o d s .

Home

Consumption

Value

as

basis

of

1545. H o m e consumption value defined: A n s w e r . This is the value of the imported g o o d s is based on the value declared in the consular, c o m m e r c i a l , trade or sales invoice. It is the price of the s a m e , like or similar articles as bought and sold or offered for sale freely in t h e usual wholesale quantities in the ordinary c o u r s e of trade in the principal markets of the exporting country on the date of exportation to the Philippines (excluding internal excise taxes to be remitted or rebated) or w h e r e there is none on such date, t h e n on the price nearest to the date of exportation. N o w , the transactional value had replaced the home consumption value in the c o m p u t a t i o n of import taxes. 1546. W h a t

are

the

examination,

duties

of

the

classification

customs

and

officer

appraisal

of

in

the

imported

articles? Answer. a) He shall determine that the packages designated for examination and their contents are in accordance with the declaration in the entry, invoice and pertinent documents. b)

He shall thereafter make a return in such a manner to indicate whether the articles have been truly and correctly declared in the entry as regard their quantity, measurement, weight and tariff classification and not imported contrary to law.

c)

He shall determine the unit of quantity in which they are usually bought and sold and appraise in accordance with the Tariff and Customs Code.

881

A Customs officer who fails to comply with the aforesaid duties - shall be punished with a fine not less than Php 5,000.00 nor more than Php 50,000.00 and imprisonment for not less then one (1) year nor more than ten (10) years and perpetual disqualification to hold public office, to vote and to participate in any public election. (RA 7650, April 6, 1993) In addition: 1.

He shall, by all reasonable w a y s and means, ascertain the value or price of imported articles as required by law notwithstanding any invoice, affidavit or statement of cost of production and shall report the appraisal and classification of said articles.

2.

He shall describe all articles on the face of the entry in tariff and in such terms as will enable the Collector to pass upon the appraisal and classifications of said articles. He shall see to it that representative and sufficient samples of all kinds of articles that m a y be readily sampled are taken under proper receipts and retained for official purposes, E X C E P T s a m p l e s of articles identical in quality, material and values if return is desired longer than may be required for use in contested c a s e s .

3.

1547. An appraisal, classification or return as finally passed upon by the Collector m a y not be c h a n g e d or readjusted, EXCEPTAnswer. a)

Within O N E (1) Y E A R after p a y m e n t of the duties, upon statement of error as provided under the Tariff and Customs Code.

b)

Within fifteen (15) d a y s after p a y m e n t of t h e duties, upon request for reappraisal and/or classification a d d r e s s e d to the C o m m i s s i o n e r by the Collector, if the appraisal and/or classification are d e e m e d to be low.

c)

In case of a timely protest filed by the interested party with the Collector.

882

1548. M a y the import taxes be assessed for a lesser amount than the entered values? A n s w e r . No. Import taxes and duties shall not be assessed in any c a s e u p o n an a m o u n t less than the entered value unless by direction of the C o m m i s s i o n e r . 1549. W h a t is the rule as to a m o u n t of duty after the a s s e s s m e n t of imported articles is m a d e by the customs official? A n s w e r . T h e correct duty shall be a s s e s s e d on every imported article and the said a m o u n t shall not be less than the entered value unless by direction of the C o m m i s s i o n e r under the following cases

a)

W h e n t h e importer certifies at the time of entry that the entered value is higher by the dutiable value.

b)

T h a t the articles are so entered to meet increases made by the appraiser in similar c a s e s pending re-appraisement.

c)

T h a t the lower a s s e s s m e n t shall be allowed only w h e n the importer's contention is sustained by final decision and shall a p p e a r that the action of the importer w a s taken in good faith after due diligence and inquiry on his part.

1550. W h a t is the effect of failure to pay internal revenue taxes on imported cigarettes? A n s w e r . Said cigarettes Become merchandise of prohibited importation. According to the S u p r e m e Court, where internal revenue on certain cigarettes has not been paid, it is clear that said cigarettes fall within the category of "merchandise of prohibited importation", the importation of which is contrary to law and may justify its forfeiture. (Vierneza vs. Commissioner of Customs, 24 SCRA) 1 5 5 1 . Is t h e C o l l e c t o r a u t h o r i z e d to sell i m p o r t e d articles w h o s e delivery is withheld for non-payment of customs duties? Answer. The Collector may sell imported articles or any portion thereof whose delivery is withheld due to non-payment of customs 883

duties upon proper notice to the importer as in seizure cases to cover the outstanding account or liability of the importer. 1552. W h a t are the legal r e q u i r e m e n t s for delivery or release of imported articles under the c u s t o m s law? A n s w e r . The Collector shall make delivery of shipment only, upon the surrender of the bill of lading, to person w h o by the terms thereof appears to be the consignee or lawful holder of the bill and the Collector shall not be liable on account of any defect in the bill or irregularity in its negotiation, unless he has notice of the s a m e . O

The Collector shall be liable for d a m a g e s arising from the delivery or release of articles without the surrender from such person of the bill of lading covering said articles. EXCEPTION

-

Upon written order of carrier or agent of the importing vessel or aircraft in w h i c h case neither the g o v e r n m e n t nor the collector shall be held liable for any d a m a g e s that may arise out of wrongful delivery. T h e Collector m a y require the production of an exact copy of the bill of lading subsequent thereto. 1553.

Under what instances m a y the Collector validly withheld the delivery of imported articles? Answer. a)

W h e n the Collector is duly notified in writing of a lien on freight, lighterage or general a v e r a g e u p o n any imported articles in his custody, unless he is satisfied that the claim has been paid or s e c u r e d .

b)

W h e n the c u s t o m s e x p e n s e s incurred by the c u s t o m s service for the handling or storage of articles and other necessary operations in connection therewith or incident to seizure and constituting as c h a r g e s on t h e articles h a v e b e e n paid.

c)

W h e n any fine or surcharge legally i m p o s e d on the articles is not paid or secured to be paid.

d)

W h e n e v e r any importer except the g o v e r n m e n t has an outstanding and d e m a n d a b l e account with the Bureau of C u s t o m s , unless delivery is authorized by the Commissioner. 884

1554. W h a t are the rules on delivery of u n e x a m i n e d package? A n s w e r . To effect the Collector shall -

delivery

of u n e x a m i n e d

package,

the

a)

Require a c a s h deposit, an irrevocable domestic letter of credit, bank g u a r a n t e e or a bond in an a m o u n t equal to 1 0 0 % of the duties, taxes, fees or other c h a r g e s sufficient to safeguard the revenue.

b)

In c a s e of n o n - c o m p l i a n c e therewith, all the packages shall be held until t h e return is m a d e a n d duties, taxes, fees and other charges are paid.

1555. W h a t is the rule on a b a t e m e n t of duties due to d a m a g e incurred during voyage of the vessel? A n s w e r . A b a t e m e n t of duties shall not be allowed on account of d a m a g e incurred or deterioration suffered during the voyage of importation, a n d duties will be a s s e s s e d on the actual quantity imported as s h o w n by the return of w e i g h e r s , gaugers, measurers or appraisers. In case of missing package(s) as appearing in the manifest or bill of lading, u p o n certification under penalty or perjury and/or falsification by the importer or consignee and upon production of proper proof to the Collector that the missing goods have not been imported into the Philippines, abatement shall be effected. In case of deficiency of any article as called for by the invoice, upon proper certification under penalties of perjury and/or falsification by the importer and production of satisfactory proof to article in the Philippines, abatement shall likewise be effected. 1556. Under w h a t instances m a y the Collector abate or refund t h e a m o u n t o f d u t i e s a c c r u i n g o r p a i d u p o n a r t i c l e s lost or d e s t r o y e d after arrival of vessel in the Philippines? Answer. a) W h e n the articles are lost or destroyed while within the limits of any port of entry prior to unlading under customs supervision. b)

While the articles aforesaid remain in customs custody after unlading.

885

c)

While the articles aforesaid are in transit under irrevocable domestic letter of credit, bank guarantee or bond with formal entry in accordance with the T C C from the port of entry to any port in the Philippines.

Abatement of duty on dead or injured animal shall be allowed upon certification under penalties of falsification or perjury and upon production of satisfactory proof to the Collector that the said animal that is the subject of importation dies or suffers injury before arrival or while in customs custody. However, the carcass of any dead animal remaining on board a vessel or within customs custody shall be removed in the manner required by the Collector and at the expense of the importer. Abatement or refund of duties, taxes and other charges are not allowed on articles lost or destroyed in bonded public or private warehouses outside customs z o n e .

1557. W h e n does the Bureau of C u s t o m s normally exercise administrative remedy to enforce tax collection? A n s w e r . The Bureau of C u s t o m s normally avails itself of the administrative remedy of seizure, s u c h as by enforcing the tax lien on the imported articles, instead of t h e judicial r e m e d y w h e n the goods to w h i c h the tax lien attaches, regardless of ownership, is still in the custody or control of the G o v e r n m e n t . However, if the importation is prohibited or u n d e c l a r e d , the r e m e d y of seizure and forfeiture may still be exercised by the BC e v e n if the g o o d s are no longer in custody. 1558. W h e n

does the

Bureau

of Customs

normally exercise

judicial remedy to enforce tax collection? A n s w e r . W h e n t h e g o o d s are properly released and thus beyond the reach of tax lien, the g o v e r n m e n t can seek p a y m e n t of the tax liability through judicial action since the tax liability of the importer constitutes a personal debt to t h e g o v e r n m e n t , therefore, enforceable by action. In this c a s e , judicial r e m e d y is normally availed of instead of administrative r e m e d y . 1559. R E M E D I E S O F T H E G O V E R N M E N T : A n s w e r . A) Extrajudicial or A d m i n i s t r a t i v e -

886

1. Enforcement of Tax Lien: H o w effected? Bureau issues a warrant of distraint. T h e property is sold and the proceeds applied to the taxes. The e x c e s s a n d deficiency both go to the taxpayer. Available only w h e n t h e g o o d s are still within the custody or control of the B u r e a u . T h i s r e m e d y is u s e d w h e n the importation is not prohibited nor the import entry improperly m a d e . For e x a m p l e - the lien arose only b e c a u s e there w a s a mistake in the a s s e s s m e n t , not b e c a u s e the g o o d s w e r e prohibited or t h e importation w a s irregular. If t h e importation is not prohibited and there was a declaration in the import, t h e n there is a final liquidation of t h e import entry. Consequently, t h e period to enforce the lien, if there is a deficiency is only o n e year, unless there is fraud or protest. T a x lien is distinct f r o m " e n f o r c e m e n t of tax lien". W h e n t h e tax to an article is not paid, the tax lien attaches to the thing a n d can be enforced against it, even if m e a n t i m e it gets into the hands of an innocent purchaser for value. However, the lien can be enforced administratively only if the thing is still within the custody of the B u r e a u . O n c e it is no longer in the Bureau's custody, the only w a y to enforce the tax lien is by going to court in an action for collection. If the property falls into the hands of an innocent purchaser for value, the Bureau of Customs can no longer retake the property. In fact, e v e n he innocent purchaser still has all the g o o d s intact, the Bureau cannot retake t h e m , although it can go to court to enforce its tax lien. 2. Seizure and Forfeiture: Comparison: While enforcement (equivalent to distraint) applies only w h e n the importation is neither prohibited nor improperly made, seizure and forfeiture applies when the importation is prohibited or improperly made.

887

How effected? Collector issues warrant for the detention of the goods. Formal hearing is set, and the importer is notified thereof. The Collector renders decision. Appeals . . . . The net result of this remedy is that the government appropriates the ownership of the thing, but without deficiency and without prejudice to criminal action. Available only w h e n the importation is unlawful or irregularly made. For example - importation is contraband. T h u s , if the importation is legal, even if the goods are still within the custom's custody and still in the hands of the importer, the goods cannot be seized or forfeited. Available even w h e n the g o o d s are no longer in the custody of the Bureau. Available e v e n w h e n the g o o d s are already in the hands of an innocent purchaser w h o knew nothing of the illegality of the importation. G o o d faith is immaterial as far as the seizure is c o n c e r n e d . It is, however, a valid defense in a criminal prosecution. While pending with the collector of c u s t o m s , the courts cannot interfere with the seizure and forfeiture. T h e Court of Tax A p p e a l s must wait for the a p p e a l . Examples of properties subject to forfeiture under the T C C : 1.

Vessels or aircraft u s e d for s m u g g l i n g ;

2.

Articles of prohibited importation;

3.

Un-manifested c a r g o e s ;

4.

A n y p a c k a g e or imported article w h i c h is found by the e x a m i n i n g official to contain any article not specified in the invoice or entry;

5.

A n y m o n e y or thing of v a l u e offered as a bribe or for the purpose of exerting improper influence over a c u s t o m s official or e m p l o y e e .

M o n e y if attempted to be brought outside of the Philippines contrary to law, c a n be forfeited.

888

1560. W h a t is the nature and purpose of seizure proceedings under the T C C ? Answer. a) P r o c e e d i n g s in seizure c a s e s are actions in rem directed against t h e property seized, not against the owner thereof. In s u c h actions, the property itself is the defendant. T h e title of the c a s e is, for instance, Republic of the Philippines vs. T w o H o n d a A c c o r d Motor Vehicles. T h e r e is an actual trial as in judicial proceedings (Pascual vs. Commr. of Customs, 4/29/66, Cigare vs. Commr. of Customs, 8/29/66, Vierneza vs. Commr. of Customs, 7/30/61) Forfeiture proceedings are civil and not criminal in nature. (Lazaro vs. Commr. of Customs, 5/14/66, Capulong vs. Aseron, 5/14/66) b)

In a seizure c a s e , the g o v e r n m e n t seeks t h e transfer of the title to the property f r o m the o w n e r to the state as a punishment to t h e property itself. T h e forfeiture may be enforced against the g o o d s independently of the criminal prosecution against the offender. (Pascual vs. Commr. of Customs, 4/25/62) N O T E : Every vessel from a foreign port must have on board a c o m p l e t e manifest of all her cargo. The cargo manifest and e a c h copy thereof shall be a c c o m p a n i e d by a translation into the official language of the Philippines if originally written in another language. T h u s , g o o d s that are not manifested or those that do not form part of the sea store's inventory or provisions can be the subject of forfeiture. [Kurst Nilsen, et al. vs. Commissioner of Customs, 89 SCRA 43)

1 5 6 1 . Procedure in seizure cases of imported articles: Answer. a)

T h e Collector issues a warrant for the detention or forfeiture of the imported articles;

b)

T h e Collector gives the importer a written notice of the seizure and fixes a hearing date to give the importer an opportunity to be heard;

c)

A formal hearing is conducted;

889

d)

The Collector renders a declaration of forfeiture

e)

The importer aggrieved by the action of the Collector in any case of seizure may appeal to the Commissioner for review within fifteen (15) days from written notice of the collector's decision;

f)

The importer aggrieved by the action or ruling of the Commissioner in any case of seizure may appeal to the CTA;

g)

The imported may proceed on appeal to the SC as in case may be.

1562. Under w h a t g r o u n d m a y the Collector of C u s t o m s issue Warrant of Seizure and

Detention of articles under the

TCC? Answer. Issuance of the W a r r a n t of Seizure and Detention must be based upon probable c a u s e that the articles in question were imported or attempted to be exported contrary to the Tariff and Customs Law. 1563. Proof required in seizure goods under the T C C : Answer. there is enough. evidence

and

forfeiture

of

imported

W h e n goods are seized and the seizure is not protested, no need for prima facie e v i d e n c e , probable cause is However, w h e n t h e seizure is contested, prima facie is required to effect the seizure.

T h e existence of probable c a u s e is required to warrant the institution of forfeiture proceedings. H o w e v e r , o n c e this is established, the burden of proof shifts to the importer to s h o w that he is excepted from the violation. (Acting Commr. vs. CTA & Andrulis) Notice to taxpayer if there are proceedings for seizure, forfeiture etc. is a requirement of d u e process. (Commissioner vs. Campos Rueda) 1564. What

is

the

duty

of

the

Collector

of

Customs

upon

m a k i n g a seizure of imported articles? A n s w e r . The Collector of C u s t o m s shall issue a W a r r a n t for the detention of the property. 890

The o w n e r or importer of the property m a y ask for the release of his property under seizure provided the property is going to be u s e d for legitimate purpose and u p o n filing of sufficient cash bond in an a m o u n t to be fixed by the Collector of C u s t o m s subject to the following conditions a)

T h e a m o u n t of the cash shall not in any case be less than the appraised value of t h e article plus fines, e x p e n s e s and costs that m a y b e a d j u d g e d in the case.

b)

T h e r e is no prima facie e v i d e n c e of fraud in the importation of the article.

c)

T h e importation of the article is not prohibited by law, and

d)

T h e release under c a s h b o n d Commissioner of Customs.

has been approved

by the

1565. W h o are the o w n e r s of articles in seizure proceedings? Answer. a ) Importer b) c)

Consignee A n y person holding the bill of lading

1566. W h o are d e e m e d agents in seizure proceedings? A n s w e r . It shall include not only any t h e seized property but also any possession of the property at the time agent in fact is u n k n o w n or cgnnot be

agent in fact of the owner of person having responsible of seizure, if the owner or his reached.

1567. H o w is notification to k n o w n o w n e r of imported articles effected in case of seizure? Answer. By giving written notice of the seizure and opportunity to be heard to the importer, consignee or their agents in reference to the delinquency that w a s the occasion of such seizure. 1568. H o w is service of notice to u n k n o w n owner of goods effected in seizure cases? Answer. a) By posting the notice for 15 days in the public corridor of the customhouse of the district in which the seizure was made. 891

b)

By publication in a newspaper.

c)

By such other means as the Commissioner of Customs shall consider desirable.

If after fifteen (15) days the unknown owner fails to appear after notification of seizure the Collector shall declare the property forfeited to the government to be sold at auction in accordance with law. 1569. H o w is seizure case in c u s t o m s law settled? Answer. a) By payment of fine, or b) By redemption of forfeited property. 1570. W h a t are the requisites for the settlement of seizure case through the payment of fine: Answer. a) T h e seizure case is Collector of C u s t o m s .

still

pending

adjudication with the

b)

There is no fraud in the importation or exportation of the article in question.

c)

T h e owner, exporter, importer or c o n s i g n e e or his agent shall offer to pay the fine i m p o s e d u p o n the property, a n d

d)

T h e fine imposable must be in an a m o u n t not less than 2 0 % or more than 8 0 % of the landed cost of the imported seized article or the F O B value of t h e seized article for export.

e)

T h e property under seizure is not absolutely prohibited nor the release thereof is not contrary to law, and

f)

T h e settlement must be subject to the C o m m i s s i o n e r of C u s t o m s .

approval

of the

1571. Requisites of forfeiture of g o o d s u n d e r the Tariff C o d e : A n s w e r . T h e wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or t h e wrongful making or

892

delivery by t h e s a m e person of any invoice, letter or paper - all touching on the importation or exportation of merchandise; T h e falsity of s u c h declaration, affidavit, invoice, letter or paper; and an intention on the part of the importer or consignee to evade the p a y m e n t of the duties d u e . T h e fraud must be proved to justify forfeiture. It must be actual, a m o u n t i n g to intention of w r o n g d o i n g with the clear purpose of avoiding the tax. {Republic vs. CTA, October 2, 2001) 1572. W h a t

is

the

extent

of

the

jurisdiction

of

the

C o m m i s s i o n e r of C u s t o m s in forfeiture proceedings? A n s w e r . T h e C o m m i s s i o n e r of C u s t o m s w h e n sitting in forfeiture proceedings constitutes a tribunal u p o n w h i c h the law confers jurisdiction to d e t e r m i n e all questions touching the forfeiture and further disposition of t h e illegally imported merchandise. (Auyong Hian vs. CTA, 59 SCRA 110) 1573. W h o has the b u r d e n of proof in seizure and/or forfeiture cases? Answer. a) In all proceedings t a k e n for the seizure and/or forfeiture of any vehicle, v e s s e l , aircraft, beast or articles under the provisions of the tariff and c u s t o m s laws, the burden of proof lies upon the claimant; b)

It is required, however, that probable cause shall be first shown for the institution of such proceedings and the seizure and/or forfeiture w a s m a d e under the circumstances and in the manner prescribed by the Tariff and Customs Code.

1574. W h a t is the degree of burden of proof in protest cases? Answer. In protest cases, the protestant has the burden of proving the correctness of his contention for the issue is not whether the Collector w a s w r o n g but whether the importer is right. The presumption is that the assessment if correct. (Behn Meyer & Co. Ltd., vs. Insular Collector of Customs, 26 Phil. 647)

893

1575. Distinguish b e t w e e n protest a n d forfeiture of imported goods: A n s w e r . In protest cases involving the legality or correctness of customs duties, where the taxpayer disagrees with the ruling of the Collector, the taxpayer can file a protest within 15 days from his payment, or within 15 days from the date the importer is entitled to refund if payment is rendered erroneous or illegal by events occurring after the payment. If not thus protested, the action taken by the Collector shall be final and conclusive against the taxpayer except as to manifest error. In seizure cases involving the forfeiture of prohibited, absolute or qualified, or illegal importations including the carrying vessel or aircraft, the Collector, shall give the o w n e r a written notice thereof, if known, or cause its posting or publication, if u n k n o w n , giving him an opportunity to be heard. After hearing, the Collector shall make his written decision. An aggrieved taxpayer may, within 15 days from notice thereof, appeal the s a m e to the Commissioner by simply notifying the Collector of his desire to have the matter reviewed by the Commissioner, forthwith, t h e Collector should forward the records to the C o m m i s s i o n e r . N O T E : The release of the property under seizure a n d cash bond does not release the o w n e r or the importer of any criminal liability arising out of the importation or exportation of his shipment. 1576. Cases reiterating that the importation of g o o d s deemed smuggled are subject to forfeiture by the customs officials: A n s w e r . In the following c a s e s , it w a s held that: a)

Commissioner vs. Castro - dutiable g o o d s of commercial quantity m a d e to pass under the cover of p a s s e n g e r s ' baggage or otherwise u n m a n i f e s t e d ; unless there be unmistakable proof of honest mistake.

b)

Leuterio vs. undervalued.

c)

Bastida vs. Acting Commissioner - m e r c h a n d i s e , including foreign dollars or other foreign currency that have c e a s e d to be legal tender, a n d anything that m a y be the subject of importation or exportation, not d e c l a r e d .

Commissioner

894

-

imported

articles

that

are

1577. Rule on forfeiture importation:

of

vessels

used

in

unlawful

A n s w e r . In Commissioner vs. CTA and Pascual, a motorboat o w n e d by Pascual w a s a p p r e h e n d e d by the navy off Cavite loaded with blue seal cigarettes. Forfeiture proceedings w e r e instituted. Pascual c o n t e n d e d that he had no knowledge of the cargo, and that the crew w a s forced at gunpoint to load t h e m . T h e SC nevertheless allowed the forfeiture, citing par. (a) and (b), Section 2 5 3 0 of T C C . Since forfeiture proceedings are in r e m and are thus directed against the res, the fact that the o w n e r of the vessel had no actual k n o w l e d g e that his vessel w a s being illegally used to transport dutiable items d o e s not render the vessel i m m u n e from forfeiture; In Rigor vs. Rosales, it w a s e v e n held that the articles do not even have to be i m p o r t e d , since t h e C o d e refers to unmanifested articles f o u n d on vessels or aircraft e n g a g e d in coastwise trade. In Sotoyama vs. C.A., however, t h e SC did not hold for the forfeiture of the vessel after being found carrying unmanifested cargo on e x a m i n a t i o n . Forfeiture only holds if (1) the vessel came in other than through a port of entry, or (2) the vessel w a s used illegally to import g o o d s . 1578. W h e n is redemption of forfeited property N O T allowed: Answer. a) W h e n there is fraud b)

W h e r e the importation is absolutely prohibited.

c)

W h e r e the release of (Transglobe Int'l. Inc. vs. 25, 1999)

the property is contrary to law. CA and Commr. of Customs, January

After settlement of a seizure or forfeiture case the property in question shall be forthwith released and all liabilities that might attach to the property by virtue of the offense including liability incurred under any cash deposit or bond shall be deemed released.

895

1579. Is there double j e o p a r d y in the civil r e m e d y of seizure and forfeiture? Answer. As held the following cases: •

People vs. Hope - Seizure and forfeiture is a civil, not a criminal remedy. Thus, even if the property is subjected to forfeiture, the importer can still be prosecuted without violating the constitutional prohibition against double jeopardy. Likewise, if the importer wins and recovers what w a s forfeited, he may still be prosecuted.

•

Acting Commissioner vs. CTA and Andrulis - It was held that the acquittal from the criminal charge does not operate a s res judicata in a seizure o r forfeiture proceeding, since the proceeding in the fiscal's office in one in personam while the forfeiture proceeding is one in rem directed against the thing itself. Neither the C o m m i s s i o n e r of C u s t o m s nor the Secretary of Finance may remit fines or forfeitures. (Rovero vs. Amparo, 91 Phil. 229)

1580. W h a t a r e t h e civil p e n a l t i e s u n d e r t h e Tariff a n d C u s t o m s Code? Answer. Surcharge is imposable w h e n there is: a)

Failure to pay liquidated charges;

b)

Unauthorized warehouses;

c)

Failure to supply the consular invoice w h e n required;

d)

Undervaluation, misdeclaration or misclassification;

e)

Failure or refusal to give e v i d e n c e or submit d o c u m e n t s for examination.

withdrawal

of

imported

articles

from

bonded

Fine is imposable under the following c i r c u m s t a n c e s : a)

A n y dutiable article is found in the b a g g a g e of an arriving passenger w h i c h is not included in the baggage declaration;

896

b)

B r e a c h of b o n d ;

c)

Unlawful boarding or leaving of vessel or aircraft;

d)

Unloading of cargo before arrival at port of destination or at improper time or place after arrival;

e)

Failure to supply t h e requisite manifest.

Forfeiture is imposable under t h e following instances: a)

A n y v e s s e l or aircraft, including c a r g o , which shall be used unlawfully in t h e importation or exportation of articles into or f r o m any Philippine port or place except a port of entry, and any vessel w h i c h , being of less than 30 tons capacity, shall be u s e d in the importation of articles into any Philippine port or place except into a port of the Sulu sea w h e r e importation in s u c h vessel m a y be authorized by the C o m m i s s i o n e r , with the approval of the department head;

b)

Unmanifested articles found on any vessel or aircraft, if s u c h is required;

c)

A n y m o n e y or thing of value offered as a bribe or for the purpose of exerting improper influence over a Customs official or e m p l o y e e ;

d)

A n y article w h i c h is fraudulently concealed in or removed f r o m any public or private w a r e h o u s e under Customs supervision;

e)

Sea stores or aircraft stores adjudged by the Collector to be excessive, w h e n the duties assessed by the Collector thereon are not paid or secured forthwith upon assessment of the s a m e ;

f)

Boxes, cases, trunks, envelopes and other containers of whatever character used as receptacles or as devices to conceal any article which is itself subject to forfeiture under the customs and tariff laws or which is designed as to conceal the character of the article;

g)

Any vessel engaging in the coastwise trade which shall have on board any article of foreign growth, produce or manufactured in excess of the amount necessary for sea 897

stores without such articles having been properly entered or legally imported; h)

Any vessel or aircraft into which shall be transferred cargo unladen contrary to law prior to the arrival of the importing vessel or aircraft at her port of destination;

i)

Any article of prohibited importation or exportation the importation of exportation of which is effected or attempted contrary to law, and all other articles w h i c h , in the opinion of the Collector, have been u s e d , are or were intended to be used as instrument in the importation of the former;

j)

Unmanifested articles found on any vessel or aircraft, if a manifest therefor is required;

k)

Any package of imported article w h i c h is found by the examining official to contain article not specified in the invoice or entry, including all other packages purportedly containing imported articles similar to those declared in the invoice or entry to be the contents of t h e misdeclared package, provided the Collector is of the opinion that the misdeclaration w a s c a u s e d with fraudulent intent;

I)

A n y beast actually being used for the c o n v e y a n c e of articles subject to forfeiture under t h e c u s t o m s and tariff laws, with the e q u i p a g e or trappings, and any vehicle similarly used, together with the equipage and a p p u r t e n a n c e s , including the beast, t e a m or other motive power drawing or propelling the s a m e ; but t h e forfeiture shall not be effected if it is established that t h e o w n e r of the m e a n s of c o n v e y a n c e used as aforesaid, or his agent in charge thereof at the time, has no k n o w l e d g e of the unlawful act;

m) A n y article sought to be imported or e x p o r t e d : 1.

Without going t h r o u g h a c u s t o m h o u s e , w h e t h e r the act w a s c o n s u m m a t e d , frustrated or a t t e m p t e d ;

2.

By failure to m e n t i o n to a c u s t o m s officials articles found in the b a g g a g e of a person arriving from abroad;

3.

On the strength of a false declaration or affidavit executed by the owner, importer, exporter or

898

c o n s i g n e e concerning the importation or exportation of s u c h articles; 4.

On the strength of a false invoice or other d o c u m e n t executed by the owner, importer, exporter or c o n s i g n e e concerning the importation or exportation of s u c h article, a n d

5.

T h r o u g h any other fraudulent practice or device by m e a n s of w h i c h s u c h article w a s entered through the c u s t o m h o u s e to the prejudice of the Government.

T h e law requires the existence of probable cause to warrant the institution of forfeiture proceedings, but o n c e thus t a k e n , the b u r d e n of proof lies on o n e w h o would take exceptions thereto. 1581. May

the

Collector

of Customs

exercise

the

power

of

remission of custom duties? A n s w e r . A Collector of C u s t o m s has discretionary authority to remit t h e a s s e s s m e n t and collection of c u s t o m s duties, taxes and other charges w h e r e the aggregate a m o u n t thereof is less than ten pesos (Php 10.00), and he m a y d i s p e n s e with the seizure of articles of less then ten pesos in value except in cases of prohibited importations or habitual or intentional violation of tariff and customs laws. 1582. Is J U D I C I A L R E M E D Y for tax collection available under the T C C ? A n s w e r . Only civil action for collection is available. Criminal action is not available, only in the N I R C is there recovery of taxes t h r o u g h criminal suit. 1583. R E M E D I E S OF T H E T A X P A Y E R : Answer. T h e taxpayer has both administrative remedies available, but both are intertwined.

and

judicial

Protest Ground - legality or correctness of the assessment of the duties.

899

Elements of a valid protest a.

It must be in writing;

b.

It must set forth the objection(s) to the ruling, decision or order of the Collector of Customs in question together with the reasons therefor.

c.

It must be filed at the time of payment or 15 days thereafter.

d.

The corresponding docket fee must be paid.

Scope of protest in Customs Law The protest must be limited to the subject matter of a single adjustment or other independent transaction, but any number of issues may be raised in a protest with reference to the particular item(s) constituting the subject matter of the protest. Single adjustment - refers to the entire content of one liquidation, including all duties, f e e s , and surcharges or fines incident thereto. Procedure - If the t a x p a y e r disagrees with the assessment made by the collector, he must nevertheless pay the tax, and then protest the a s s e s s m e n t within 15 days from payment. T h e protest must be in writing, setting forth all the objections to the ruling or decision in question together with the reasons relied u p o n , or else the s a m e shall be deemed waived. O

No protest shall be considered unless p a y m e n t of the a m o u n t due after final liquidation has first b e e n m a d e .

3

If no protest is m a d e by the importer, t h e decision of the Collector shall be final and conclusive against him except as to matters correctable for manifest error in the manner prescribed by law. (Allied Brokerage Corp. vs. Commissioner of Customs, 40 SCRA 555)

3

T h e collector t h e n c o n d u c t s a hearing de parte, and then m a k e s a decision.

900

3

If the decision favors the g o v e r n m e n t , the taxpayer must appeal the s a m e to the C o m m i s s i o n e r , within fifteen (15) d a y s f r o m receipt of notice, otherwise it b e c o m e s final. The records of the case are automatically elevated w h e n a p p e a l is t a k e n .

3

If the decision of the collector favors the taxpayer, there is an a u t o m a t i c review by the Commissioner. The decision t h e n does not b e c o m e final.

O

T h e C o m m i s s i o n e r on review m a k e s his decision. If favorable to t h e taxpayer, again there is an automatic review by the Secretary of Finance, and so the decision never b e c o m e s final. If, on the other h a n d , the decision favors the g o v e r n m e n t , the taxpayer must appeal the s a m e , otherwise it will b e c o m e final. In this case, he may file a motion for reconsideration with the Secretary of Finance, provided the motion is not pro forma (that is, the motion raises n e w issues), but this is risky because the p e n d e n c y of s u c h motion for reconsideration does not s u s p e n d t h e running of t h e prescriptive period to appeal. T h e better r e m e d y then is for the taxpayer to appeal the decision of the C o m m i s s i o n e r to the Court of Tax Appeal within 30 d a y s f r o m receipt of the decision adversely affecting the interest of the taxpayer.

O

Only the decision of the C o m m i s s i o n e r can be raised to the C T A on petition for review. T h e decision of the collector cannot, not only b e c a u s e it is technically not a "decision" yet, but also b e c a u s e of the doctrine of "exhaustion of administrative r e m e d y " .

N O T E : A tax protest case, under the T C C involves a protest of the liquidation of import entries; A liquidation id the final computation and ascertainment by the collector of the duties on imported merchandise, based on official reports as to the quantity, character and value thereof, and the collector's own finding as to the applicable rate of duty. 1584. W h a t is the r e m e d y of a taxpayer aggrieved by decision or ruling if the Collector in case of seizure?

the

A n s w e r . Within 15 days after notification in writing by the Collector of his action or decision on the seizure case the aggrieved person may:

901

A) A p p e a l the same to the Commissioner of Customs within 15 days from receipt of said adverse decision. B) Seizure cases: Claim and Dispute W h e n the goods are seized, the taxpayer can claim the seized goods by paying the fine. However, this can only be availed of if the thing is not prohibited. Or, the taxpayer can dispute the forfeiture. In either case, a hearing is set, the collector decides. The same procedure for appeal as in protest cases applies. C) R e f u n d D) A b a t e m e n t - W h a t w a s declared and paid w a s not what was imported, because of any of the following: 1. d a m a g e w a s incurred during the v o y a g e ; 2. packages w e r e missing; 3. contents of the p a c k a g e w e r e deficient; 4. articles w e r e lost or destroyed after arrival; 5. d e a d or injured animals. E) D r a w b a c k - imported g o o d s w e r e e x p o r t e d . (Sees. 1701-1708)

correct,

but w e r e

re-

This refers to duties or taxes paid back or remitted by the G o v e r n m e n t on the exportation of that on w h i c h they w e r e levied. It also refers to t h e refund of duties on imported fuel used for propulsion of vessels. F) A b a n d o n m e n t 1. E x p r e s s - Within ten (10) d a y s f r o m the filing of import entry, a b a n d o n m e n t m a y be m a d e , provided: a) portion a b a n d o n e d is at least 1 0 % of total invoice; b) not less than o n e p a c k a g e ;

902

c) g o o d s are placed within the area. Elements of express abandonment: a)

It m u s t be in writing;

b)

It must be a d d r e s s e d to the Collector of C u s t o m s concerned;

c)

It m u s t expressly signify the intention of the owner importer or c o n s i g n e e to a b a n d o n his importation or s h i p m e n t ;

d)

It must be subscribed and s w o r n to before a notary public or a n y C u s t o m s officer authorized to administer oath under Sec. 3503 of T C C . ( C M O 15-94)

H o w effected? - It occurs w h e n the owner, importer, c o n s i g n e e of the imported article expressly signifies in writing to the Collector of C u s t o m s his intention to abandon. 2. Implied - If the import (15) days. However, government, the a b a n d o n m e n t , giving

entry is not submitted within fifteen for the g o o d s to be sold by the collector must declare the notice to the taxpayer.

H o w effected? a)

W h e n the owner, consignee or interested party after due notice, fails to file an entry within 30 days, which shall not be extendible from the date of discharge of the last package from the vessel or aircraft.

b)

W h e n the owner, consignee or interested party, after having filed an entry, fails to claim his importation within fifteen (15) days that is not also extendible, from the date of posting of notice to claim such importation.

c)

W h e n the owner or importer fails or refuses to mark his imported article w h e n required by law within a period of 30 days after due notice thereof.

903

1585. M a y an importer submit bond in support of the release of his g o o d s f r o m t h e c u s t o m s c u s t o d y ? Answer. Yes. However, Sec. 2301 of the T C C states that seized articles may not be released under bond if there is prima facie evidence of fraud in their importation. 1586. W h a t is the effect of a b a n d o n m e n t of articles subject to tax? Answer. a) The owner, importer, consignee or other interested party shall be d e e m e d to have renounced all his interest and property rights over the a b a n d o n e d imported articles; b) The abandoned articles shall ipso facto be d e e m e d the property of the government and shall be disposed of in accordance with the provisions of the Tariff and C u s t o m s C o d e ; c)

It does not relieve the o w n e r or importer from any criminal liability that m a y arise from any violation of law committed in connection with the importation of the imported articles.

1 5 8 7 . R e m e d y o f d e l i n q u e n t i m p o r t e d t o p r e v e n t t h e s a l e o f his unpaid and undelivered shipment: Answer. T h e delinquent importer m a y prior t o the sale of the imported article, settle his obligations with t h e B u r e a u of Customs, in which c a s e the aforesaid articles m a y be delivered u p o n proper payment of duties, taxes and other c h a r g e s and c o m p l i a n c e with the requirements of law. 1588. NO Injunction Rule defined: Answer. No court can interfere in the exercise o f the exclusive jurisdiction of the B u r e a u of C u s t o m s to enforce t h e tax liabilities under the T C C . The only court that c a n grant injunctions against the Commissioner is the C T A (by special provision of law), but it can only do so if the c a s e is within its jurisdiction. T h u s , unless the tax is first paid, protested and d e c i d e d , a n d t h e n a p p e a l e d to the Commissioner, the C T A cannot issue an injunction.

904

In effect, no injunction at all can be issued against the Collector or C o m m i s s i o n e r for the e n f o r c e m e n t of payment or seizure. 1589. R e m e d y of an importer during the pendency of seizure proceedings: Answer. a) Filing of bond - T h e importer or o w n e r m a y secure the release of the property u p o n the filing of a sufficient bond in an a m o u n t to be fixed by the Collector conditioned for the p a y m e n t of t h e appraised v a l u e of the merchandise and/or fine, e x p e n s e s a n d cost that m a y be a d j u d g e d in the case. H o w e v e r , articles of prohibited importation cannot be released under b o n d . c)

Settlement of c a s e - He m a y w a i v e forfeiture proceedings by a settlement of the c a s e u p o n p a y m e n t of the proper fine or, if the property is subject to forfeiture, the domestic market v a l u e (not appraised value) of t h e property.

1590. S U M M A R Y O F T A X P A Y E R ' S C U S T O M S PROTEST A party adversely affected by the imposition of customs duties m a y file a written protest on his alleged liabilities with the Collector of C u s t o m s within fifteen (15) days a f t e r p a v i n g the subject a m o u n t of duties. Hearing within fifteen (15) d a y s from receipt of the duties under protest before the Collector. T h e Collector shall decide the issue after termination of t h e hearing within thirty (30) days;

O

a)

If Collector's decision is adverse to the taxpayer-importer he m a y appeal to the C o m m i s s i o n e r of Customs within fifteen (15) days from receipt of the former's adverse decision;

b)

If the Commissioner's decision is adverse to taxpayer's interest he may appeal to the C T A within thirty (30) days;

c)

Appeal to the Supreme Court by certiorari within fifteen (15) days from receipt of CTA's adverse decision.

If the decision of the Collector is adverse to the Government:

905

a) An automatic review is taken by the Commissioner of Customs, b) Should the Commissioner sustain the Collector's decision, the Secretary of Finance automatically reviews such decision; N O T E : if the Commissioner or the Secretary of Finance fails to resolve the case within 30 days from receipt of the record of the case, the decision shall b e c o m e final and executory. c) If the decision of the Commissioner or the Secretary of Finance reversed the Collector's decision resulting now to an adverse decision against the taxpayer, he m a y appeal to the C T A within 30 days from receipt thereof; d) Then to the SC within 15 d a y s from receipt of the CTA's decision. ^

The Collector acting within his jurisdiction shall cause the imported g o o d s to be entered at the c u s t o m s w a r e h o u s e .

The Collector shall assess, liquidate and collect the duties thereon or he may detain the goods if the importer does not pay the duties. 1591. W h e n is there automatic review of tax cases? A n s w e r . A u t o m a t i c review by the Secretary of Finance arises only in the following c a s e s : a)

T h o s e involving a n t i - d u m p i n g duties a n d during;

anti-countervailing

b)

w h e n the c o m m i s s i o n e r ' s decision in the a s s e s s m e n t case is adverse to the g o v e r n m e n t .

T h a t a d e c i s i o n is a d v e r s e to the g o v e r n m e n t is r e c k o n e d f r o m the original a s s e s s m e n t . Illustration: T h e examiner a s s e s s e s the tax at P h p 50,000.00. Importer pays and protests, claiming the tax is only Php 10,000.00. After 906

hearing, the collector reconsiders and reduces the assessment to Php 20,000.00. This is adverse not only to the importer, but also to the g o v e r n m e n t b e c a u s e there w a s a diminution of the a m o u n t . So the reckoning point is the original assessment. Once it is r e d u c e d , it is d e e m e d a d v e r s e to the government, even if the collector a c k n o w l e d g e s his mistake. 1592. W h a t decisions of the Commissioner of Customs appealable to the Court of Tax Appeals?

are

Answer. a) T h o s e involving liability for c u s t o m s duties, fees or other money charges; b)

T h o s e involving affected;

seizure,

detention,

or release of property

c)

T h o s e involving fines, forfeitures or other penalties imposed in relation thereto;

d)

T h o s e involving other matters arising under the Customs Law or other law or part of law administered by the Bureau of Customs.

1593. W h a t is the role of the regular courts in matters of cases involving imported goods? A n s w e r . T h e regular (RTC) courts are devoid of jurisdiction to interfere in seizure proceedings despite allegation of illegality for such exclusive authority is vested in the Bureau of Customs. (Ponce Enrile vs. Vinuya, January 30, 1971) T h e regular courts issuing a warrant to search a dwelling house have no authority to take custody of goods subsequently seized, as the s a m e would be in violation of Customs laws. (Collector of Customs vs. Torres, et. al, May 31, 1972) 1594. T H E R E P U B L I C OF T H E PHILIPPINES IS NOT E X E M P T FROM S T O R A G E CHARGES ON IMPORTATIONS FOR ITS O W N U S E A N D P U R P O S E S IF S T O R E D IN A PRIVATE WAREHOUSE, GOVERNMENT IMPORTATIONS ARE EXEMPT ONLY WHEN STORED IN GOVERNMENT WAREHOUSES.

907

1595. How is a claim for refund of duties a n d taxes effected under the Tariff a n d C u s t o m s C o d e ? A n s w e r . All claims for refund of duties shall be made in writing and filed with the Collector to w h o m such duties w e r e paid. Thereupon, the Collector shall verify the claim and if found to be correct shall certify the same to the Commissioner of Customs with proper recommendation together with all the necessary papers and documents. Upon receipt of the C C , he shall cause the claim to be paid if found correct. If as a result of the refund of customs duties there would necessarily result a corresponding refund of internal revenue taxes on the s a m e importation, the Collector shall likewise certify the same to the Commissioner w h o shall cause the excess taxes to be paid, refunded or tax credited in favor of the importer, with advice to the CIR. 1596. C o m p r o m i s e proposal of c u s t o m s duties: A n s w e r . T h e power to c o m p r o m i s e with respect to c u s t o m s duties is, at best, limited to cases w h e r e potestative authority is specifically granted such as in the remission of duties by the Collector subject to the approval of the C o m m i s s i o n e r of Customs and the Secretary of Finance. 1597. May the C o m m i s s i o n e r of C u s t o m s c o m p r o m i s e criminal liability o f a n o f f e n d e r i n c a s e o f u n l a w f u l i m p o r t a t i o n ? A n s w e r . Prior to the effectivity of R.A. 1937 on July 1, 1957, the applicable law (Section 1369 of the revised Administrative Code) contained a provision allowing the C o m m i s s i o n e r of C u s t o m s to c o m p r o m i s e the criminal liability of the offender in c a s e s of unlawful importation. However, in R. A. 1937 said section w a s eliminated. This clearly s h o w s the intent of C o n g r e s s thereafter not to allow c o m p r o m i s e s of the offender's criminal liability in said cases. (People vs. Desiderio, 15 SCRA 402) REINTERATIONS GENERAL: 3

ON

TARIFF

and

CUSTOMS

LAW

IN

All articles imported into the Philippines, w h e t h e r subject to duty or not, shall be entered through a c u s t o m h o u s e at a port of entry.

908

3

Factors that indicate prima facie fraudulent importation: 1.

T h e surreptitious entry of the vessel into Philippine waters, so that there is no proper clearance for the vessel to entry our w a t e r s ; and

2.

The absence importations.

of

cargo

manifest

for

the

subject

3

T h e G o v e r n m e n t does not a s s u m e any legal responsibility in respect to the safekeeping of articles stored in any customs or bonded warehouse.

3

T h e Tariff a n d C u s t o m s C o d e imported articles, ad v a l o r e m .

3

T h e prescriptive period of offenses punishable under the Tariff and C u s t o m s C o d e is t w e l v e (12) years for offenses which is penalized with i m p r i s o n m e n t for eight (8) years and one (1) day to twelve (12) years.

3

All imported articles except importation admitted free of duty, shall be subject to a f o r m a l or informal entry. Articles of c o m m e r c i a l nature intended for sale, barter or hire, the dutiable v a l u e of w h i c h is Php 2,000.00 or less, and personal and household effects or articles, not in commercial quantity imported in passenger's b a g g a g e , mail or otherwise, for personal use, shall be cleared on an informal entry whenever duty, tax or other charges are collectible.

provides for percentage on

Import entry d e f i n e d : Is the declaration by the proper person of the facts and data required by law for purposes of enabling the g o v e r n m e n t to levy and charge the import duty, tax, fee and charge. Period within w h i c h to deposit imported articles in the customhouse: Imported articles must be entered in the customhouse at the port of entry within seven (7) days from the date of discharge of the last package from the vessel either 1. By the importer, being holder of the bill of lading; 2. By a customs broker acting under authority from a holder of the bill of lading; or 909

3.

By a person duly empowered to act as agent or attorney-in-fact for such holder.

The 7-day period may be extended by the Collector of the port for not more than seven (7) days. (Ramon Ramos, Jr. vs. Pamaran, 60 SCRA 327)

1598.

/•

3

In all proceedings taken for seizure and/or forfeiture of any vehicle, aircraft, beast or articles under the provisions of the tariff and customs laws, the burden of proof shall lie upon the claimant;

3

Goods in Customs custody pending payment of customs duties are beyond the reach of attachment;

3

The Principle of Primacy of Exhaustion of Administrative Remedies shall be followed in cases involving questions cognizable under the T C C ;

3

Unlike in the enforcement of the tax lien, if g o o d s are forfeited there is no deficiency j u d g m e n t . T h e taxpayer m a y recover the goods, if importation is not prohibited, by paying the fine or the value of the g o o d s if forfeited;

3

W h e r e the importation is prohibited, the r e m e d y of seizure and forfeiture may be exercised by the Bureau of C u s t o m s even w h e r e the g o o d s are not or no longer in t h e C u s t o m s custody and in possession or control of t h e importer or his transferee whether in g o o d faith or in bad faith;

3

T h e V A T and excise tax i m p o s e d under t h e N I R C , w h e n due on an importation constitute a tax lien on the goods S U P E R I O R to all c h a r g e s or liens t h e r e o n irrespective of the possessor thereof.

COMPARATIVE SUMMARY OF DEVICES AND REMEDIES UNDER THE NIRC A N D THE T C C TO E N F O R C E TAX COLLECTION: (Government devices & remedies in general) WAYS OF STRENGTHENING ENFORCEMENT

910

THE

EFFECTIVE

TAX

U n d e r the N I R C a n d the BIR: a) Educational c a m p a i g n , and tax counseling.

U n d e r the T C C , BC & T C :

publicity

a) Educational c a m p a i g n , and tax counseling

publicity

b) O b s e r v a n c e of t h e c a n n o n s of a sound tax s y s t e m .

b) O b s e r v a n c e of the canons of a s o u n d tax s y s t e m .

c) Information gathering preparation of tax registers.

and

c) Tariff C o m m i s s i o n and Philippine C o n s u l a r Officer's researches and continuous data gathering

d) Registration of business with the DTI a n d with BIR.

name

d) Registration of vessels and aircraft in coastwise and foreign trade.

e) Required issuance of sales invoices and receipts a n d keeping of accounting books.

e) Required commercial and consular invoices or certification by Philippine consular officials.

f) Effective BIR organization, and selection of efficient and honest personnel, proper coordination with other g o v e r n m e n t offices lending indirect support to tax collection.

f) Effective B C , T C , PCG & PPA organization and manning them with efficient and honest personnel, proper coordination with other g o v e r n m e n t offices.

g) Accreditation and registration of tax agents

g) Examination, accreditation and certification of Customs Brokers.

h) Exhibition of certificate of p a y m e n t of taxes at places of business, signs to be exhibited by business e n g a g e d in liquor or tobacco production or sale

//.

|

HOW IS DISCOVERY AND DETECTION THE NIRC AND TCC EFFECTED?

METHODS

TCC

NIRC

a) Examination of accounting books and records, requiring issuance of | invoices and receipts. 91 1

UNDER

|

a) Inspection and investigation of 1 arriving and departing vessels and aircraft; and their "entry" and "clearance" before leaving; cargo

and passenger manifests and stores* list; examination of "import entry" required. a

b) Surveillance of the Phil, coast, and of arrival of vessels and aircraft.

c) Making investigation, issuing summons and taking testimony

c) Making investigation, issuing s u m m o n s and taking testimony

d) Rewards to tax informers

d) Rewards to assistance detection of smuggling.

e) Exercise of police powers making searches, seizures, arrests.

e) Exercise of police powers making searches, seizures, arrests.

b) Conducting business.

///.

surveillance

of

WHAT ARE THE DIFFERENT SAFEGUARDS TO INSURE TAX NIRC AND TCC?

PERSUASIVE COLLECTION

MEANS UNDER

in

AND THE

NIRC

TCC

a) Requiring deposits of b o n d s to assure collection, or re-exportation of goods.

a) Requiring bonds, cash deposits or bank g u a r a n t e e to assure collection or re-exportation.

b) Statutory tax lien

b) Statutory tax lien

c) Posing the threat and liability for: 1. interest 2. Surcharges 3. Deportation 4. Criminal liability 5. Fines, forfeitures and other penalties.

c) Posing the threat and liability for: 1. Interest 2. S u r c h a r g e s 3. Deportation 4. Criminal liability 5. Fines, forfeitures and other penalties.

d) Declaration, statements and returns to be m a d e under penalties of perjury.

d) Declaration of "import entry" under penalties of falsification and perjury.

e) Cooperative functions of other non-tax-collecting government agencies or offices under

e) Cooperative functions of the Philippine Coast G u a r d , Phil. Ports Authority; t h e Tariff C o m m i s s i o n and

912

"Administrative Tax L a w s " .

Agencies

enforcing

Police A g e n c i e s .

f) Storage in b o n d e d w a r e h o u s e s of goods subject to specific tax.

f) Storage warehouses.

g) A p p r o v a l , supervision and joint control of p r e m i s e s used in the production or storing of g o o d s subject to excise taxes under the NIRC.

g) A b s o l u t e control of BC over port premises, requiring all goods to pass thru c u s t o m s house at port of entry; vessels in foreign trade to touch only ports of entry and aircraft to land first in an international port of entry.

h) Ordering termination accounting period.

in

customs

bonded

of

1 5 9 9 . W H A T A R E T H E D I F F E R E N T C O E R C I V E (Extrajudicial) M E A N S IN THE COLLECTION OF DELINQUENT TAXES:

NIRC

TCC

a) Distraint (actual and constructive) injunction is not generally available; it m a y only be issued by the C T A - proceeds are applied to the tax liability, surcharges and costs of sale; any excess goes to the taxpayer but any deficiency shall also be for his account.

a) Collector may get goods on which the g o v e r n m e n t has any claim for unpaid duties, taxes, fees and other charges.

b) No levy.

b) Levy

c) Forfeiture - applied in nonpayment of specific taxes. (The property subject to the tax is forfeited in favor of the government).

91 3

c) Seizure is generally applied when penalty is fine and forfeiture remedy is availed of when the importation is prohibited or irregular, e.g., failure to file an import entry although the importation is not prohibited. The taxpayer, by paying the fine or the value of the goods may recover the goods under certain conditions.

d) Enforcement of tax lien.

d) Enforcement of tax lien while the goods are in customs custody or control. The tax lien is beyond the reach of the regular courts. The proceeds are applied to the tax liability surcharges and cost of sale; any excess goes to the taxpayer but he is also subject to make good any deficiency. This remedy is availed of w h e n the importation is neither prohibited nor irregular.

e) Compromise (does not need Secretary's approval, and includes criminal cases) and abatement.

e ) C o m p r o m i s e (needs approval of Secretary, and does not include criminal cases), and settlement.

f) Judicial -The g o v e r n m e n t may file either a civil or criminal action to recover the tax liability.

f) Judicial - W h e n the goods are released a n d the tax lien is lost, judicial action against the importer m a y then be instituted. (When the g o o d s are prohibited or imported irregularly, although released, the g o o d s are still subject to seizure.

1600. COMPARATIVE REMEDIES AVAILABLE UNDER THE NIRC AND T H E TCC:

NIRC

TAXPAYERS

TCC

A) Administrative remedies 1. Before payment of the tax: a)

TO

Protest - Disputing the assessment by filing a motion for reconsideration or reinvestigation within 30 d a y s from receipt of t h e formal a s s e s s m e n t . (Sec. 228)

b) Entering into a c o m p r o m i s e with the BIR (Sec. 204) 2. After payment of the tax:

914

A) Administrative remedies 1. Protest a), any importer or interested party adversely affected with the published value of duties m a y within 15 days from date of publication file a written protest. b) If legality of assessment or appraisal is questioned, t a x p a y e r may protest within 15 d a y s from assessment. * P a y m e n t under protest is necessary.

a) Filing claim for refund or credit within 2 years regardless of any supervening event. (Sec. 229) N O T E : * P a y m e n t under protest is not necessary. * T a x p a y e r is given the right of r e d e m p t i o n within 1 year f r o m date of sale or forfeiture of the property sold. (Sec. 215)

* Settlement of any seizure by p a y m e n t of fine or redemption of foreclosed goods shall not be allowed in any case where importation is absolutely prohibited or if released thereof is prohibited by law. (Sec. 2 3 0 7 , T C C )

1. Civil Action -

a) A p p e a l to the C T A within 30 d a y s f r o m receipt of t h e a d v e r s e decision of the C I R or f r o m lapse of 180 d a y s inaction of t h e C I R on the dispute. (Sec. 2 2 8 ) b) Action to contest forfeiture of chattel. (Sec. 231)

for d a m a g e s

Refund - Abatement or drawback (if importation missing or deficient or if reexported). (Sees. 17011708, T C C )

B) Judicial remedies:

B) Judicial r e m e d i e s : 1. Civil A c t i o n :

c) Action 227)

2.

(sec.

d)

Injunction - W h e n the collection of the tax m a y jeopardize interest of taxpayer or the government, CTA may enjoin the collection and may require the taxpayer to put in a b o n d . (Sec. 1, RA 1125)

2. Criminal Action: Acting erring and abusive tax officials and/or employees of the BIR.

915

a) A p p e a l to C T A within 30 d a y s from received of the adverse decision of the C o m m i s s i o n e r of Secretary of Finance. *

A d v e r s e decision of the Collector is appealable to t h e Commissioner not to the C T A within 15 days from receipt thereof (notice to the collector of appeal to the C o m m i s s i o n e r is required) (Sec. 2313. T C C )

b)

Action to question legality of the seizure.

the

c) A b a n d o n m e n t of the goods. (Sec. 1802, TCC)

N O T E : The taxpayer's judicial relief both under the NIRC and the TCC may lie either with the CTA (exclusive in all cases cognizable by it) or the ordinary courts (in all other cases).

PROBLEM EXERCISES 1601.

What is the objective of the anti-dumping law? A n s w e r . It a i m s to prohibit the sale to and in the Philippines of foreign g o o d s at unfair prices. T h e importance of the law lies not in the n u m b e r of findings of d u m p i n g m a d e neither by the Department of Finance nor in the a m o u n t of d u m p i n g duties collected but in its deterrent effect on attempts to injure local industries by unfair prices.

1602. X,

a

dual

country

citizen

after the

opted

to

approval

permanently of his

dual

reside

in

the

citizenship.

He

imported a two-door refrigerator for their o w n use and paid

the

corresponding

decided

to

instead

bringing

relocate

effects.

Six

duties.

his

family

along

with

After to

Bangkok,

them

months thereafter,

his

sometime

all

their

eldest son

he

Thailand personal (S)

got

married a n d he decided to reside in Manila. X shipped to S t h e still exported

n e w 2-door refrigerator earlier imported and

together with

other various

appliances

so

S

n e e d not b u y t h e m a g a i n in starting his family. Is the reimportation

of the

same

2-door

refrigerator subject to

duty? A n s w e r . Y e s , b e c a u s e the T C C provides that "all articles, when imported from any foreign country shall be subject to duty upon e a c h importation, even t h o u g h previously exported, except as otherwise specifically provided in the C o d e or in other laws. 1603. Can

the

customs

authorities

subject

persons

coming

into the Philippines f r o m f o r e i g n countries to search of their person and property? Answer. All persons coming into the Philippines from foreign countries are liable to detention and search by Customs authorities under such regulations as maybe prescribed relative thereto, E X C E P T heads of states and foreign diplomats pursuant to international law and comity.

917

1604. W h a t treatment is a c c o r d e d to b a g g a g e of diplomats stationed in the Philippines, a n d their office supplies and e q u i p m e n t under the Tariff C o d e ? Answer. They are not only exempt from duties and taxes and the requirement of an informal and formal entry but also immune from examination and search under condition of reciprocity. 1605. "X", a p a s s e n g e r on b o a r d a ship p a s s i n g t h r o u g h the Port of Manila has s o m e tins of o p i u m (prohibited articles) in his p o s s e s s i o n . Is the o p i u m subject to seizure and the o w n e r to prosecution for alleged importation of opium? Answer. No. T h e mere possession of o p i u m on board vessel in Philippine waters is not in itself sufficient to a m o u n t to an importation of the s a m e . There must be proof of intent to import. "X" is not guilty of the crime of illegal importation of such drug, in the absence of proof that he intended to discharge the s a m e or to actually bring it within the Philippines. (U.S. us C h u a Loy, 37 Phil. 510) 1606. "X", a finance attache a s s i g n e d in the Middle East, came h o m e to the Philippines after c o m p l e t i n g his 4-year tour of

duty,

bringing

with

him

a

BMW

motor

vehicle

registered in his n a m e . Is the car e x e m p t f r o m p a y m e n t of duty? Answer. Yes. Finance attache and all other attache's are included in the e x e m p t i o n of one car. T h e y enjoy the benefits of exemption from duties and taxes, including o n e motor vehicle upon the dissolution of their mission. 1607. Is

Philippine

special

or

Government

diplomatic

officials

missions

who

abroad

returned

from

exempt

from

baggage examinations? Answer. All Philippine G o v e r n m e n t officials leaving for, or returning f r o m , official or unofficial missions a b r o a d are subject to baggage inspection by the Bureau of C u s t o m s personnel. This is intended to curb s m u g g l i n g .

918

1608. W h a t about packages imported freight or through the mail?

by such

diplomats

by

A n s w e r . S u c h p a c k a g e s w h e n bearing the official seal of a foreign g o v e r n m e n t , a c c o m p a n i e d by a certificate under such seal to the effect that they contain d o c u m e n t s may be admitted from of duty without C u s t o m s e x a m i n a t i o n . A proper notation as to the disposition of the articles should be m a d e by the Customs officer c o n c e r n e d on the manifest. 1609. W h a t about those articles imported for the personal or family use of the said diplomats? A n s w e r . T h e y are also e x e m p t f r o m duties and taxes under special a g r e e m e n t b e t w e e n t h e Philippine G o v e r n m e n t and the countries w h i c h they represent. T h e privilege is granted only upon specific instruction by t h e D e p a r t m e n t of Finance which is issued only upon request by t h e D e p a r t m e n t of Foreign Affairs. 1610. T h e c u s t o m s officials seized allegedly untaxed vehicles a n d p a r t s o f b u s i n e s s m a n J a o , p r o m p t i n g t h e latter t o file a petition for certiorari, prohibition a n d m a n d a m u s with

prayer for a temporary restraining order with the

RTC. The RTC granted the injunction and prohibited the respondent

from

seizing,

detaining,

transporting

and

selling at public auction the disputed article. Contending that the R T C h a d no jurisdiction over the subject matter, the tax officials filed a petition for review with the Court of A p p e a l s . Decide. [ N O T E : this case w a s decided prior to RA 9282] A n s w e r . T h e petition of the tax officials is impressed with merits. T h e RTC is devoid of any c o m p e t e n c e to pass upon the validity or regularity of the seizure and forfeiture proceedings conducted by the Bureau of C u s t o m s or to enjoin or otherwise interferes with these proceedings. T h e Collector of Customs sitting in seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching upon seizure and forfeiture of dutiable goods. The RTC is precluded from assuming cognizance over said matters even through petitions of certiorari, prohibition and mandamus. (Jao vs. CA, October 6, 1995)

919

Mison

vs.

Natividad.

Even the illegality of the warrant of seizure and detention cannot justify the trial court's interference with the Collector's jurisdiction between the existence of the collector's power to the issue and the regularity of the proceedings taken under such power. Even if there be irregularity in the exercise of such power, the RTC does not have the competence to review, modify, or reverse whatever conclusions may result therefrom. (Taxpayer's remedies - appeal to the CTA) 1 6 1 1 . H o w is the office of the C o m m i s s i o n e r of C u s t o m s filledup in case of v a c a n c y ? A n s w e r . In case of temporary and/or permanent vacancy, one of the Deputy Commissioners shall be designated by the Secretary of Finance to act as C o m m i s s i o n e r of C u s t o m s until the incumbent Commissioner r e a s s u m e s his duties or the position is filled by permanent appointment by the President. 1612. Assessment of customs duties the

Collector.

classification

Under Sec. or return

1407

is the responsibility of of the T C C ,

approved

by

him

appraisal,

may

not be

altered or modified in a n y manner. Does the Secretary of Finance have the authority to order a re-assessment of duties? A n s w e r . Yes. Under the following instances: a) Within one year after p a y m e n t of the duties or u p o n statement of error as a p p r o v e d by t h e Collector; b) Within 15 d a y s after p a y m e n t , u p o n request by the Collector for re-appraisal or re-classification if the appraisal or classification is d e e m e d to be low; and c) Upon request for reappraisal or reclassification in the form of a timely protest. 1613. X has a 1 0 - w h e e l e r truck that he u s e s in his personal b u s i n e s s . Y, a b u s i n e s s m a n e n g a g e d in s m u g g l i n g hired X's truck to transport other

agricultural

warehouse. X has

imported products

garlic, vegetables and from

the

customs

no certificate of public convenience

920

but a g r e e d to lease his vehicle only b e c a u s e X a n d Y used to be c l a s s m a t e s in their high school days. X did not k n o w that the g o o d s w e r e illegally i m p o r t e d . C a n the Collector of C u s t o m s of the port area validly seized the g o o d s a n d forfeit X's truck as an instrument in the smuggling? A n s w e r . Yes. T h e Collector of C u s t o m s of the port area can validly seize all the g o o d s and forfeit t h e truck as an instrument in the s m u g g l i n g activity, since the s a m e w a s used unlawfully in the importation of s m u g g l e d g o o d s . T h e mere carrying of such articles on board the truck in c o m m e r c i a l quantities shall subject the truck to forfeiture, since it w a s not being used as a duly authorized c o m m o n carrier, w h i c h w a s chartered or leased as such. [Sec. 2 5 3 0 (1), T C C ] However, a l t h o u g h forfeiture of the vehicle will not be effected if it is established that the o w n e r thereof has NO K N O W L E D G E of or participation in the unlawful act, there arises a prima facie presumption or k n o w l e d g e or participation if the owner is N O T in business for w h i c h the c o n v e y a n c e is generally used. Thus, not having a certificate of public c o n v e n i e n c e to operate a trucking business, he is legally d e e m e d not to have been e n g a g e d in the trucking business. (Sec. 2 5 3 1 , T C C ) T h e truck may validly is forfeited in favor of the g o v e r n m e n t . 1614. X, a registered o w n e r of a v e s s e l licensed to e n g a g e in c o a s t w i s e s h i p p i n g w a s a p p r e h e n d e d by the Phil. Navy within the Phil, water carrying untaxed imported cigarettes and goods. No one claimed the cigarettes and g o o d s . C o n s e q u e n t l y , all w e r e f o r f e i t e d i n f a v o r o f t h e g o v e r n m e n t . X c l a i m e d his v e s s e l alleging that he did not k n o w that his vessel w a s u s e d for s m u g g l i n g . Is the motorboat subject to forfeiture? A n s w e r . The vessel is clearly subject to forfeiture in favor of the Government. Forfeiture proceedings are in the nature of proceedings in rem and are directed against the res. The fact that X has no actual knowledge that his motorboat was used illegally does not render the vessel exempt from forfeiture. X's defense that he has no knowledge that his vessel was used illegally was personal to him but cannot absolve the vessel from liability of forfeiture. 921

1615. Grand Trading (GT) w a s the consignee of sacks of refined s u g a r seized by the Collector of C u s t o m s on the ground that these w e r e of foreign origin. However, In a N o v e m b e r 3, 2002 decision, the Collector ordered the r e l e a s e o f s u b j e c t s u g a r . T h i s d e c i s i o n w a s later modified by the Collector finding that the sacks of sugar w e r e really of f o r e i g n origin, s m u g g l e d into the country and declared t h e m forfeited. GT c o n t e n d s that the N o v e m b e r 3 decision b e c a m e final a n d executory in view of the absence of an appeal therefrom by the aggrieved party himself within the 15-day period provided in Sec. 2313 of the T C C . On the other hand, the Collector argued that since the N o v e m b e r 3 d e c i s i o n w a s a d v e r s e to the government, the case should have gone to the Commissioner of Customs on automatic review pursuant to Memorandum Order No. 20-87 which implements Sec. 12 of the Integrated Reorganization Plan. Is the N o v e m b e r decision of the Collector subject to the automatic review of the Commissioner of customs? A n s w e r . Yes. Sec.12 of the Integrated Reorganization Plan which the C o m m i s s i o n e r of C u s t o m s in his C u s t o m s M e m o r a n d u m Order No. 20-87, enjoined all Collectors to follow strictly, is intended to protect the interest of the g o v e r n m e n t in the collection of customs duties in those seizure and protest cases w h i c h , without the automatic review provided therein, neither t h e Commissioner of Customs nor the Secretary of Finance w o u l d probably ever know about. Without the automatic review by the C o m m i s s i o n e r of Customs or the Secretary of Finance, a collector in any of our country's far flung ports w o u l d have absolute and unbridled discretion to determine w h e t h e r g o o d s seized by him are locally produced, hence, not dutiable, or of foreign origin, a n d therefore subject to payment of c u s t o m s duties and t a x e s . (Yaokasin vs. Commissioner of Customs, 180 SCRA 591) 1616. W h a t are the

requisites

for forfeiture

of goods

under

S e c . 2 5 3 0 (f), i n r e l a t i o n t o ( 1 ) ( 3 - 5 ) , o f t h e T C C ? Answer. a)

the wrongful making by the owner, importer, exporter or consignee of any declaration or affidavit, or the wrongful making or delivery by the s a m e person of any invoice, letter or

922

paper - all touching merchandise;

on the

importation

or exportation

of

b)

the falsity of s u c h declaration, affidavit, invoice, letter or paper, and

c)

an intention on the part of t h e importer or consignee to evade the p a y m e n t of the duties d u e .

1617. M a y the tax officials f r o m the B u r e a u of C u s t o m s m a k e a valid search, seizure and arrest without a warrant? A n s w e r . Under the Tariff and C u s t o m s C o d e , the tax officials from the B u r e a u of C u s t o m s m a y m a k e a valid s e a r c h , seizure and arrest e v e n without a warrant for purposes of enforcing customs and tariff laws and tax collection. (2004 case) N O T E : W h e r e there is illegality in seizure and forfeiture conducted by t h e tax official or collector, the r e m e d y of the taxpayer is to appeal to the C o m m i s s i o n e r (then to the C T A and to the SC) and not to the R T C . 1618. May the president reverse, modify or a m e n d the decision of the Tariff C o m m i s s i o n ? A n s w e r . T h e Tariff C o m m i s s i o n is an agency in the Executive Department necessarily it is subject to the control and supervision of the President, its decisions and recommendations cannot tie the hands of the Chief Executive with finality. Hence, the President can reverse, modify of a m e n d the decision of the Tariff Commission. (2005 case) 1619. Should there be conflict between the findings and r e c o m m e n d a t i o n of the Tariff C o m m i s s i o n (TC) on the imposition of import taxes, May the Department of Trade a n d Industry (DTI) review or modify the findings of the Tariff C o m m i s s i o n ? Answer. The DTI has no authority to review or modify the findings and recommendation of the Tariff Commission. Even if conceding that the TC's findings may be administratively reviewed, it is the N E D A that may conduct such review following the principles of administrative law, and the NEDA's decision in turn is reviewable by the Office of the President. In addition, actions of the Tariff

923

Commission are not beyond the pale of certiorari jurisdiction of the court. (2005 case. RE: Safeguard Measures Act) 1 6 2 0 . T h e B u r e a u o f C u s t o m s r a i d e d a n d s e i z e d g o o d s i n the w a r e h o u s e of X Corporation on the belief that they were unlawfully released f r o m t h e c u s t o m s c u s t o d y . X filed a c a s e b e f o r e t h e r e g u l a r c o u r t q u e s t i o n i n g t h e validity and regularity of the seizure and forfeiture proceeding. Further, X believes that the right of the tax officials to collect had a l r e a d y p r e s c r i b e d c o n s i d e r i n g that the c u s t o m s officials a l l o w e d the release of the g o o d s from c u s t o m s c u s t o d y with c l e a r a n c e s o t h e r w i s e h o w could the g o o d s b e r e l e a s e d i f n o p a y m e n t w e r e m a d e relative thereto? Will the action prosper? A n s w e r . The regular courts (RTC) are devoid of any competence to pass upon the validity or regularity of seizure and forfeiture proceedings conducted by the Bureau of C u s t o m s and to enjoin or otherwise interfere with these proceedings. T h e Collector sitting in the seizure and forfeiture proceedings has exclusive jurisdiction to hear and determine all questions touching on the seizure and forfeiture of dutiable goods and the regular courts cannot interfere with nor deprive him of such jurisdiction. (2005 case) The seizure is valid. T h e c u s t o m s a g e n t s have authority over seizure and forfeiture cases involving imported g o o d s . T h e regular courts do not have jurisdiction to take c o g n i z a n c e of cases involving seizure of imported g o o d s . T h e r e is no need of warrant under the given facts. In fact, the seizure is not unconstitutional because it w a s m a d e for purposes of enforcing collection of unpaid taxes. Notably, the collection of taxes is never unreasonable. X's submission that the right to collect c u s t o m s duties has prescribed is not correct b e c a u s e importation has not e n d e d . For articles subject to c u s t o m s duties, importation ends w h e n t h e regular permit for withdrawal shall have b e e n issued and the corresponding taxes fully paid. Considering that falsified d o c u m e n t s w e r e used importation w a s not yet e n d e d . T h u s , prescription period to collect has not toiled. 1 6 2 1 . X w a s n o t a b l e t o p a y his o b l i g a t i o n s t o Y . T h e latter filed a case in court a n d w o n . A writ of a t t a c h m e n t w a s issued by the

Regional Trial

Court.

that the

customs

agents

imported

goods

belonging

The

are

924

to

in X.

court sheriff learned possession Before

any

of some seizure

p r o c e e d i n g s could be initiated by the c u s t o m s officials, the court sheriff w e n t to the Bureau of C u s t o m s to serve the writ of attachment. May the goods of X be the subject of the writ of attachment? Reason. A n s w e r . T h e g o o d s in the possession of the c u s t o m s officials can not be the subject of t h e writ of attachment issued by the regular court. W h e n importation has not e n d e d the g o o d s are beyond the reach of any court. Importation is d e e m e d terminated only upon full p a y m e n t of the taxes i m p o s e d on said g o o d s at the port of entry and the legal permit for its release shall have b e e n granted by the Collector of C u s t o m s . 1622. X

imported

abroad officials,

and he

cellphones through was

commercial

connivance

able

cellphones without tax Collector received

in to

with

cause

payments

the and

information that the

quantities some release

from

customs of

the

clearances. The cellphones

are

n o w hidden in the house of Y, X's brother. The Collector instituted seizure proceedings and ordered the seizure a n d detention of subject g o o d s . On the strength of the order, agents from the

Bureau of Customs

raided Y's

h o u s e a n d s e i z e d all t h e c e l l p h o n e s . I s t h e s e a r c h a n d seizure valid? Reason. A n s w e r . While t h e general rule provides that a search warrant is not necessary to effect the search and seizure of dutiable goods concealed for purposes of tax evasion, the customs officials cannot enter a dwelling without a valid warrant. T h e search and seizure of the c u s t o m s agents without the benefit of a search warrant issued by the court is not valid and is unconstitutional. The customs officials are allowed to enter offices, w a r e h o u s e or business establishments without warrant for enforce customs laws but not dwelling. 1623. M a y the Collector of C u s t o m s issue a n d detention of a C e s s a plane persons and gas lamps for the sole a n d g u i d i n g t h e plane's t a k e off f r o m smuggling?

a warrant of seizure used to transport p u r p o s e of lighting the airstrip in aid of

Answer. Y e s , the Cessna plane w a s used to insure the successful delivery of the smuggled goods. It transported the smugglers and subsequently delivered the necessary lighting equipment to enable 925

the cargo plane to take off without peril and transport the goods to its final destination. Such complementary or collateral use of the plane for smuggling operation is sufficient for it to be deemed to have been used unlawfully in the smuggling of undeclared goods. 1624. W h a t is the basis of dutiable value of an i m p o r t e d article subject to an ad valorem tax under the T C C ? Answer. Under RA 9135, the basis now is the transactional value which shall be the price actually paid or payable for the goods when sold for export to the Philippines, adjusted by adding certain cost elements to the extent that they are incurred by the buyer but are not included in the price actually paid or payable for the subject imported goods. If such value could not be d e t e r m i n e d , the (a) transactional values of identical goods, (b) of similar goods; (c) deductive value; (d) computed value and (e) fallback value may be used to ascertain the import taxes d u e . 1625. Is

the

power

of

supervision

and

control

over

the

entrance of vessels a n d aircraft limited to t h o s e e n g a g e d in domestic commerce only? Answer. No. Such powers apply only t o vessels o r aircraft e n g a g e d only in foreign c o m m e r c e . 1626. Are

foreign

mails

arriving

in

the

country

within

the

jurisdiction of the Bureau of C u s t o m s ? Answer. Yes. A m o n g the general duties of t h e B u r e a u of Customs is to supervise the handling of foreign and domestic mails arriving in the Philippines w h e t h e r through the vessels or aircraft to determine lawful duties d u e on imported dutiable articles but it has nothing to do with the postage d u e t h e r e o n . 1627. W h a t is the nature of the jurisdiction of the Bureau of Customs over seizure and forfeiture cases? Answer. It is exclusively original. ( N O T concurrent original, exclusive appellate and concurrent appellate) 1628. The

Commissioner

of

Customs

issued

rules

and

regulations that seek to tighten the release of imported goods. X, an graft a n d

i m p o r t e r b e l i e v e s t h a t m o r e a v e n u e s for

corruption

results

926

because

more

p e o p l e are

n o w involved in the approval of the release of imported articles. X inquires f r o m y o u the validity of the rules and regulations issued by the Commissioner of Customs. What is your position on the matter? A n s w e r . All rules and regulations issued by the C o m m i s s i o n e r of C u s t o m s shall be subject to the approval of the Secretary of Finance. Under the given facts, if t h e rules and regulations w e r e not a p p r o v e d t h e n they are v o i d . X c a n validly contest the same before the court. 1629. Are vessels engaged in foreign trade allowed to touch at a port o t h e r t h e n a port of e n t r y ? A n s w e r . T h e Tariff C o d e requires that all vessels e n g a g e d in foreign trade are required to t o u c h at a port of entry only. T h e only exception is w h e n said vessel is specially allowed by the Bureau of Customs. 1630. X

goods

arrived

from

customs warehouse.

Japan

Before

and its

were

stored

in

the

release X w e n t to the

Bureau of Customs to check on the cartoons, thereupon, he

noticed some

damage.

It

was

boxes opened later

and the

established

damage occurred during

that

others the

badly

loss

and

its v o y a g e . I s X e x e m p t f r o m

import duties on his losses? A n s w e r . No he is not e x e m p t b e c a u s e the customs laws do not allow a b a t e m e n t of duties on account of losses, d a m a g e and deterioration during t h e v o y a g e . His remedy is to demand reimbursement from the shipper, insurer or the broker as the case may be. 1631. What

kind

of

properties

in

customs

custody

can

disposed of by public sale? Answer. a) Abandoned articles b)

Articles entered under warehousing entry not withdrawn;

c)

Seized articles after proceedings were made; and

d)

Articles subject to a valid lien for customs charges. 927

be

1632. If articles or g o o d s are imported free of duties, taxes and other charges, when is its importation deemed terminated? Answer. Upon legally leaving the jurisdiction of the customs its importation is d e e m e d to have terminated. 1633. W h o has jurisdiction over the r e m o v a l of a n y article or the departure of any passenger from the landing place of an aircraft c o m i n g into the Philippines in c a s e of emergency or forced landing? Answer. The Bureau of C u s t o m s and not the NAIA o r the Civil Aeronautics Authority. 1634.

X,

an

English

national

decided

to

marry

her Filipina

girlfriend, N, w h o m he met in L o n d o n then w o r k i n g as a nurse in one of the hospitals there. N c a m e h o m e ahead to prepare for their w e d d i n g . After four m o n t h s X follows N to settle in t h e P h i l i p p i n e s . X s t o p p e d o v e r in H o n g Kong and bought several appliances which he caused to be shipped to the Philippines by boat. Is X e x e m p t from payment

of

duties

considering

that

he

decides

to

permanently settle in the country? R e a s o n . Answer. No, t h e appliances shipped b y X t o t h e Philippines although intended for their personal use m a y not be e x e m p t from import duties because a m o n g the conditions for e x e m p t i o n is that the articles must have b e e n brought by him f r o m his former place of abode. 1635. Is

the

government

liable

for

customs

duties

on

importation of articles? Answer. Yes, all g o v e r n m e n t importations for its o w n use or its subordinates, branches, instrumentalities, or corporations shall be subject to duty, tax, f e e s and other c h a r g e s except those importations provided for in Sec. 105 of the Tariff a n d Customs Code. (Sec. 1205)

928

1636. To w h o m should the imported articles be delivered or released? A n s w e r . To the c o n s i g n e e , or lawful holder of the bill of lading, or to the c u s t o m s broker. 1637. Briefly d i s c u s s t h e t a x p a y e r s ' r e m e d i e s u n d e r the Tariff and Customs Code: A n s w e r . T a x p a y e r ' s remedies arise only after the payment of duties. (No p a y m e n t No protest Rule) T h e administrative remedies consist of filing for a refund w h i c h m a y take the f o r m of abatement or d r a w b a c k . T h e t a x p a y e r c a n also file a protest within 15 days from p a y m e n t if he disagrees with the ruling or decision of the Collector of C u s t o m s regarding the legality or correctness of the assessment of c u s t o m s duties. If the decision of the Collector is adverse to the taxpayer, he can notify the Collector within 15 d a y s f r o m receipt of the said decision of his desire to have his case reviewed by the Commissioner. Resort to judicial relief can be availed of by the taxpayer by appealing the decision of the C o m m i s s i o n e r within 30 days from receipt thereof to the C T A , and finally to the S C . T h e decision of t h e Collector on the taxpayer's protest, if adverse to the G o v e r n m e n t (that is, in favor of the taxpayer) is automatically elevated to the C o m m i s s i o n e r for review, If such decision is affirmed by the Commissioner, the same shall be automatically elevated to and finally reviewed by the Secretary of Finance. 1638. W h a t is the role of the Philippine C o a s t g u a r d under the TCC? Answer. T h e Code recognizes the functions of the Philippine Coastguard to exercise surveillance of vessels entering or departing from the Philippine territory and its role of preventing and suppressing illegal entry, smuggling and other customs frauds and violations of the maritime law.

929

1639. Is there n e e d for a s e a r c h w a r r a n t to go on board a vessel or aircraft for t h e p u r p o s e of c o n d u c t i n g a search thereof and the persons and articles therein? Answer. No search warrant is necessary for a person exercising police authority to search a vessel or aircraft or any person or articles on board therein. r

The power to search under the T C C includes the removal of any false bottom, partition, bulkhead or other obstruction. The owner of the vessel may not claim d a m a g e caused to any article, vessel or aircraft under a legal search.

1 6 4 0 . M a y a t a x p a y e r file a petition f o r d e c l a r a t o r y relief to q u e s t i o n his tax liability b e f o r e t h e r e g u l a r c o u r t ? Answer. The taxpayer is not allowed. T h e reason is t o prevent delay in the collection of taxes u p o n w h i c h the government depends for its existence. To allow a taxpayer to first secure a ruling as regards the validity of a tax before paying it would defeat the purpose. (National Dental Supply C o . vs. Meer, Oct. 16, 1951) 1641. Are Tax Credit Certificates allowed to be payment

of

duties

and

taxes

due

the

used

in the

Bureau

of

Customs? Answer. Y e s . 1642. W h a t are the other types of fees that m a y be imposed by the Bureau of customs aside from duties? Answer. a) Arrastre charges b)

W h a r f a g e dues - This is c h a r g e d not for the use of the wharf but for a special f u n d , t h e "Port W o r k s F u n d " of the B u r e a u . It is the counterpart of license.

c)

Berthing fees

d)

T o n n a g e fees, and

e)

Harbor fees.

930

1643. Are c o m m o n carriers subject to forfeiture? A n s w e r . C o m m o n carriers are generally not subject to forfeiture but if the o w n e r thereof has k n o w l e d g e of its use in smuggling and he w a s a consenting party to the illegal activity, it may be forfeited. If a motor vehicle is hired to carry s m u g g l e d goods but it has no Certificate of Public C o n v e n i e n c e (CPC), it is not a c o m m o n carrier. It is thus subject to forfeiture and lack of personal k n o w l e d g e of the o w n e r of the carrier is not a defense to forfeiture. 1644.X

is

from

the

owner

the

of trucks

Bureau

of

transporting

Customs

warehouse or place of business. the driver w a s transporting

to

container vans the

taxpayers'

On one occasion, while

a 20-footer containing van

loaded with perishable g o o d s , he w a s intercepted by tax o f f i c i a l s f r o m t h e B u r e a u w h o w a n t e d t o c h e c k o n all d o c u m e n t s appertaining to the contents of the vans. The driver w a s not in possession of s o m e of the documents. The truck w a s not allowed to leave. As a consequence of the flagging most

of

the

down items

and

delay in

were

spoiled

delivering the goods, and

beyond

human

c o n s u m p t i o n . A r e the tax officials liable under the T C C ? A n s w e r . Mere flagging d o w n of the container van is not punishable under the Tariff C o d e . The tax officials cannot be convicted under the T C C since there is no evidence that they did actually search the container v a n s . 1645. S e c t i o n 105, last p a r a g r a p h o f t h e Tariff a n d C u s t o m s C o d e provides that "there shall be no exemptions w h a t s o e v e r f r o m t h e p a y m e n t o f c u s t o m s duties", cite exceptions thereto, if any. Answer. a) Identified goods that are conditionally-free from duties as provided under the T C C . b)

customs

Exemptions granted to G O C C s with existing commitments, agreements or obligations with foreign countries.

931

c)

Exemptions of international institutions, associations or organizations pursuant to agreements and special laws where the government is a signatory thereto.

d)

Exemptions granted by the President of the Philippines upon the recommendation of N E D A in the interest of the national economic development.