Fast Facts: What You Should Know About Real Property Tax

Owning a home is a milestone that merits celebration. As a homeowner, you have a private space where you can unwind and relax to your heart’s content! This newfound comfort comes with obligations to the government, like real property tax.  Familiarizing yourself with taxes can save you from penalties for late or underpayments since real estate tax varies from property to property. This infographic will inform you about real estate property tax, when it’s due, how to calculate it, and the consequences of non-payment.

What is Real Property Tax?

Real property tax is the tax the government collects from owners of properties like land, buildings, and machinery to fund various community projects. Its guiding principle is Section 232 of Republic Act 7160, which gives local government units (LGUs) within Metro Manila the power to impose a real property tax.  The colloquial term for real estate property tax is “amilyar,” which comes from the Filipino word “amilyaramiyento” as a derivative of “amillaramiento“ from the Spanish language and means “tax assessment.” Houses, condominiums, commercial spaces, and the like have corresponding real property taxes. 

When Should You Pay Real Property Tax in the Philippines?

If you own a property, you must pay its tax by January 31st of every year. However, quarterly installments are available if you can’t pay your dues in full by this date. Here are the due dates for the installment payments per Section 250:

• On or before March 31st
• On or before June 30th
• On or before September 30th
• On or before December 31st

If your property has previous delinquencies, interests, or penalties in taxes, you must pay them off first before the LGU can credit your payments for the current year.    

How Do You Compute Real Property Tax?

To compute your real property tax, remember the formula:

Real Property Tax = Real Property Tax Rate x Assessed Property Value

The tax rate for properties in Metro Manila is 2%, while the rate for provinces is 1%. The calculation for the Assessed Property Value uses a separate formula:

Assessed Property Value = Fair Market Value x Assessment Level

The Assessment Level is the percentage applied to the Fair Market Value and determines the property’s taxable value. The maximum Assessment Levels depend on the property type:

• Residential: 20%
• Commercial: 50%
• Industrial: 50%

It is best to check with your respective LGU’s city assessor’s office to get your property’s fair market value as policies may vary per city. Case in point: Quezon City.

Sample computation

Let’s say you own a condominium unit in Makati worth PHP 3,500,000. First, you have to get the assessed property value by multiplying the unit’s fair market value and the appropriate assessment level:

• Assessed Property Value = PHP 3,500,000 (Fair Market Value) x 20% (Max. Assessment Level)

• Assessed Property Value = PHP 700,000

Now that you have the assessed property value, you can compute your real property tax using the applicable tax rate for your property. Since Makati is in Metro Manila, it follows the 2% tax rate.

• Real Property Tax = 2% (Real Property Tax Rate) x PHP 700,000 (Assessed Property Value)

• Real Property Tax = PHP 14,000

How to Pay Real Property Tax

There are two ways to pay your real property tax: going to the City Hall of your LGU or online if the LGU has it set up.

Online payment

Many LGUs have online portals to make paying real property tax easier. The instructions may vary depending on the LGU, but it’s all just a matter of logging into the portal and following the instructions. Examples of LGU online portals are Makati City’s MAKA-Connect and Pasig City’s Pasig City Online Services.

City hall payment

If you want to pay at your LGU’s City Hall, you’ll need to bring your last official tax payment receipt, property title, tax declaration number, and a valid ID. Then, look for the Assessor’s Office, Taxpayer’s Lounge, or any designated area where LGU staff can assess your property and determine the taxes you must pay. After the assessment, the staff in charge will advise you regarding your real property tax amount. Next, go to the billing section and pay the amount. Keep the receipt for your next payment cycle. If you’re paying quarterly, you must repeat this process every quarter.

First-time payment

If it’s your first time paying your real property tax, you’ll undergo extra steps, including preparing the following documents:

• Tax Declaration;
• BIR Tax Clearance Certificate;
• Certified True Copy of Title;
• Certificate Authorizing Registration;
• Valid ID with Photocopies;
• Updated Real Property Tax Payments; and
• Sworn Statement of the Property’s True and Fair Market Value

Remember that your LGU may have other requirements regarding real property tax, so look them up for a smooth payment process. After submitting your documents, wait for the City Hall to verify and assess your property.  Once the LGU approves the records you’ve provided, they’ll input your details into the LGU’s system, including the amount you must pay. You can then come back when the Municipal Clerk contacts you upon approval of your documents.  After paying your dues, you’ll receive your real property tax declaration that you can use for your next payment cycle.

What are the Consequences of Not Paying Real Property Tax?

Section 255 of RA 7160 specifies that if you fail to pay your real property tax on the quarterly or annual due dates, you’ll incur a 2% monthly penalty. That will continue until you fully pay off your dues. That means the longer you delay your real property tax payments, the higher your dues will be. It’s in your best interest to pay as soon as possible to avoid penalties.  Note that the total number of non-payments shouldn’t exceed 36 months. Otherwise, the LGU has the right to issue a warrant of levy and seize your property. By seizing your property, the government can sell it to pay what you owe and take a cut to cover expenses they must make to facilitate the sale.  Although it’s possible to reclaim your property one (1) year after the sale, you will still need to pay the amount you owe, expenses from the sale, and interest of not more than 2% per month.

Find Your New Home with Federal Land

Property ownership is an accomplishment and a responsibility at the same time. The latter includes paying real property taxes to the local government that has jurisdiction over your asset. As a premier Philippine real estate company, Federal Land, one of the leading real estate developers in the Philippines, develops thoughtfully designed RFO and pre-selling Ortigas condo for sale and other prime locations across the country. Get in touch with them today to find your next property. Send a message to  Federal Land to learn more.