Filing Real Property Tax in the Philippines

filing real property tax
Rosben Orbeso Murillo, CPA
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MOST of the local governments in the United States implement a millage rate on property tax. This tax serves as a principal source of income. In the Philippines, only a few real estate brokers are engaging in this kind of business. Well, do you know how to file real property tax in the Philippines? If not sure, this article will help you in filing real property tax in the Philippines.

If you’re planning to sell or buy real properties, you should read this first before finding a buyer or broker. Here are things that every person should know about this.

Definition of Real Property

These properties are either movable or immovable. It includes land, building, machinery and other improvements affixed or attached to real property.

Real Property Tax Rate

Tax rates depend on the location either in a city or province. In every province, city or municipality should impose a uniform rate of real property tax.

  1. Note, in Manila and other cities, the real property tax rate should be not less than one-half (1/2) of one percent (1%) but not more than two percent (2%) on the assessed value of the real property.
  2. While the tax rate in provinces should be at the rate not less than one-fourth (1/4) of one percent (1%) but not more than one-half (1/2) of one percent (1%) of the assessed value of real property.

There are other special levies on real properties.

  • First, One percent (1%) annually is imposed on real property to accrue to the special education Fund under Republic Act No. 5447, which shall be added to the real property tax imposed by the local government.
  • Second, is an additional tax on idle lands. These idle lands include agricultural lands more than five hectares in an area suitable for cultivation, dairying, an inland fishery which ¾ remains uncultivated and urban land more than five hectares square which 2/3 are still unused as certified by the provincial or city assessor.


Real Property Tax  Exemptions in the Philippines

Not all real properties sold or bought are subject to real property tax. Here are some of those properties that are not subject to this tax. These exemptions are based on chapter IV of Real Estate Taxation.

  1. Real Property owned by the Republic of the Philippines or any of its political subdivisions and any government-owned corporation.
  2. Non-profit cemeteries or burial grounds
  3. Charitable institutions, churches, personage or convents appurtenant, mosques, and other improvements attached to it.
  4. Land acquired by grant, purchase or lease from the public domain for conversion into dairy farms for a period of five years from the time of conversion.
  5. The machinery of a new preferred industry as certified by the Board of Investments used or operated for industrial, agricultural, manufacturing or mining purposes within the first years of the operation.
  6. Perennial trees and plants of economic value, except those planted principally to grow.

Real Property Tax Valuations

All real property whether taxable or not is appraised at the current and fair market value prevailing depending on the location. In real property, the assessed value shall not increase once every five years in the absence of new improvements to increase the value.

While machinery is appraised according to the current market value and it is determined based on the original cost in the case of newly acquired machinery. If the machinery was previously used, the current market value is determined by diving the current market value over the remaining economic life and multiply by the replacement or reproduction cost.

Buildings, Machinery, and Other Improvements are appraised at a certain percentage of the assessment level should not be less than the assessed level for lands nor more than eighty percent (80%) of the market value, except buildings used exclusively for residential purposes.

real property tax rate valuations


Deadline of Payment of Real Property Tax

The real property tax becomes due and payable on the first day of January and from the same date said tax and all penalties accrue.

All sums due from any landowner or owner as payment of special levy shall be payable to the provincial or city treasurer or his deputy in the same manner as the annual ordinary tax imposed on real property. Failure to pay will be paying the same penalties for delinquency and it is enforceable in the same means.

Payment of real property tax is at the discretion of the taxpayer to pay at an installment or lump sum. The four installments are due and payable on or before March, June for the second, September for the third and last installment is on December.

To know other rulings on a transfer of real properties as a donation by gratuitous transfer, you can read on how to file donor’s tax under TRAIN law 2018.


Definition of Terms


Agricultural Land -land devoted principally to the raising of crops such as rice, corn, sugar cane, tobacco, coconut, etc.

Appraisal– is the act or process of determining the value of the real property.

Assessment level– is the percentage applied to the market value to determine the taxable or assessed value of the property.

Assessed value– the value placed on the taxable property by the assessor for ad valorem tax purposes. Taxable value is computed by multiplying the assessed value by the tax rate.

Economic life– a life of the property to use

Improvements– Any amounts added to the property to extend the life of usage.

Market Value– is the price that a seller is willing to sell, and the buyer is willing to buy.

Original Cost– the acquisition cost or the purchase price

Replacement or reproduction cost– a cost that is incurred on current prices, in acquiring a substitute property. Also, the cost of reproducing a new replica property on the basis of current prices with the same or similar material.


 

-ONLINE FREELANCE Studied at Saint Paul School of Professional Studies Work Experiences: Taught both Accounting and Taxation for more than six (6) years. Former Tax CPA reviewer at SPSBL CPA review center.

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