June 6, 2022

Real Property Tax Philippines

https://www.allproperties.com.ph/real-property-tax-philippines/#

One responsibility of a homeowner, aside from paying the mortgage and association fees, is to settle
the property’s real estate or real property tax yearly.

Real Estate Tax is a tax levied by the local government on properties such as land, building,
improvements on the land or the building, and machinery. Exemption to this law are properties
owned by the government, charitable institutions, churches, cooperatives, and those used in the
supply of water and electric power.

Why are properties being taxed?

In the Philippines, the Local Governments Unit or LGU has the power to create revenue sources
because of Republic Act 7160 or the Local Government Code that was passed in the year 1991.

Section 232 of the Local Government Code designated the taxing powers among local government
units to prevent double or multiple taxations. Under this law, the ceiling of tax rates is provided, and
the National policy still sets the tax base, the valuation rules, and the local government’s limits.

Section 197 to 283 of the Local Government Code allows the local government, from provinces to
cities and municipal government in Metro Manila to have the power to impose a real property tax.

The Local Government Code did not specify the meaning of real property for purposes of taxation. In
the absence of such a definition according to Nicolas and De Vega Law Offices, Article 415 of the
Civil Code applies, and the following are considered real property:

 Land, buildings, roads, and constructions of all kinds adhered to the soil;
 Trees, plants, and growing fruits, while they are attached to the land or form an integral part
of an immovable;
 Everything fixedly attached to an immovable, in such a way that it cannot be separated
therefrom without breaking the material or deterioration of the object;
 Statues, reliefs, paintings, or other objects for use or ornamentation, placed in buildings or on
lands by the owner of the immovable in such a manner that it reveals the intention to attach
them permanently to the tenements;
 Machinery, receptacles, instruments, or implements intended by the owner of the tenement
for an industry or works which may be carried on in a building or on a piece of land, and
which tend directly to meet the needs of the said industry or works;
  Animal houses, pigeon-houses, beehives, fish ponds, or breeding places of similar nature, in
case their owner has placed them or preserves them to have them permanently attached to the
land, and forming a permanent part of it; the animals in these places are included;
 Fertilizer used on a piece of land;
 Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters
either running or stagnant;
 Docks and structures which, though floating, are intended by their nature and object to
remain at a fixed place on a river, lake, or coast;
 Contracts for public works, and servitudes, and other real rights over immovable property.

The Local Government Code also included exemptions on Real Estate Tax such as:

 Real property owned by the Republic of the Philippines, its political subdivisions, except
when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable
person;
 Charitable institutions, churches, parsonages, or convents appurtenant thereto, mosques, non-
profit or religious cemeteries, and all lands, buildings, and improvements, directly, and
exclusively used for religious, charitable or educational purposes;
 All types of machinery and equipment that are, directly, and exclusively used by local water
districts and government-owned or–controlled corporations (GOCCs) engaged in the supply
and distribution of water and/or generation and transmission of electric power;
 All real property owned by duly registered cooperatives as provided for under RA 6938; and
 Machinery and equipment used for pollution control and environment protection.

With the Local Government Code, the local government where the properties are situated has the
right to appraise all real properties that are either taxable or exempted at their current and fair market
value.

Real property is also classified as residential, agricultural, commercial, industrial, mineral,

timberland, or special, valued, and is assessed based on its actual use, regardless of where it is
located, who owns it, and who uses it.

Property owners can pay real estate taxes either in full or through quarterly installments at the city or
municipal treasurer’s office.

Who Should Pay Real Estate Tax?

Real estate Tax should be settled by the individual or people who own or whose names are listed in
the titles and certificates of the property or whoever owns it as of January 1.

Why do we need to pay Real Estate Tax?

Real Property Tax in the Philippines has a massive effect on the economy of the country.

Local Government Additional Funds

The real property tax is one of the most important tax revenue of a local government unit. During the
eighties, it accounted for 23 percent of the total revenues of the local governments. It declined in
1990 to 18 percent and dropped in 1994 to 11.0 percent but eventually picked up over time.

The real property tax is shared with smaller local government units that compose the province or the
city.

For provinces, 40 percent goes to their municipality while 25 percent goes to the village or barangay
where the property is located, and the province retains 35 percent. For city governments, it is divided
between the village (getting one-third) and the city (retaining two-thirds).

With real property tax, the local government units can provide an additional budget to their project
for infrastructure, health, education, and the like.