Acquiring a property feels like a dream come true. However, with privilege comes responsibility. So for the first time homeowners and the uninitiated, here are some fast facts you need to know about real property tax in the Philippines.
What is Real Property Tax?
Real property tax is an ad valorem tax imposed on real estate paid annually to the Local Government Unit.
Ad Valorem Tax is a levy on real property determined based on a fixed proportion of the value of the property.
What is the legal basis for Real Property Tax?
The legal basis for real property tax is in Title II of the Local Government Code of 1991 or Republic Act 7160. RA 7160 vested local government units the power to create local and external revenue sources such as the property tax, business tax, professional tax, amusement tax and other fees and charges. RA 7160 also established limitations such as ceiling limits and base rates.
Who is responsible for paying Real Property Tax?
The homeowner for residential properties or property administrator for commercial properties is responsible to for real property tax.
Exempted from the tax includes government properties, charitable institutions, churches, cooperatives, and schools.
When is Real Property Tax due?
Real Property tax is collected every 31st of January each year. However, taxpayers can also decide to pay in quarterly installment every:
- March 31
- June 30
- September 30
- December 31
If a taxpayer opts to pay the basic real property tax and the additional tax for public education called Special Education Fund in advance, the municipality concerned may grant a discount of not more than 20% of the annual tax.
Where can taxpayers pay the Real Property Tax?
The Treasurer’s Office of the municipality collects the payment of real property tax.
Aside from the chosen mode of payment, taxpayers have to bring the latest tax declaration and official receipts. For first-time homeowners, tax declaration and official receipts are part of the attachments given by the developer upon unit turnover or from the bank after loan approval.
How do you compute for Real Property Tax?
Real property tax rate for most cities and municipalities in Metro Manila is 2% and 1% for the provinces. The assessed property value, or the taxable value of the property, is the fair market value multiplied by the assessment level. Maximum assessment level for residential property is 20%, while for commercial and industrial property is 50%. Some cities have different tax rates. To verify your city’s tax rate, contact the city treasurer office.
To illustrate, let us compute for homeowner Angel’s recently acquired Makati condominium unit worth Php 3,500,000.
Real Property Tax = Real Property Tax Rate X (Fair Market Value X Assessment Level)
Real Property Tax = 2% X (Php 3,500,000 X 20%)
Real Property Tax = Php 14,000
Late payments will result in an interest rate of 2% surcharge per month to a maximum of 72% percent or 36 months of late payment.
Non-payment will result in the local government to foreclose and auction the property under the category tax-delinquent properties.
What other tax do you need to know?
Aside from real property tax, homeowners also need to take note of capital gains tax, documentary stamp tax, estate tax, and income tax. The Bureau of Internal Revenue lists the tax obligations of its citizen.
Need help with taxes? Here is the list of BIR accredited tax practitioners/agents.
When in doubt or need of clarifications, contact the City Treasurer’s Office of your community to get an accurate response.