SMV Updating

and General Revision

of Real Property Assessments
FUNCTIONS OF BLGF UNDER E.O. NO. 292
ADMINISTRATIVE CODE OF 1987

Sec. 33, Title II, Chapter 4

(1) Assist in the formulation and implementation
of policies on local government revenue
administration and fund management.
(2)
(2) Exercise administrative and technical
supervision and coordination over the treasury
and assessment operations of local
governments.
SECTIONS 200, 201 & 219
LOCAL GOVERNMENT CODE OF 1991

Sec. 200. Administration of the Real Property

Tax
The
The provinces and cities including
municipalities within the Metropolitan Manila
Area,, shall be primarily
p y responsible
p for the
proper, efficient and effective administration of
the real property tax.
SECTIONS 200, 201 & 219
LOCAL GOVERNMENT CODE OF 1991

Sec. 201. Appraisal of Real Property

All real property, whether taxable or exempt,
shall be appraised at the current and fair
market value prevailing in the locality where
the pproperty
p y is situated. The Department
p of
Finance shall promulgated the necessary and
regulations for the classification, appraisal,
and assessment of real property pursuant to
the provisions of this Code.
SECTIONS 200, 201 & 219
LOCAL GOVERNMENT CODE OF 1991

Sec. 219. General Revision of Assessments

and Property Classification
The
The Provincial,
Provincial city or municipal assessor shall
undertake a general revision of real property
assessment within two ((2)) yyears after the
effectivity of this Code and every three (3)
years thereafter.
SECTIONS 200, 201 & 219
LOCAL GOVERNMENT CODE OF 1991

Sec. 219. General Revision of Assessments

and Property Classification
Art. 310. General Revision of Assessments and
Property Classification
((a)) The p
provincial, city
y and municipal
p assessor shall
undertake a general revision of real property
assessment within two (2) years after the
effectivity of the Code and every three (3) years
thereafter.
SECTIONS 200, 201 & 219
LOCAL GOVERNMENT CODE OF 1991

Sec. 219. General Revision of Assessments

and Property Classification
Art. 310. General Revision of Assessments and
Property Classification
(b) For this purpose, the provincial assessors, the city
assessors, and the municipal assessors of MMA
shall prepare the schedule of fair market values for
the different kinds and classes of real property
located within the territorial jurisdiction of the
province, city or municipality within one (1) year from
the effectivity of the Code in accordance with such
rules and regulations issued by DOF.
SECTIONS 200, 201 & 219
LOCAL GOVERNMENT CODE OF 1991

Sec. 219. General Revision of Assessments

and Property Classification
Art. 310. General Revision of Assessments and
Property Classification
(c) The general revision of assessments and property
classification shall commence upon the enactment
of the schedule of fair market values but not later
than two (2) years from the effectivity of the Code
Code.
Thereafter, the provincial, city or municipal assessor
shall undertake the general revision of real property
assessments and property classification once every
three (3) years.
MRPAAO & PVS
DOF ISSUANCES

Manual on Real Property Appraisal and

Assessment Operations (MRPAAO) under
Local Assessment Regulations No. 1-04 issued
by the DOF on Oct. 1, 2004.
Department
p Order No. 37-09 issued byy the DOF
on Oct. 19, 2009, prescribing the Philippine
Valuation Standards (PVS 1st Edition: Adoption
of the IVSC Valuation Standards under
Philippine setting
WHAT IS A SCHEDULE OF MARKET VALUES?
SMV

It is an approved schedule of unit base market

values for different classes of real property used
by the provincial, city or municipal assessors as
basis for the appraisal and assessment of real
properties in their respective territorial
j i di ti
jurisdictions ffor reall property
t ttaxation
ti purposes.
Sections 199 (e) and (f) of the LGC provide:
(e) Appraisal is the act or process of
determining the value of property as of a
specific date for a specific purpose.
(f) Assessment
Assessment is the act or process of
determining the value of a property, or
proportion
p p thereof subject
j to tax,, including
g the
discovery, listing, classification, and appraisal
of properties.
Real Estate the physical and tangible thing.
Real Property All the rights, interests, and
benefits related to the ownership of real estate.
Market Value estimated amount for which a
property
p p y should exchange g on the date of
valuation between a willing buyer and a willing
seller in an arms-length transaction after proper
marketing wherein the parties had each acted
knowledgeably, prudently and without
compulsion.
compulsion
Why
y revise the SMV?

Mandated by law (Section 219 R.A. No. 7160).

Seeks
S k to t reflect
fl t true
t market
k t levels
l l off properties
ti
based on the updated base unit values.
Rationalizes the real property tax base
base.
To promote transparency and accuracy in the
property
p p y market to entice investors.
To provide equitable and fair distribution of tax
burden.
PREPARATION OF THE SMV

Before any General Revision of Real Property

Assessment is made, there shall be prepared a SMV
by the Provincial, City and the Municipality of MMA
for the different classes of real property situated in
their respective LGUs for enactment of an ordinance
b th
by the Sanggunian
S i concerned. d
WHAT IS THE GENERAL REVISION OF
PROPERTY ASSESSMENTS?

The General Revision of real property assessments is

the updating
p g of all real p
property
p y records of the LGU
once every three (3) years using the revised
Schedule of Market Values (SMV).
Why Conduct General Revision?

General Revision serves two important purposes

in
i addition
dditi tot its
it primary
i purpose off equalizing
li i and
d
updating valuation. These are:
1) T
To rediscover
di reall properties
ti ththatt h
have
been lost from the tax rolls,
2) To enable the assessor to purge the rolls of
double assessments of properties that have
accumulated through the years
years, and
3) To reclassify properties based on its
Highest and Best Use (HABU)
(HABU).
DOF FINDINGS

PROBLEMS ON PROPERTY VALUATION & TAXATION

LAND VALUATION TAXATION & FEES

Significant political influence in Multiple taxes on land

the valuation system ownership & transfers
Multiple, conflicting valuation High transaction taxes
methodologies discourage formal transactions
Absence of uniform valuation & lead to opportunities for
standards inappropriate practices
Outdated, distorted real Weak enforcement of land-
property values related taxes
Limited access to information,
use of information technology
in the appraisal process
Limited provisions for formal
education & training of
assessors/appraisers
Continuous decline of LGU compliance to the Local Government Code
Requirement to Conduct General Revision of Schedule of Market Values once
everyy three (3)
( ) years.
y

100%

90%

83%
80%

70%
nt of LGU Compliance

63%
60%
54%
50%

36%
40%
Percen

31%
30%
25%
20%

10%

75% 92% 61% 66% 57% 52% 41% 33% 27% 34% 28% 22%
0%
1993 (1st GR) 1996 (2nd GR) 1999 (3rd GR) 2002 (4th GR) 2005 (5th GR) 2006 (6th GR)
Provinces 75% 61% 57% 41% 27% 28%
Cities 92% 66% 52% 33% 34% 22%
Total 83% 63% 54% 36% 31% 25%

Source: Bureau of Local Government Finance (BLGF)

DOF FINDINGS

PROBLEMS ON PROPERTY VALUATION & TAXATION

BIR zonal Mandated regular Over 20 government agencies

valuation has revision of SMVs is undertake real property
no fixed not conducted by valuation using different
statutory local governments standards & methodologies
Constrained Economic
review period Development
Low property tax collection
Inefficient land markets
Inequitable
Inequitable distribution of
tax burden
Lack of confidence in the
valuation system
Confusion among users

Valuation is Lack of monitoring & Lack of uniform

vulnerable to evaluation on valuation valuation standards
political pressure
p p matters & assessors
LAMP1

REFORMS PROPOSED

LAND VALUATION TAXATION & FEES

Establish an independent, national Rationalize land-related taxes

authority that would set & enforce
Rationalize fees progressing towards
valuation standards & guidelines
cost recovery of services
Adopt a single valuation base for
taxation purposes
De-politicize the property valuation
system
t
Professionalize the real property
valuation industry & introduce
appropriate education & training for
practitioners
Develop & implement a national real
property database system
B ENEFITS OF AN U PDATED SMV

More accurate
More
basis for
transparent &
revenue
active property
forecasting &
market
targeting

Fair and
Improved
equitable
credibility
distribution of
of the SMV
the
h tax burden
b d

Better
Improved
revenue SMV informed
property
collection
owners
C O M P U TAT I O N O F R E A L P R O P E R T Y TA X

Market Assess- Real

X ment X T R
Tax Rate
t = Property
Value
Level Tax

Assessed Value
AssessedValue
A S S E S S M E N T L E V E LLS
S A N D TA X R AT E S ( L A N D )
ASSESSMENT LEVELS TAX RATES
Maximum of
Residential - 20% Basic RPT: Maximum of
Commercial - 50% For cities - 2%
Industrial - 50% For provinces - 1%
Agricultural - 40% SEF: Fixed rate of 1%
Mineral
ea - 50%
Timberland - 20%
How will the revised SMV improve our RPT collection?

Real Property Tax (RPT) is dependent on three elements:

1) Market
M k Value;
V l
2) Assessment Level; and
3) Tax Rate.
An increase in the market values of real properties will lead
to an increase in RPT.

However, the LGU should also consider the taxpayers

ability to pay the taxes. This, the LGU may opt to lower the
assessment level or the tax rates as provided in the LGC.
This will improve the LGUs revenue and lessen the
taxpayerss burden as well.
taxpayer
What is the Joint-Memorandum Circular No. 2010-01?

The Joint-Memorandum Circular No.2010-01 is a

reminder
i d from
f the
h DDepartment off Fi
Finance (DOF) and d
Department of Interior and Local Government (DILG)
for LGUs to comply with the provisions of the Local
Government Code regarding appraisal and
assessment of properties and to conduct general
revision
i i off SMV
SMV.
The JMC 1 also prescribes the use of Philippine
V l ti Standards
Valuation St d d (DOF Dept.
D t Order
O d No.37-09)
N 37 09) and
d
Mass Appraisal Guidebook (DOF Dept. Order
No.2010-10).)
For inquiries, contact the JMC Task Force Secretariat at:
JMC Task Force Department of Finance (DOF)
Bureau of Local Government Finance, Department of Finance
8/F EDPC Building, Bangko Sentral ng Pilipinas Complex,
Roxas Blvd.,
Blvd Manila
Telefax: (02) 524-6324/(02)522-8770

JMC Task Force Department of the Interior and Local Government (DILG)
Bureau of Local Government Development
Department of the Interior and Local Government
4/F, A. Francisco Gold Condominium II, EDSA, corner Mapagmahal
St., Diliman, Quezon City
Tel.: (02) 929-9235
Fax: (02)927-7852
 - END -
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