Real Property Taxation

1. Fundamental Principles
› 1. Real property shall be appraised at its current and fair
market value
› 2. Real property shall be classified for assessment
purposes on the basis of its actual use
› 3. Real property shall be assessed on the basis of a
uniform classification within each LGU
› 4. The appraisal, assessment, levy and collection of real
property tax shall not be let to any private person
› 5. The appraisal and assessment of real property shall be
equitable.
2. Nature of Real Property Tax
› a. It is a direct tax
› b. Indivisible single obligation
› c. Ad valorem tax based on the assessed value of the
property
› d. Local tax
› e. Imposed on the use and not on the ownership of the
property
› f. Progressive in character depending to a certain extent on
the use and value of the property
3. Imposition of real property tax
› a) Power to levy real property tax
– Only provinces and cities as well as municipalities within Metro
Manila may impose RPTs. (see SECTION 200 AND 232, LGC)

– Municipalities outside Metro Manila and barangays cannot impose

RPT.
b) Exemption from real property tax

› a. Real property owned by the Republic or any of its political

subdivisions (except when beneficial use has been granted to a
taxable person)
› b. Charitable institutions, churches, parsonages, or convents
appurtenant thereto, mosques, nonprofit or religious cemeteries and
all lands, buildings or improvements actually, directly, and exclusively
used for religious, charitable or educational purposes
› c. All machineries and equipment actually, directly and exclusively
used by local water districts and GOCCs engaged in supply and
distribution of water and/or generation and transmission of electric
power
› d. All real property owned by duly registered cooperatives
› e. Machinery and equipment used for pollution control and
environmental protection (includes infrastructure)32
4. Appraisal and assessment of real property
tax
a) Rule on appraisal of real property at fair market value

– Q: How is real property appraised?

– All real property, whether taxable or exempt, shall be

appraised at the current and FMV prevailing in the locality
where the property is situated (see Section 201, LGC).
b) Declaration of real property
› Q: What is the purpose of a tax declaration?

› A tax declaration only enables the assessor to identify the

property for purposes of determining the assessment
levels. It does not bind the assessor when he makes the
assessment.
› c) Listing of real property in assessment rolls
› d) Preparation of schedules of fair market value
› (i) Authority of assessor to take evidence
› (ii) Amendment of schedule of fair market value
› Q: When is the schedule of FMVs prepared?

› The schedule of FMVs shall be prepared before any general revision

of property assessment is made

› Q: Who prepares the schedule of FMVs?

› The provincial, city and the municipal assessors of the municipalities

within Metro Manila prepares the schedule of FMV for the different
classes of real property situated in their respective LGUs for
enactment by ordinance of the Sanggunian concerned.
›
Q: What are the different approaches in estimating
the FMV of real property for RPT purposes?
› 1. Sales Analysis Approach – the sales price paid in actual
market transactions is considered by taking into account
valid sales data accumulated from among the Register of
Deeds, notaries public, appraisers, brokers, dealers, bank
officials, and various sources stated under the LGC
› 2. Income Capitalization Approach – the value of an
income-producing property is no more than the return
derived from it. An analysis of the income produced is
necessary in order to estimate the sum which might be
invested in the purchase of the property
› 3. Reproduction cost approach – the formal approach used
exclusively in appraising manmade improvements such as
buildings and other structures, based on such data as
materials and labor costs to reproduce a new replica of the
improvement
e) Classes of real property
› Q: What are the classes of real property for assessment
purposes?

› Residential RACIMS
› Agricultural
› Commercial
› Industrial
› Mineral
› Special
› Q: What are the special classes of real property under the
LGC?

› All lands, buildings, and other improvements actually, directly

and exclusively:
› 1. Used for hospitals, cultural or scientific purposes
› 2. Owned and used by local water districts
› 3. Owned and used by GOCCs rendering essential public
services in a. Supply and distribution of water; b. Generation
and transmission of electric power
›
f) Actual use of property as basis of
assessment
› g) Assessment of real property
› (i) Assessment levels
› (ii) General Revisions of assessments and property
classification
› (iii) Date of effectivity of assessment or reassessment
› (iv) Assessment of property subject to back taxes
› (v) Notification of new or revised assessment
› Q: Define assessment.
›
› Assessment is the act or process of determining the value
of a property or proportion thereof subject to tax, including
the discovery, listing, classification, and appraisal of
properties
› Q: Define assessment level.
›
› It is the percentage applied to the FMV of the real property
to determine the taxable value of the property.
› Q: Define assessed value
›
› It is the FMV of the real property multiplied by the
assessment level. It is synonymous with “taxable value”
›
 Q: What is the procedure in computing real
property tax?
Step 1: Market value x assessment level % = Assessed Value

Step 2: Assessed Value x Tax rate % = Real Property Tax payable

› (ii) General Revisions of assessments and property
classification
› (iii) Date of effectivity of assessment or reassessment
› (iv) Assessment of property subject to back taxes
› (v) Notification of new or revised assessment
› h) Appraisal and assessment of machinery
5. Collection of real property tax
› Q: What is the rule on assessment of RPT?
›
› General Rule: The assessment must be made within 5
years from the date they become due
›
› Exception: If there is fraud or intent to evade taxes,
assessment may be made within 10 years from discovery
of fraud or intent to evade.
› Q: What is the rule on collection of RPT?
›
› Collection of RPT must be made within 5 years from
assessment
›
›
› Q: In what instances is the running of the prescriptive
period be suspended?
› 1. Treasurer is legally prevented from assessing/ collecting
2. Taxpayer requests for reinvestigation and executes
waiver
› 3. Taxpayer is out of the country or cannot be located
› Q: In what instances can there be a condonation or reduction of RPT?

› 1. General failure of crops

› 2. Substantial decrease in the price of agricultural or agri-based products
› 3. Calamity
› 4. When public interest so requires
› Note: (1) In the case of (1) to (3), the condonation is done by the
Sanggunian concerned by ordinance and upon recommendation of the
Local Disaster Coordinating Council. In the case of (4), only the President
may exercise this power.
›
e) Remedies of LGUs for collection of real
property tax
(i) Issuance of notice of delinquency for real property tax
assessment
(ii) Local government’s lien
(iii) Remedies in general
(iv) Resale of real estate taken for taxes, fees, or charges
(v) Further levy until full payment of amount due
› the unpaid tax attaches to the property and is chargeable
against the taxable person who had actual or beneficial
use and possession of it regardless of whether or not he is
the owner.
› Q: What are the remedies available to the LGU for the
collection of RPT?
›
› 1. Administrative action thru levy of real property
› a. Distraint of personal property
› b. Lien on property subject to tax
› c. Levy on real property tax
› 2. Judicial action
› Q: When is there levy on real property?
›
› After the expiration of the time required to pay the tax levied, the real
property subject to tax may be levied upon.
›
› Note: (1) The remedies of and levy may be repeated if necessary
until the full amount due including all expenses is collected (see
Section 265, LGC)
›
› (2) Notice and publication for sale, as well as the legal requirements
for a tax delinquency sale are mandatory and failure to comply can
invalidate the sale. (De Knecht v. CA; De Knecht v. Sayo [290 SCRA
223])
6. Refund or credit of real property tax
› a) Payment under protest
› b) Repayment of excessive collections
7. Taxpayer’s remedies
› a) Contesting an assessment of value of real property
› b) Payment of real property tax under protest
› Q: Who may contest the assessment of real property?
› In order for a taxpayer to have legal standing to contest an
assessment to the LBAA, he must be a person having legal
interest in the property.
Process in contesting a RPT assessment.
› 1. Pay the tax under protest and annotation of “paid under protest” in receipt
› 2. File written protest with local treasurer within 30 days from payment of the tax
› 3. Treasurer to decide within 60 days from receipt of the protest
› 4. From treasurer’s decision or inaction, appeal to the LBAA within 60 days
› 5. LBAA to decide within 120 days
› 6. Appeal LBAA decision to CBAA within 30 days from receipt of adverse decision
› 7. CBAA appealable to CTA en banc within 30 days from receipt of the adverse
decision of the CBAA
› 8. Appeal to SC within 15 days from receipt of adverse decision of CTA

› Note: (1) In (4), if the treasurer’s decision is in favor of the taxpayer, he may now
apply for a tax refund or tax credit.
Q: What is the effect of an appeal on
assessments?
› An appeal on assessments of real property shall, in no
case, suspend the collection of the corresponding realty
taxes on the property involved as assessed by the
provincial or city assessor, without prejudice to subsequent
adjustment depending upon the final outcome of the
appeal.
› Q: Is payment a pre-requisite to protest an assessment for
RPT?

› Yes. SECTION 252 OF THE LGC provides that no protest

shall be entertained unless the taxpayer first pays the tax.
Q: When is payment under protest not
required?
› Prior payment under protest is not required when the
taxpayer is questioning the very authority and power of the
assessor to impose the assessment and of the treasurer to
collect the tax as opposed to questioning the
increase/decrease in the tax to be paid
› Q: What is the rule on refunds of RPT?

› The taxpayer must file the written claim within 2 years from
the date of payment of tax or from the date when the
taxpayer is entitled to reduction or adjustment.36

› The provincial treasurer has 60 days to decide the claim for

tax refund or credit