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  Guide to Philippine Taxes 220 Chapter XI    LOCAL TAXES 371 Local government units (LGUs) derive their revenues from localand external sources. Local sources include tax revenues from the real property tax and the business tax, and non-tax revenues from fees and charges, receipts from government business operations and proceeds fromsale of assets. External sources, on the other hand, include the InternalRevenue Allotment (IRA) and other shares from special laws, grants and aids and borrowings. I. TAXING POWERS OF LOCAL GOVERNMENTSA. Taxes on Real Property  a. Basic Real Property Tax The real property tax (RPT) is an ad valorem tax onreal properties such as lands, buildings, and other improvements,and machineries imposed by provinces, cities and municipalitieswithin the Metropolitan Manila Area (MMA), at the followingrates: 372 371  Book II, Title One of RA 7160, otherwise known as the “Local GovernmentCode of 1991”. 372  Section 233, supra.  221 Chapter XI Local Taxes Guide to Philippine Taxes Provinces - Not exceeding 1% of theassessed value of the real property; and Cities or Municipalities - Not exceeding 2% of the within the MMA assessed value of the real propertyThe RPT is based on the assessed value which is a certain percentage of the market value of the real property. The assessed value is arrived at upon application of the assessment levels to themarket value of the property. The assessment levels are fixed byordinance of the local Sanggunian depending on the actual use of the property, at rates not exceeding the following: 373 (1) Lands  Class Assessment Levels    Residential 20%   Agricultural 40%    Commercial, Industrial and Mineral 50%    Timberland 20%(2) Buildings and Other StructuresThe rate progresses directly with the fair market value(FMV) as follows:     Residential  – 0% for those with FMV of PhP175,000.00 or less to 60% for those with FMV of more than PhP10 million. 373  Section 218, supra.  222 Chapter XI Local Taxes Guide to Philippine Taxes    Agricultural  – 25% for those with FMV of PhP300,000.00 or less to 50% for those with FMV of more than PhP2 million.    Commercial/Industrial  – 30% for those with FMV of PhP300,000.00 or less to 80% for those with FMV of more than PhP10 million.    Timberland  – 45% for those with FMV of PhP300,000.00 or less to 70% for those with FMV of more than PhP2 million.(3) Machineries Class Assessment Levels   Agricultural 40%   Residential 50%   Commercial and Industrial 80%(4) Special Classes.   The assessment levels for all lands, buildings,machineries, and other improvements are as follows: Actual Use Assessment Levels   Cultural 15%   Scientific 15%   Hospital 15%   Local Water Districts 10%   Government-owned or controlled 10%corporations engaged in the supplyand distribution of water and/or generation and transmission of electric power   223 Chapter XI Local Taxes Guide to Philippine Taxes  Exemptions:  The following are exempted from payment of the RPT:  374  Real property owned by the Republic of the Philippines or any of its political subdivisions, except when the beneficialuse thereof has been granted, for consideration or otherwise,to a taxable person;  Charitable institutions, churches, parsonages, or conventsappurtenant thereto, mosques, non-profit or religiouscemeteries, and all lands, buildings, and improvementsactually, directly, and exclusively used for religious, charitableor educational purposes;  All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or–controlled corporations (GOCCs) engaged in thesupply and distribution of water and/or generation and transmission of electric power;  All real property owned by duly registered cooperatives as provided for under RA 6938; and    Machinery and equipment used for pollution control and environment protection.Except as provided in the LGC, any exemption from the paymentof RPT previously granted to or presently enjoyed by, all persons, whether natural or juridical, including all GOCCs were withdrawn upon theeffectivity of the LGC. 374  Section 234, supra.
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