The Local Treasury Operations Manual

Book 5
Consolacion Q. Agcaoili, EMDM
Acting Regional Director

Basic Operations on Local Treasury Service (BOLTS)

Department of Finance
Bureau of Local Government Finance
MIMAROPA Region
 Local Treasury Operations Manual

Book 5 ☞ Detailed
Procedures on Real Property Tax,
Business Tax, Fees and
Charges, and Other Resource
Mobilization

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 BOOK 5
Chapter 1 Real Property Taxation
Chapter 2 Business and Other Local Taxes
Chapter 3 Fees and Charges
Chapter 4 Government Enterprise Operations
Chapter 5 Credit Financing and Alternative Sources of
Funds

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 BOOK 5, Chapter 1

Real Property Taxation –

▪ direct tax on ownership of lands, buildings and other improvements, including

machinery
▪ covers the (1) administration, (2) appraisal, (3) assessment, (4) levy and (5)
collection of real property tax (RPT)
▪ real property is subject to the definition under Art. 415 of the Civil Code

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 BOOK 5, Chapter 1

Sec. 165. Power to Levy Property Tax. – A province, city, or municipality within
Metropolitan Manila Area may levy an annual ad valorem tax on real property
such as land, buildings, machinery, and other improvements not specifically
exempted by law. (Sec. 232, LGC)

The power to levy the ad valorem tax on real property is exercised through the
sanggunian of the LGU concerned by way of an ordinance. (Sec. 132, LGC)

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 BOOK 5, Chapter 1

Sec. 166. Definition of Terms:

▪ Actual Use – purpose for which the real property is principally or predominantly utilized by
the person in possession thereof
▪ Ad Valorem Tax – levy determined on the basis of a fixed proportion of the value of the real
property
▪ Assessment Level - percentage applied to the market value to determine the taxable value of
the real property
▪ Assesses Value/Taxable Value – market value of the real property multiplied by the
Assessment Level
▪ Market Value – estimated amount for which a property should exchange on the date of
valuation between a willing buyer and a willing seller in arm’s length transaction after
proper marketing wherein the parties had each acted knowledgeably, prudently, and without
compulsion.

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 BOOK 5, Chapter 1

Sec. 167. Fundamental Principles – governing real property taxation:

▪ real property shall be appraised at its current and fair market value prevailing in the locality
where it is situated
▪ real property shall be classified for assessment purposes on the basis of actual use
▪ real property shall be assessed on the basis of a uniform classification within each LGU
▪ the appraisal, assessment, levy and collection of RPT shall not be let to a any private person
▪ the appraisal and assessment of real property shall be equitable
(Sec. 198, LGC)

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 BOOK 5, Chapter 1

Sec. 168. Administration of the Real Property Tax. –

▪ provinces and cities, including municipalities in Metropolitan Manila Area

▪ primarily responsible for the proper, efficient and effective, administration
of the RPT
▪ subject to the rules and regulations issued by DOF
▪ power of the DOF in the review and examination assessment and tax
records to ensure the proper implementation of real property taxation
(Art. 291, IRR implementing Sec. 200, LGC)

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 BOOK 5, Chapter 1

Sec. 169. Rates of Levy

Sec. 170. Special Levies

Taxes on Real Property Rates

Basic Tax Province - 1% of AV

(Sec. 233, LGC) City/Mun (MMA) - 2% of AV

SEF
(Sec. 235, LGC) 1% of AV

Idle Land Tax

(Sec. 236, LGC) 5% of AV

Special Levy
(Sec. 240, LGC) 60% of actual cost

Socialized Housing Tax

(UDHA) 5%

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 BOOK 5, Chapter 1, Section 170

▪ Idle Land Tax

- Listing of idle lands by the municipal assessor (Sec. 239, LGC)

- What are idle lands?

1. Agricultural lands more than 1 ha., 1/2 of which remains uncultivated or
unimproved, but not considered idle if:
• planted to permanent or perennial crops with at least 50 trees to a ha.
• used for grazing purposes
2. Lands other than agricultural located in a city or municipality more than 1,000
sq.m. in area, ½ of which remain unutilized or unimproved

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 BOOK 5, Chapter 1, Section 170

Exemptions from Idle Land Tax

▪ force majeure
▪ civil disturbance
▪ natural calamity
▪ any other cause which physically or legally prevents the
owner of the property from improving, utilizing or
cultivating the same

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 BOOK 5, Chapter 1

Sec. 171. Exemption from Real Property Tax. –

1) 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;
Note: - GOCCs are not considered political subdivisions
- PEZA no longer exempt from RPT

2) 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;
Note: - properties owned by the institutions to create revenues not exempt

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 BOOK 5, Chapter 1, Section 171

3) Machineries and equipment that are actually, directly, and exclusively used by local water utilities and
GOCCs engaged in the supply and distribution of water and/or generation and transmission of electric power;
Note: - water utilities and power corp. owned by private persons are not exempt

4) Real Property owned by duly registered cooperatives as provided under R.A. 6938;
Note: - cooperatives duly registered with the Cooperatives Development Authority (CDA), with
minimum accumulated reserves and undivided net savings of P10 million are exempt

5) Machinery and equipment used for pollution control and environmental protection.
(Sec. 234, LGC)

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 BOOK 5, Chapter 1, Section 171

Except as otherwise provided herein, any exemption from payment of real

property tax previously granted to, or presently enjoyed by, all persons, whether
natural or juridical, including GOCCs are hereby withdrawn upon the
effectivty of this Code. (Sec. 234, LGC)

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 BOOK 5, Chapter 1, Section 171

More on RPT Exemption . . .

▪ LGUS do not have authority to grant exemptions from RPT on those which are not expressly
exempt by the LGC, as it is tantamount to amending the law enacted by Congress;
▪ “equality treatment clause” in the franchise acts of SMART, PT & T, Bell Telecoms, and DIGITEL
granted them the privilege to enjoy RPT exemption on their properties used in connection with the
operation of their franchise, but all other properties remain taxable.
▪ real properties owned by embassies, consulates, and other diplomatic offices are not taxable because
they are deemed extensions of the country they represent and are subject to the laws thereof

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 BOOK 5, Chapter 1, Section 171

Sec. 172. Withdrawal of Exemptions from Payment of Real Property Taxes .-

• the 1991 Local Government Code expressly withdrew all exemption from RPT
previously granted to, or enjoyed by all persons, including GOCCs, except
local water districts, cooperatives duly registered under R. A. 6938, non-stock
and non-profit hospitals and educational institutions;

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 BOOK 5, Chapter 1

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

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 BOOK 5, Chapter 1

Sec. 174. Collection of the Real Property Tax:

a) Assessment Roll –
▪ a list of all persons whose real properties have been newly assessed or re-assessed and the values of such
properties on the basis of the declarations filed by the owners
▪ to be submitted by the Local Assessor to the Local Treasurer on or before the 31st day of December
a) Responsibility of Local Treasurers –
▪ bond
▪ no need for SB resolution delegating to Municipal Treasurers within the province the responsibility to
collect RPT since it is already granted under the LGC. (Sec. 247, LGC)
b) Deputization of Barangay Treasurers –
▪ City or Municipal Treasurer
▪ bond to be paid by the city or municipality
(Secs. 247 & 248, LGC)

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 BOOK 5, Chapter 1

Sec. 175. Procedures for the Collection of Real Property Tax. –

A. Posting of Collection Notice

▪ For Current Year: Notice of Time for Collection of Tax - post on or before the 31st of January, at a
conspicuous and publicly accessible place at the City or Municipal Hall, and published in a newspaper of
general circulation in a locality once a week for 2 consecutive weeks, indicating the date when RPT may be
paid without interest. (Sec. 249, LGC)

▪ For Previous Year: Notice of Delinquency in Payment of Real Property Tax – post at the main entrance of
the Provincial Capitol, City or Municipal Hall, and in publicly accessible and conspicuous place in each
barangay of the LGU, and shall be published in a newspaper of general circulation in the province, city or
municipality. (Sec. 254(a), LGC)

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 BOOK 5, Chapter 1, Section 175

B. Issuance of Notice to the Taxpayer/Real Property Tax Bill (LTO Form 89) - reflects the RPT
due for the CY and the delinquent RPT

C. Where RPT may be Paid -

▪ City or Municipal Treasury Office where property is located, or to the Provincial Treasury
Office where property is located. (Art. 338, IRR, implementing Sec. 247, LGC)
▪ Real property in MMA, City or Municipal Treasury Office where located
▪ deputized Barangay Treasurer of the barangay where property is located

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 BOOK 5, Chapter 1

Sec. 176. Payment of Real Property Tax in Installments

1st Installment on or before March 31

2nd Installment on or before June 30
3rd Installment on or before September 30
4th Installment on or before December 31

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 BOOK 5, Chapter 1

Sec. 175. Procedures for Collection of Real Property Tax

Sec. 176. Payment of Real Property Tax in Installments
Sec. 177. Tax Discount for Advanced Prompt Payment
Sec. 178. Payment Under Protest
Sec. 179. Repayment of Excessive Collections
Sec. 180. Interest on Delinquent Real Property Tax
Sec. 181. Guiding Principles in Determining Delinquency
Sec. 182. Procedures in Computing Taxes, Interest and Discounts
Sec. 183. Acceptance of Real Property Tax through Over-the-Counter Payment in
Accredited Banks

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 BOOK 5, Chapter 1
Sec. 184. Remedies for the Collection of Real Property Tax

• remedies are cumulative, simultaneous, and unconditional:

1. Administrative – levy on real property
2. Judicial – civil action for collection

• availing of remedies – upon expiration of the year when the tax becomes due and payable

• formal demand for payment not a pre-requisite

• LGU lien – superior to any other lien or encumbrances and may only be extinguished by payment
of the tax

• Certification of Delinquencies Remaining Uncollected for at least 1 year, stating the reasons for
non-collection or non-payment; submit to sanggunian on or before the 31st of December with
request for assistance (Sec. 269, LGC)

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 BOOK 5, Chapter 1

• Periods within which to collect RPT:

1. 5 years from the year RPT became due and payable – no fraud or intent
to evade payment
2. 10 years from discovery - fraud or intent to evade payment

• suspension of the running of the periods:

a. legally prevented to collect the tax
b. request for re-investigation with waiver in writing before expiration of the
period within which to collect
c. owner or person having legal interest on the property is out of the country

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 BOOK 5, Chapter 1

Sec. 185. Condonation or Reduction of Real Property Tax and Interest

• Sanggunian:
general failure of crops, substantial decrease in the price of agricultural or agri-based
products, or calamity
recommendation of LDCC
condone, or reduce wholly or partially RPT and interest
succeeding year or years
ordinance
• President:
public interest requires
condone or reduce RPT and interest
any year, in any province, city, or municipality in MMA

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 BOOK 5, Chapter 1

Sec. 186. Pre-Auction Sale Notice of the Delinquency

• Issuance of Notice of Tax Delinquency:
a. Description, location, and name of owner
b. Date upon which RPT became delinquent
c. “at anytime before the distraint of personal property, payment of the delinquent RPT with surcharges, interest and
penalties may be made, at 2% interest per month on such unpaid amount, until the delinquent tax shall have been
fully paid, but not exceeding 36 months or 72%”
d. “unless the delinquent RPT surcharges and penalties are paid before the expiration of the year for which the tax is
due, except when the notice of assessment or special levy is contested administratively or judicially pursuant to the
provisions of Chapter 3, Title Two, Book 2 of R. A. No. 7160, the delinquent real property will be sold at public
auction, and the title to the property will be vested in the purchaser, subject, however, to the right of the delinquent
owner of the property or any person having legal interest therein to redeem the property within 1 year from the
date of auction sale”

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 BOOK 5, Chapter 1, Section 186
• Posting – main entrance of the provincial capitol, city or municipal hall and in a publicly accessible and
conspicuous place in each barangay of the LGU concerned
• Publication – once a week for 2 consecutive weeks, in a newspaper of general circulation in the province, city,
or municipality where the delinquent property is located
• Service of Notice – either by registered mail with return card or by personal service to the delinquent real
property owner or any person having legal interest therein at the address appearing in the records of the
Local Treasury Office or known personally by the Local Treasurer
• Proof of Service – accomplished and submitted by the Serving Officer to the Provincial, City, or Municipal
Treasurer concerned containing a statement that the notice was served upon the real property owner on a
specific time and date, and at a particular address, with Registry Receipt No. and date thereof if service was
by mail, or the signature of the delinquent real property owner, or representative, or any member of the
household who must be of sufficient age and discretion, affixed thereon, acknowledging receipt of the notice
with the time and date if by personal service
• Local Treasurer may continue to communicate with the delinquent real property owner on the possibility of a
compromise agreement

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 BOOK 5, Chapter 1
Sec. 187. Administrative Remedy

A. Levy on Real Property

• Issuance of Warrant of Levy

delinquent RPT remains unpaid despite Notice of Delinquency
may be simultaneous with the institution of civil action for collection
prepared in a duly authenticated certificate with details, as follows:
1. name of delinquent real property owner or person having legal interest
2. brief, but sufficient description of the delinquent property
3. amount of RPT due and interest
Warrant of Levy shall operate with force and effect of a legal execution throughout the
province, city, or municipality within MMA where the levied property is located

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 BOOK 5, Chapter 1, Section 187

• Service of Warrant of Levy – through registered mail with return card or personally upon the
delinquent owner or person having legal interest at the address appearing in the records of the
Local Treasury Office or known personally by the Local Treasurer. In the event that the property
owner is out of the country or cannot be located, the warrant shall be served upon the duly
appointed administrator or occupant of the delinquent property who must be of sufficient age and
discretion.
• Notice of Levy – written Notice of Levy with the attached copy of Warrant of Levy mailed to or
served upon the Local Assessor and the Registrar of Deeds for the annotation of the levy on the
Tax Dec. and the Title.
• Report of Levy to the Sanggunian – Local Treasurer submits a report of levy to the sanggunian
within 10 days after the receipt of the Warrant of Levy by the owner of the delinquent property
or person having legal interest in the delinquent property

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 BOOK 5, Chapter 1, Section 187

• Proof of Service –to be accomplished by the officer serving the Warrant of Levy,
stating that the warrant was served upon the delinquent owner on a specific
time and date and at a particular address, with the Registry Receipt No. and
date thereof if service was by mail, or with the signature of the delinquent real
property owner, or representative, or any member of the household who must be
of sufficient age and discretion, affixed thereon; that the Notice of Levy was
served upon the Local Assessor and Registrar of Deeds; submitted to the Local
Treasurer

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 BOOK 5, Chapter 1, Section 187

B. Advertisement of Sale
• Issuance of Notice of Sale – within 30 days after the service of the Warrant
of Levy, the Local Treasurer proceeds to publicly advertise for auction the
delinquent real property or a usable portion thereof , by way of a Notice of
Sale with the details, as follows:
a. Amount of the delinquent RPT and interest
b. Expenses of sale
c. Date of sale
d. Place of sale
e. Name of owner of delinquent real property and/or person having legal
interest therein
f. Sufficient description of the real property to be auctioned

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 BOOK 5, Chapter 1, Section 187

• Service of Notice of Sale – either through registered mail with return card or personal
service, upon the delinquent owner or person having legal interest therein, at the
address appearing in the records of the Local Treasury Office or known personally by
the Local Treasurer; if owner is out of the country or cannot be located, the notice shall
be served upon the administrator or occupant who must be of sufficient age and
discretion
• Proof of Service – accomplished by the officer serving the Notice of Sale upon the
delinquent owner
• Posting of Notice of Sale – at the main entrance of the Provincial Capitol, City or
Municipal Hall, and in a publicly accessible and conspicuous place in the barangay ,
where property is located
• Publication of Notice of Sale – once a week for 2 weeks in a newspaper of general
circulation in the province, city ,or municipality where delinquent property is located

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 BOOK 5, Chapter 1, Section 187
C. Public Sale or Auction

• Auction Sale - if no payment is made; conducted in accordance with the details specified in the
Notice of Sale particularly the date and place of sale; highest bidder in cash with bid sufficient to
pay the delinquent RPT, interest, and cost of sale; observance of bid rules set by the province, city,
or municipality in MMA

Committee on Bid to formulate the rules and regulations of the bid, composed of the Local
Treasurer, Local Assessor, and a representative of the Office of the LCE

Rules and Regulations of Bid include the qualifications and disqualifications of the
participants; conditions or limitations of sale; procedure and manner for the conduct of bid;
time within which winning bidder should deliver the bid price; and such other rules be agreed
upon to carry-out the bid justly, properly and efficiently; disseminated and read to the
participating bidders before the conduct of sale

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 BOOK 5, Chapter 1, Section 187

Registration of interested bidders with the Local Treasurer who maintains a list of
the names of bidders with sufficient description; a number assigned each bidder to
keep amount to be determined in the RPT ordinance; returned after the auction,
except bonds posted by winning bidders who failed to deliver the bid price within the
period required which shall be in favor of the LGU
Highest Cash Bidder – is the one with the highest cash bid sufficient to pay the
delinquent tax, accrued interest, and cost of sale; immediately pay the bid price
which be in cash or manager’s check for the exact id amount payable to the Local
Treasurer
Failure of the Highest Bidder to Pay the Bid Price – the next highest bidder whose bid
is sufficient to pay the delinquent RPT, interest and cost of sale shall be considered
the winning bidder and notified in writing to pay the bid in 24 hours

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 BOOK 5, Chapter 1, Section 187

• Revocation of Sale or Award – surfacing of any of the following circumstances which

could not have been ascertained by due diligence prior to or after the sale:
1) Evidence presented show that all RPT and penalties had been paid before the sale
2) Real property subject of sale is exempt from the delinquent RPT by virtue of
ownership by the state or its political subdivisions except when the beneficial use
theory is applicable, or that the property subject of auction has been devoted
exclusively for educational, religious, or charitable purposes
3) Real property subject of auction is exempt from the delinquent RPT due in
accordance with Section 234, 1991 LGC or any other law
4) Non-payment of bid price

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 BOOK 5, Chapter 1, Section 187

• Certificate of Sale - in favor of the purchaser with the following details:

a. name of the purchaser
b. sufficient description of the property sold
c. amount of delinquent RPT, interest, and expenses of sale
d. brief description of auction proceedings
• Report of Sale to the Sanggunian – within 30 days after the sale which report shall
form part of the records of the Local Treasury Office
• Remittance of Excess Payment – to the owner of the property sold; in excess of the
delinquent tax, interest , and cost of sale
• Right of Possession of the auctioned property shall remain in the owner or person
having legal interest therein, who shall still be entitled to all fruits and income

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 BOOK 5, Chapter 1, Section 187

• Redemption of Property Sold - within 1 year from date of sale by payment of redemption price
consisting of :
1. amount of delinquent RPT
2. interest due
3. expenses of sale
4. interest of not more than 2% per month on the purchase price from date of auction sale to the
date of payment of redemption price

❖ Payment of redemption price will invalidate the Certificate of Sale

• Notice of Redemption – issued to the purchaser informing redemption of the real property sold
in auction and requesting the return of the Certificate of Sale

• Certificate of Redemption – issued to the owner of the property or person having legal interest
therein after redemption price is fully paid

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 BOOK 5, Chapter 1, Section 187

• Return of the Amount Paid by the Purchaser – by the Local Treasurer upon receipt of
the Certificate of Sale from the purchaser, including interest of not more than 2% per
month from the date of sale to the date of full payment of redemption price

Redemption of property sold in auction will render the said property free from all
liens on account of RPT delinquency

• Final Deed of Sale – in favor of the purchaser in case of failure to redeem the auctioned
property by the owner or person having legal interest therein within 1 year from date of
sale; conveys the property, free from all liens of the delinquent , interest, and cost of sale;
contains a brief statement of the auction proceedings

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 BOOK 5, Chapter 1, Section 187

•Surrender of Owner’s Duplicate Copy of Title – shall be required

by the Local Treasurer from the owner of the auctioned property ,
including the Tax Declaration
•Consolidation of Title – Owner’s Duplicate Copy of Title shall be
attached to the Final Deed of Sale and submitted to the Registrar
of Deeds for consolidation in the name of the purchaser
•Issuance of New Tax Declaration – in the name of the new owner
after consolidation of title which is the duty of the Local Assessor

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 BOOK 5, Chapter 1, Section 187
• Purchase/Forfeiture of Property by the LGU
want of bidder or insufficient bid amount
Local Treasurer will purchase/forfeit the property in favor of the LGU
• Report of Proceedings of Purchase/Forfeiture – accomplished by the Local Treasurer within 2 days
after the purchase/forfeiture of the delinquent real property, which shall form part of the records of
the Local Treasury Office
• Right to Redeem by the Owner – within 1 year from date of purchase /forfeiture
• Vesting of Title to the LGU – shall be effected by the RD
• Exemption from Registration Fees and DST – of all certificates, documents, and papers covering the
sale of the delinquent real property
• Further Distraint or Levy - if necessary, levy on real property may be repeated until full amount
of the delinquent RPT, interest, and expenses, is collected
• Update RPTAR - after full payment of RPT delinquency
• Resale of Forfeited Real Property – by ordinance duly enacted by the sanggunian and upon notice
of not less than 20 days; proceeds shall accrue to the GF

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 BOOK 5, Chapter 1

Sec. 188. Collection of Real Property Tax Through the Courts

• Filing of Action
duty of Local Treasurer
resorted to as the only remedy, or simultaneous , or combination with
administrative remedy
all RPT delinquencies or any defficiency
formal demand not pre-requisite to filing

• Compromise Pending Action

at any stage of the judicial proceeding
resolution of the sanggunian, authorizing the LCE to enter into compromise
agreement
covered or allowed under existing RPT ordinance, or amendment thereto

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 Administrative Procedure Judicial Procedure

Civil Action for

Notice of
Delinquency Simultaneous Collection/
Pleading for
Intervenor in
Court
Warrant of
Levy 10 days, submit Report on the
Sanggunian
Levy
30 Days

e
al
fS
to Register of
p or
Advertiseme Re
m
it Deeds
nt of Sale sub
ys,
da
30
2 days, submit Report of

Assessor’s
Office
Proceedings

Public Sale/Auction
of Certificate
rt.
Sold to Highest Bidder

No Ce of
sh
bi
dd r ni rt. Redemption
er Fu le h Ce
/In Sa rnis
su Fu ale
ffi S
ci
en of
tB Yes
id

1 Year 1 Year No Deed

Redemption
Certificate of Sale Forfeiture of Sale
 BOOK 5, Chapter 1

Sec. 189. Action Assailing Validity of Tax Sale

• deposit amount equivalent to the purchase price plus interest of 2% per month thereof
for the court to give due course
• substantive rights of the delinquent owner or person having legal interest in the property
have been impaired

Sec. 190. Payment of Delinquent Taxes on Property Subject of Controversy

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 BOOK 5, Chapter 1

Sec. 191. Compromise Agreement

1. Prior to distraint of personal property and the expiration of the year for
which the RPT is due;
2. Before the date fixed for the auction sale;
3. Within one year from date of auction sale
4. Within one year from date of purchase/forfeiture by LGU
5. During the pendency of the civil action for collection

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 BOOK 5, Chapter 1

Sec. 192. Sanctions

Sec. 193. Distribution of Proceeds
Sec. 194. General Assessment Revisions, Expenses Incident Thereto
Sec. 195. Condonation or Reduction of Real Property Tax and Interest
Sec. 196. Condonation or Reduction of Tax by the President of the Philippines
Sec. 197. Fees in Court Actions
Sec. 198. Fees in Registration of Papers or Documents on Sale of Delinquent
Real Property to Province, City, or Municipality

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 Thank You
and Have a Good
Day!

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