Real property tax bites

If you acquired real property in 2019, reality should be setting in in the coming weeks. You should note that all persons acquiring or making any improvement on real property at any time in any city or municipality has the duty to file a tax declaration declaring the true value of the property within 60 days from acquisition or upon completion or occupancy of the improvement, whichever comes earlier.

The Local Government Code of 1991 or Republic Act No. 7160 provides that all real property, whether taxable of exempt, will be appraised at the current and fair market value prevailing in the locality where the property is situated. It is the duty of all persons owning or administering real property, including improvements, to prepare and file a sworn statement declaring the true value of their property.

Real property tax (RPT) is an ad valorem tax levied on real property determined on the basis of a fixed proportion of the value of the property. The rate for municipalities and cities in Metro Manila is two percent while in the provinces it is one percent.

The assessed value or taxable value is the fair market value of the real property multiplied by the assessment level. The assessment level is fixed by the LGU through local ordinances. On the other hand, the fair market value is the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy.

For assessment purposes, real property is classified as residential, agricultural, commercial, industrial, mineral, timberland or special. The LGU concerned has the power to classify lands through their respective councils. Real property will, however, be classified, valued and assessed on the basis of its actual use regardless of location, whoever owns it, and whoever uses it.

Exempt from real property tax are properties owned by the state, except when used by a taxable person; charitable institutions, churches, parsonages, convents, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes; 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; all real property owned by duly registered cooperatives; machinery and equipment used for pollution control and environmental protection.

The assessor will undertake a general revision of real property assessments within two years from the effectivity of the Local Government Code and every three years thereafter.

The RPT is paid every year. The deadline for the full payment is every Jan. 31. Some LGUs give discounts for full and advance payments. Quarterly payment options are also available to taxpayers.

Recently, the City of Manila passed Ordinance No. 8567 lowering the real property tax by 20 percent starting Jan. 1, 2020, the first of a three-year incremental 40 percent tax reduction. An additional 10 percent reduction will follow in 2021 and 2020. In the City of San Juan, however, the LGU is implementing Ordinance No. 46, Series of 2017 imposing an increase in the real property assessment. Hence, taxpayers in the city are expected to experience a surge in RPT.

Some other LGUs have not revised their RPT rates since the passing of the Local Government Code in 1991. Some others have revised their rates but opted to suspend implementation of the collection to ease the burden on taxpayers. Reliefs and lower rates somehow also attract delinquent taxpayers to pay outstanding RPTs, hence boosting revenue collection.

The policy of the state — to ensure genuine and meaningful local autonomy to enable LGUs to attain full development and self-reliance — is manifested by the power for them to create and broaden sources of revenue. As political subdivisions of the state, they are vested with the duty, responsibility and accountability to promote the general welfare of the people and deliver basic services and facilities. Thus, the efficient collection of RPT is necessary to achieve these lofty goals.