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What You Need to Know About

Real Property Tax (RPT) In The


Philippines
Atty. Cherry Vi Saldua Castillo

Real Property Tax (RPT) is a tax that owners of real property need to
pay every year so that the local government unit (LGU) will not
auction off their property.

There are some investors who buy tax-delinquent real properties


and participate in auctions held by LGUʼs.

Buying tax delinquent properties is one of the many ways one can
buy properties at low prices.

We also publish schedules and lists of tax-delinquent real properties


of different cities – they are classified under the category tax-
delinquent properties.

Jump to a section [hide]

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?
6.1 Maximum RPT rates:
6.2 Special Education Fund (SEF) – 1%
6.3 Ad Valorem Tax on Idle Lands – 5%

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7 How do you compute the Assessed Value?
8 Maximum Assessment Level rates
9 Sample Computation
10 Special Classes of Real Property
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

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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 yearsʼ 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 treasurerʼs 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

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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 2%
Manila
Provinces 1%

Special Education Fund (SEF) – 1%

In addition to the basic RPT, the LGUʼs 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 LGUʼs 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,

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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%

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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 Assessment


Over 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%

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5,000,000.00 10,000,000.00 75%
10,000,000.00 80%

4. Timberland

FMV Over But Not Assessment


Over 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

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FMV per assessorʼs 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

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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, ½ 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, ½ of which remain unutilized or
unimproved

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3. Residential lots in subdivisions, regardless of land area

~~~

Aside from real property owners, I hope this also helps those
studying for the 2013 real estate brokers exam. Do you have any
questions, comments or reactions? Just let me know by leaving a
comment below, thanks!

~~~

Cherry Vi M. Saldua-Castillo

Real Estate Broker, Lawyer, and CPA


PRC Real Estate Broker License No. 3187
PRC CPA License No. 0102054
Roll of Attorneys No. 55239

Text by Jay Castillo and Cherry Castillo. Copyright © 2008 – 2013


All rights reserved.

Full disclosure: Nothing to disclose.

Image courtesy: of renjith krishnan / FreeDigitalPhotos

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