Real Property Tax

- Direct Taxes imposed on the privilege to use real property such as land, building, machinery, and
other improvements, unless specifically exempted.

What are included?

1. List of immovables in Art. 415 of the NCC
2. Machinery (under Sec 199 of the Local Government Code)

Rules on Machines:
1. If permanently attached - Subject to Real Property Tax
2. If not, permanently attached:
a. Essential and Principal element of an industry without which such industry, work or activity
cannot function - Subject to RPT
b. Otherwise, not subject to RPT

Who is liable to pay RPT?

-Chargeable against the person who has actual or beneficial use and possession of it regardless
of whether or not he is the owner

Who may levy RPT?

1. Province
2. City; and
3. Municipality within Metro Manila

Taxing Powers of LGU:

1. Power to Levy Real Estate Tax
2. Fix Real Estate Tax

*Both of these can be exercised and a local tax can be enacted without public hearing.

Procedure in the Administration of Real Property Tax:

1. Declaration of Real Property

Purpose: Enables the assessor to identify the property for purposes of determining assessment levels.
However, it does not prove ownership, only and inidicium of a claim of ownership.

Who may declare?

1. Owner or Administrator
2. Provincial/City/Municipal Assessor - if no declaration is made by the owner within time prescribed

What if a tax declaration is made to a person who has no successional or administrative rights to an
estate?
-Null and Void because real property tax shall be assessed in the name of the person owning or
administering the property.

For a property declared for the first time, it shall be assessed for back taxes for not more than 10
years prior to the date of initial assessment.

2. Listing of Real Property in the Assessment Rolls

As a general rule, properties shall be listed, valued, and assessed in the name of the owner,
administrator, or anyone having legal interest. Except:

a. Undivided Real Property

b. In case of undivided real property other than that owned by a deceased
 c. Corporation, partnership, and association
d. Owned by the Republic of the Philippines, and its subsidiaries.

3. Appraisal and Valuation of Real Property

Purpose: To determine the value of the property as of specific date for a specific purpose

How to determine Fair Market Value?

For Land:
a. Assessor summons the owner and takes deposition concerning the property (ownership,
amount, nature, and value)
b. Assessor prepares a schedule of FMV for difference classes of properties
c. The said schedule is published in a newspaper of general circulation in the place concerned. In
the absence thereof, it shall be posted in the provincial capitol, city or municipal hall, and to 2
other conspicious public places
d. Assessor may recommend to Sanggunian concerned amendments to correct errors in
valuation.

For Machinery:
a. For brand new - acquisition cost. If imported, include freight, insurance, bank and other
charges, brokerage, arrastre and handling, duties and taxes, plus charges.
b. Otherwise, use this formula:
Remaining economic life x Replacement/Reproduction Cost = FMV
Estimated Economic life

Economic life - Estimated period of which the machinery may be profitable utilized.
Remaining economic life - period of time from the date of appraisal to the date the machine
becomes valueless
Replacement or Reproduction Cost - cost that would be incurred in acquiring an equally
desirable substitute property, or of producing replica on the basis of current prices

c. Depreciation allowance - **will be explained by the reported**

4. Determining Assessed Value and the Tax Due

Assessment - The act or process of determining the value of a property, or proportion thereof
subject to tax, including the discovery, listing, classification, and appraisal of properties

What would be the basis?

-As a general rule, the basis would be on its actual use regardless of its location, the owner, and
the person using it

Actual use - Refers to the purpose for which the property is principally or predominantly utilized
by the person in possession thereof.

Exception:
1. For Mixed land uses - predominant use of the lands shall govern the classification, valuation,
and assessment
2. For buildings used for a purpose different form that which the land is classified - predominant
use of the building or buildings shall govern.

Assessment levels - fixed by ordinance of the appropriate Sanggunian.

For Land:
Land Use Assessment Level Not to Exceed
Residential 20%
Agricultural 40%
 Commercial, Industrial, and Mineral 50%
Timberland 20%

Classes of Real Property for Assessment Purposes:

1. Residential
2. Agricultural
3. Commercial
4. Industrial
5. Mineral
6. Timberland
7. Special - directly and exclusively used for hospitals, cultural, or scientific purposes
- owned and used by local water GOCCs rendering essential service in the supply and
distribution of water and electricity.

For Buildings and Other structures:

Land Use Graduated rates of
Residential 0-60%
Agricultural 25-50%
Commercial, Industrial, and Mineral 30-80%
Timberland 45-70%

For Machineries
Class Assessment Level Not to Exceed
Residential 50%
Agricultural 40%
Commercial & Industrial 80%

For Special Classes of Properties

Purpose Assessment Level Not to Exceed
Cultural 15%
Scientific 15%
Hospital 15%
Owned and used by local water district 10%
GOCCs rendering essential public services 10%

*The concerned assessor shall undertake a general revision of real property assessments within 2
years after the effectivity of LGC, and every 3 years thereafter.

5. Payment and Collection of Taxes

Steps:
1. Take the schedule of FMV
2. Take the assessment by determining the classification of property
3. Multiply the FMV by the assessment level to get the assessed value
4. Compute the RPT by multiplying the assessed value and the RPT rate

Types of Real Property Tax

1. Basic Real Property Tax
2. Special levies
 Basic Real Property Tax

LGU Rate of Basic Real Property Tax

Province Not exceeding 1% of the assessed value
City Not exceeding 2% of the assessed value
Municipality within Metro Manila Not exceeding 2% of the assessed value

**The actual rates are fixed by the Sanggunian concerned.**

Formula:
Market value xxx
Multiply by: Assessment level x%
Assessed Value xxx
Multiply by: Rate of Tax x%
Real Property Tax xxx

Special Levies

1. Special Education Fund (SEF) - 1% of the assessed value additional real estate tax to finance the
Special Education Fund

- proceeds shall automatically be released to the local school boards

2. Additional Ad Valorem on Idle lands - not exceeding 5% of the assessed value of the property

Purpose: To penalize landowners for not using their properties productively, and to encourage
land resource utilization for national development.

**Reporter nalang mudiscuss ani kay para di na magdugang sa suwaton**

3. Special Assessments - levied on lands specially benfited by public works, projects, or

improvements funded by the local government unit;
- Shall not exceed 60%

**Reported na mudiscuss sa exceptions kay 2 ra man ata to**

4. Imposed by other laws like Socialized Housing Tax - Additional one-half (0.5%) of the assessed
value of all lands in urban areas in excess of 50,000 pesos.