2 specific limitations on local power to tax

Under the Local Government Code, local government units are granted the power to levy taxes on real property not otherwise exempted under the law.

The Local Government Code provides two (2) specific limitations on local government units' power of taxation. The first is Section 133(o), which provides:
Section 133. Common Limitations on the Taxing Powers of Local Government Units. Unless otherwise provided herein, the exercise of the taxing powers of provinces, cities, municipalities, and barangays shall not extend to the levy of the following:

. . . .

(o) Taxes, fees or charges of any kind on the National Government, its agencies and instrumentalities, and local government units.
The first limitation provides a general rule, that is, that local government units cannot levy any taxes, fees, or charges of any kind on the national government or its agencies and instrumentalities. The provision, however, also provides for an exception: "[u]nless otherwise provided herein." The implication, therefore, is that while a government agency or instrumentality is generally tax-exempt, the Local Government Code may provide for instances when it could be taxable.

The second limitation is provided for under Section 234 of the Local Government Code, which enumerates the properties that are specifically exempted from the payment of real property taxes:
Section 234. Exemptions from Real Property Tax. - The following are exempted from payment of the real property tax:

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

(b) Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;

(c) All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or -controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;

(d) All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and

(e) Machinery and equipment used for pollution control and environmental protection.

Except as provided herein, any exemption from payment of real property tax previously granted to, or presently enjoyed by, all persons, whether natural or juridical, including all government-owned or - controlled corporations are hereby withdrawn upon the effectivity of this Code.
The second limitation likewise provides for its own exceptions. Under Section 234(a), the general rule is that any real property owned by the Republic or its political subdivisions is exempt from the payment of real property tax "except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person." The implication is that real property, even if owned by the Republic or any of its political subdivisions, may still be subject to real property tax if the beneficial use of the real property was granted to a taxable person.

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