1 What is Real Property Tax?

2 Who should pay the RPT

3 Where to pay
4 When to pay
5 How do you compute real property tax (RPT)?
6 What are the RPT rates?
o 6.1 Maximum RPT rates:
o 6.2 Special Education Fund (SEF) 1%
o 6.3 Ad Valorem Tax on Idle Lands 5%
7 How do you compute the Assessed Value?
8 Maximum Assessment Level rates
9 Sample Computation
10 Special Classes of Real Property
o 10.1 What are the assessment levels for special classes of real property?
11 What are Idle Lands?

In the past, we have discussed what happens during these LGU auctions. You may
want to read them should you be interested in this type of investment:

Marikina Public Auction of Tax-Delinquent Real Properties (one of our very first posts)

Four tips for investors who plan to invest in tax-delinquent real properties in Quezon
City
9 lessons learned from the real property tax foreclosure auction sale in Quezon City
In this post, I will discuss the legal bases for RPT and how to compute it.

What is Real Property Tax?

Real Property Tax is the tax on real property imposed by the Local Government Unit
(LGU). The legal basis is Title II of the Local Government Code (LGC), Republic Act
(R.A.) no. 7160. The implementing rules and regulations of R. A. 7160 can be
found here.

The RPT for any year shall accrue on the first day of January and from that date it shall
constitute a lien on the property which shall be superior to any other lien, mortgage, or
encumbrance of any kind whatever, and shall be extinguished only upon payment of the
delinquent tax.
If you have prior years delinquencies, interests, and penalties, your RPT payment shall
first be applied to them. Once they are settled, your tax payment may be credited for the
current period.

Who should pay the RPT

The owner or administrator of the property

Where to pay
At the City or municipal treasurers office

When to pay
If you choose to pay for one whole year, the payment is due on or before January 31. If
the basic RPT and the additional tax accruing to the Special Education Fund (SEF) are
paid in advance, the sanggunian concerned may grant a discount not exceeding twenty
percent (20%) of the annual tax due. Jay wrote about the discount on RPT recently in
his post How To Get A 20% Discount on Real Property Taxes.

If you choose to pay in installments, the four quarterly installments shall be due on or
before the last day of each quarter, namely: March 31, June 30, September 30, and
December 31.

In case of failure to pay the basic RPT and other taxes when due, the interest at the rate
of two percent (2%) per month shall be imposed on the unpaid amount, until fully paid.
The maximum number of months is thirty-six (36) months, so effectively, the maximum
interest rate is seventy-two percent (72%).

How do you compute real property tax (RPT)?

RPT = RPT Rate x Assessed Value

What are the RPT rates?

Maximum RPT rates:
Coverage RPT rate

Cities and Municipalities within Metro Manila 2%

Provinces 1%
Special Education Fund (SEF) 1%
In addition to the basic RPT, the LGUs may levy and collect an annual tax of one
percent (1%) which shall accrued exclusively to the Special Education Fund (SEF).

Ad Valorem Tax on Idle Lands 5%

In addition to the basic RPT, the LGUs may collect a maximum idle land tax is 5%
assessed value of the property.

How do you compute the Assessed Value?

Assessed Value = Fair Market Value x Assessment
Level

Sec. 199 (l) of the LGC defines Fair Market Value as the price at which a property may
be sold by a seller who is not compelled to sell and bought by a buyer who is not
compelled to buy. In practice, however, the Fair Market Value is based on the
assessment of the municipal or city assessor as written in the Tax Declaration.

The Assessment Level shall be fixed through ordinances of the Sangguniang

Panlalawigan, Sangguniang Panglungsod, or the Sangguniang Pambayan of the
municipality within the Metro Manila area. To get this data, look for the tax Ordinance of
the city or municipality where your property is located.

Maximum Assessment Level rates

I. Land

Class Assessment Level

Residential 20%

Timberland 20%

Agricultural 40%

Commercial 50%

Industrial 50%
 Mineral 50%

II. Building and Other Structures

1. Residential
FMV Over But Not Over Assessment Level

0.00 175,000.00 0%

175,000.00 300,000.00 10%

300,000.00 500,000.00 20%

500,000.00 750,000.00 25%

750,000.00 1,000,000.00 30%

1,000,000.00 2,000,000.00 35%

2,000,000.00 5,000,000.00 40%

5,000,000.00 10,000,000.00 50%

10,000,000.00 60%

2. Agricultural

FMV Over But Not Over Assessment Level

300,000.00 25%

300,000.00 500,000.00 30%

 500,000.00 750,000.00 35%

750,000.00 1,000,000.00 40%

1,000,000.00 2,000,000.00 45%

2,000,000.00 50%

3. Commercial/Industrial

FMV Over But Not Over Assessment Level

300,000.00 30%

300,000.00 500,000.00 35%

500,000.00 750,000.00 40%

750,000.00 1,000,000.00 50%

1,000,000.00 2,000,000.00 60%

2,000,000.00 5,000,000.00 70%

5,000,000.00 10,000,000.00 75%

10,000,000.00 80%

4. Timberland

FMV Over But Not Over Assessment Level

 300,000.00 45%

300,000.00 500,000.00 50%

500,000.00 750,000.00 55%

750,000.00 1,000,000.00 60%

1,000,000.00 2,000,000.00 65%

2,000,000.00 70%

II. Machineries

Class Assessment Level

Agricultural 40%

Residential 50%

Commercial 80%

Industrial 80%

Sample Computation
Data:

Actual use of property: Residential

Location: City within Metro Manila

FMV per assessors officer (based on Tax Declaration):

Land P350,000
Improvement P350,000
Assessment Level for Land: 20%

Assessment Level for Improvement: 20%

Note: The assessment levels are fixed through ordinances of the Sangguniang
Panlalawigan, Sangguniang Panglungsod, or the Sangguniang Pambayan of the
municipality within the Metro Manila area. We will be using the maximum rates for sample
computation purposes.

Computation

Assessed Value of Land = P350,000 x 20% = P70,000

Assessed Value of Improvement = P350,000 x 20% = P70,000

Basic Real Property Tax for Land and Improvement

= (P70,000 + P70,000) x 2% = P2,800

Special Education Fund (SEF) for Land and Improvement = (P70,000 + P70,000) x 1%
= P1,400

Special Classes of Real Property

All lands, buildings, and other improvements thereon actually, directly and exclusively
used for hospitals, cultural, or scientific purposes, and those owned and used by local water
districts, and government-owned or controlled corporations rendering essential public
services in the supply and distribution of water and/or generation and transmission of
electric power

What are the assessment levels for special classes of real property?
Actual Use Assessment
Level
 Cultural 15%

Scientific 15%

Hospital 15%

Local water districts 10%

Government-owned or controlled 10%

corporations engaged in the supply and
distribution of water and/or generation and
transmission of electric power
What are Idle Lands?
1. Agricultural lands more than one (1) hectare in area, suitable for cultivation, dairying,
inland fishery, and other agricultural uses, of which remain uncultivated or unimproved.

Exceptions
i. Lands planted to permanent or perennial crops with at least 50 trees to a
hectare; and

ii. Lands used for grazing purposes (Note: put goats or cows on your property).

2. Lands Other than Agricultural, located in a city or municipality, more than 1,000 sqm. in
area, of which remain unutilized or unimproved

3. Residential lots in subdivisions, regardless of land area