Taxation is one of the ways wherein the government generates income. This can be levied upon persons, property, and the like. One of the common kinds of taxes imposed is the Real Property Tax (RPT). The legal basis for such provides a comprehensive guide for current property owners, and as well as potential buyers in the Philippines.
Legal Basis
Taxes, especially real property taxes, can be collected by the Local Government Unit where the property is situated. As provided in the constitution, LGUs are empowered to levy and collect taxes alongside the national government1. Another legal basis for the collection of RPT is the Local Government Code of 1991, the legislation that allows the transfer of power, authority, and responsibility from the national to the local government – which includes taxation. This law provides that local government units are given taxing powers for real property tax, business, and fees2.
What is Real Property Tax
Real properties refer to land and even permanent structures affixed to it (both natural and man-made), all of which are immovable in nature. Real Property Tax or RPT is the tax levied upon land, buildings, machinery, and improvements. It is classified as an ad valorem tax which is based on the property’s assessed value.
Tax Base, Assessment, and Rates
RPT is based on the fair market value and is also dependent on the property classification. The fair market value (FMV) is determined by the assessor of the city or of the province. Additionally, their assessment would depend on the classification which are: residential, agricultural, commercial, industrial. Each of these classifications have a different bearing for the RPT assessment.
Aside from the assessment of the city or provincial assessor, there are certain rates that are needed to be accounted for. In provinces, the RPT rate is not exceeding 1% of the assessed value. For locations within metro manila, the rate is not exceeding 2%. Moreover, there is also a special education fund tax rate – an additional 1% of the assessed value, for the Local School Board’s Special Education Fund. Overall, the computation for RPT is: RPT = Assessed Value x (Basic Tax Rate + SEF Tax Rate).
Exemptions
Despite real property tax being one of the income generating activities of the government, there are still exemptions for it. Properties of the Republic of the Philippines or of the government are generally RPT free unless beneficial use is to be granted to a taxable person. Charitable institutions, churches, and cooperatives are also exempted given that they should operate actually, directly, and exclusively for their purpose. Otherwise, they shall be taxed. Lastly, machineries and equipments meant and used for pollution control and or environmental protection are also excused from Real Property Tax.
Payment, Collection, and Remedies
Payment for real property tax can be through an annual lump-sum payment, which is due on or before January 31 of the taxable year. For some LGUs, this accounts for an early payment discount of 20%. Payments can also be done quarterly on or before the dates of: March 31, June 30, September 30, and December 31.
Consequences of Non-Payment
Non-payment and late payment of RPT also constitutes legal consequences. For non-payments, one can be charged of monthly interest at 2% on the unpaid amount. And depending on the local government, there could be an imposed 25% surcharge of the unpaid amount. This can also bring about administrative remedies for the LGU such as real property being levied and be subject to public auctions.
In the case of City Government of Antipolo vs Transmix Builders & Construction, the latter purchased three parcels of land in Antipolo – all of which were registered in Transmix’s name, but tax declarations are in the name of the previous owner. This constituted a forfeiture of the properties since all of the documents such as notices, warrant of levy and public auction notices were all sent to the previous owner instead of Transmix. Unlike land registration proceedings which are in rem, auction sale of land for delinquency of RPT is in personam. Contrary to in rem proceedings where publication and posting as a form of notice would suffice, mere publication and posting are insufficient notices in tax sales. Simply stated, personal notice to the taxpayer is essential in administrative proceedings of forfeiture of real property. And since Transmix was not given the required notices, the entire process was declared null and void.
Remedies to Taxpayers
Philippine laws also provide remedies to tax payers. One can protest the assessment of the city or provincial assessor if they see any anomalies or believe that they have been assessed unfairly. Individuals can also file for appeals before the local board of assessment appeals, central board of assessment appeals, and even the courts.
- Philippine Constitution. (1987), Article X- Local Government, Section 5, ↩︎
- Republic Act No. 7160. (1991). Local Government Code of 1991 ↩︎
