Community Tax – Secs. 157-160

Nature and Coverage of the Community Tax

The community tax is a local tax imposed under the Local Government Code through cities and municipalities on specified individuals and juridical persons. It is annual in character, local in collection, and personal to the taxpayer, although the law uses income, receipts, earnings, and real property value as measures for the additional component.

Sections 157 to 160 define the taxable persons, the basic and additional amounts, the express exemptions, and the place where payment must be made. These provisions do not deal with the later procedural rules on certificates, presentation of certificates, penalties, or printing, except that the liability they create is the liability ordinarily evidenced by a community tax certificate.

The tax is not a national income tax, a real property tax, or a business tax. Income, gross receipts, earnings, dividends, and assessed values are used to measure the additional tax, but the subject of the imposition remains the annual community tax due from the person or entity falling within the statutory class.

Individuals Liable

Section 157 covers every inhabitant of the Philippines who is at least eighteen years old and who falls within any one of the statutory situations. The word inhabitant makes residence or presence in the Philippines material; citizenship alone is not the controlling test.

An individual becomes liable if, during the calendar year, any of the following applies:

• The individual has been regularly employed on a wage or salary basis for at least thirty consecutive working days.
• The individual is engaged in business or occupation.
• The individual owns real property with an aggregate assessed value of at least P1,000.
• The individual is required by law to file an income tax return.

These grounds are alternative, not cumulative. A salaried employee who satisfies the thirty-consecutive-working-day requirement is liable even without business income. A person engaged in business or occupation is liable even if the activity is small, provided the person falls within the statutory class. A real property owner is liable once the aggregate assessed value reaches the statutory minimum, even if the property is located in more than one locality.

The age requirement is a threshold condition for individual liability under this provision. A person below eighteen is outside the individual class described by Section 157, even if that person has property or income, subject to other laws that may govern the property, income, guardian, or representative.

Basic and Additional Tax on Individuals

The additional tax is computed by reference to income, gross receipts, earnings, or property-related income contemplated by the provision, but it remains an additional community tax and not a separate income tax. The ceiling prevents the additional component from increasing without limit as the taxpayer's income base increases.

For husband and wife, the law directs that the additional tax be based on the total property owned by them and the total gross receipts or earnings derived by them. The rule looks to the combined economic base of the spouses for the computation and prevents the community tax base from being artificially reduced by treating common or conjugal property and earnings as unrelated amounts.

Because the tax is annual, the relevant inquiry is whether the individual entered a taxable class during the calendar year and what measure applies for the additional component. The law does not require that the taxpayer remain employed, continue the business, or retain the same property for every day of the year before liability can arise, so long as the statutory condition for liability is met.

Juridical Persons Liable

Section 158 imposes the community tax on every corporation, no matter how created or organized, whether domestic or resident foreign, that is engaged in or doing business in the Philippines. The provision is directed at juridical persons conducting business activity within the country and having a local point for payment through the principal office rule.

A domestic corporation falls within the provision when it is engaged in or doing business. A resident foreign corporation is covered because it is a foreign corporation doing business in the Philippines. A foreign corporation not doing business in the Philippines does not fall within the resident foreign corporation class described by the provision.

Basic and Additional Tax on Corporations

The real property base is the worth of real property in the Philippines owned by the corporation during the preceding year. The controlling valuation is the valuation used for payment of real property tax, as reflected in the assessment rolls of the city or municipality where the property is situated, rather than book value, acquisition cost, or a private appraisal.

The receipts or earnings base refers to gross receipts or earnings derived from business in the Philippines during the preceding year. The measure is gross in character; it is not reduced merely because the corporation incurred deductions, expenses, or a net loss for income tax purposes, unless a valid implementing rule consistent with the statute specifically affects the computation.

Dividends received by a corporation from another corporation are considered part of gross receipts or earnings for purposes of the additional community tax. This inclusion is specific to the community tax computation and should not be confused with separate income tax rules on exclusions, deductions, or intercorporate dividends.

The corporate additional tax uses two separate measures: Philippine real property and Philippine gross receipts or earnings. A corporation may have one, both, or neither measure in a given year, but the annual basic tax applies once the corporation falls within the taxable class.

Exemptions

Section 159 provides two express exemptions from the community tax:

• Diplomatic and consular representatives.
• Transient visitors whose stay in the Philippines does not exceed three months.

The exemption for diplomatic and consular representatives reflects the special status of foreign representatives and the limits imposed by international comity and applicable immunities on local taxation. The exemption is attached to the representative status described by the law, not to every private transaction involving a foreign national.

The exemption for transient visitors is limited by the length and character of the stay. A visitor whose stay does not exceed three months is exempt; once the stay exceeds the statutory period, the visitor can no longer rely on that specific exemption if the visitor otherwise falls within a taxable class.

Non-liability must be distinguished from exemption. A person who is below eighteen, not an inhabitant, not employed for the statutory period, not engaged in business or occupation, not a qualifying real property owner, and not required to file an income tax return is not liable because the charging provision does not reach that person. An exempt person, by contrast, may otherwise be within a taxable class but is expressly relieved by Section 159.

Place of Payment

Section 160 fixes the locality where the community tax must be paid. The place-of-payment rule identifies the city or municipality entitled to collect the tax and prevents competing local claims over the same annual community tax liability.

For individuals, residence is the primary situs because the community tax is personal and annual. Temporary presence in another locality does not by itself transfer the place of payment when the taxpayer has a fixed residence elsewhere.

For an individual without fixed residence, payment where the taxpayer may be found avoids failure of collection merely because no stable residence can be identified. This rule is especially relevant to persons who move from place to place but are not within the transient visitor exemption.

For juridical persons, the principal office rule is distinct from branch taxation. A corporation may operate branches, warehouses, stores, or project offices in several localities, but the community tax under Section 160 is paid where its principal office is located. Other local taxes may attach to branches or local business activity under separate provisions, but those taxes do not change the statutory situs of the community tax.

Functional Distinctions

The individual tax is built around residence, age, and personal economic indicators. The corporate tax is built around business presence, principal office, real property ownership, and gross Philippine receipts or earnings. Both taxes share the same structure of a fixed basic amount plus a capped additional amount, but their bases and situs rules are different.

The community tax provisions should be read with the general requirement that local taxes be imposed through a valid local ordinance and administered by the proper local treasurer. Sections 157 to 160 supply the statutory classes and limits; the ordinance and local treasury process implement collection within those limits.