iRealtee OS Glossary

Local Government Code

Republic Act No. 7160, known as the Local Government Code of 1991, establishes the structure, powers, and revenue authority of provinces, cities, municipalities...

Local Government Code

Local Government Code is a law that decentralizes powers to Philippine local government units (LGUs) and sets their authority to levy taxes, fees, and charges.

Definition

Republic Act No. 7160, known as the Local Government Code of 1991, establishes the structure, powers, and revenue authority of provinces, cities, municipalities, and barangays. It empowers LGUs to impose local taxes—including Real Property Tax (RPT) or amilyar—and regulates how revenues fund local services, infrastructure, and land use. The Code also defines autonomy, intergovernmental relations, and administrative remedies for tax collection.

Key Provisions

  • Taxation powers: LGUs may levy RPT/amilyar, transfer taxes, and business taxes within limits set by the Code.
  • Revenue allocation: Sets budget rules and the Internal Revenue Allotment (now National Tax Allotment) distribution.
  • Land use and zoning: Authorizes LGUs to enact zoning ordinances that affect property development and permitting.
  • Administrative remedies: Provides surcharge, interest, distraint, levy, and auction processes for delinquent real property taxes.
  • Accountability: Requires public hearings and ordinances for new or increased local taxes and fees.

Who is Affected?

  • Property owners and developers paying Amilyar and transfer taxes.
  • Real estate brokers advising clients on local tax obligations.
  • Buyers and investors assessing carrying costs and compliance for holdings.
  • LGU treasurers, assessors, and planning offices implementing taxation and zoning.

Penalties

  • Up to 25% surcharge on unpaid local taxes, plus up to 2% monthly interest (capped as provided by the Code).
  • Distraint of personal property or levy and auction of real property for delinquency.
  • Possible denial of permits or clearances until local taxes are settled.

Relevance (Philippine Real Estate)

  • RPT and transfer taxes materially affect holding and transaction costs; due diligence must check assessed value and arrears.
  • Zoning and land-use ordinances shape project feasibility; brokers and developers must align with Developer Accreditation and permitting.
  • Use Payment Tracking to monitor local tax deadlines and Property Analytics to model net yields.
  • Coordinate with LGUs for tax clearances before title transfer through the Registry of Deeds.

References

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