Local Taxation RPT Cartojano2015

REAL PROPERTY TAXATION

by Atty. Rey Cartojano, REC, REA, REBMaya Bandolon-Cartojano, REC, REA, REB

11/27/2015www.cartojanorealty.com

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Real Property Tax

What is Real Property Tax?

▪ Tax on real property

▪ Imposed by the Local Government Unit (LGU)

▪ Based on Local Government Code (R.A No. 7160)

▪ 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.


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Real Property 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.

▪ 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.


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Real Property Tax


▪ 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%).


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Real Property Tax


▪ Tax on real property

▪ Imposed by the Local Government Unit (LGU)

▪ Based on Local Government Code (R.A No. 7160)

▪ 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.


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PAYMENT OF REAL PROPERTY TAX

Who should pay the RPT?

▪ The Owner or Administrator of the property

Where to pay?

▪ At the City or Municipal Treasurer’s Office


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PAYMENT OF REAL PROPERTY TAX

When to pay?▪ Payment in advance is entitled to 20% discount if paid on or before

January 31 of the year

▪ May be paid in 4 equal quarterly installments

- March 31

- June 30

- September 30

- December 31

▪ Delinquent payment is subject to 2% interest per month but not more than 36 months or 72%


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Real Property Tax

Assessment

▪ The act of determining the value of a property

Fair Market Value FMV

▪ The highest price in terms of money

▪ Based on Land Classification per Tax Declaration

Assessment Level

▪ Percentage applied to FMV

▪ Used to determine taxable value property

▪ Based on Actual Use of property


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Real Property Tax

How do you compute real property tax (RPT)?

▪ RPT = RPT Rate x Assessed Value

How do you compute the Assessed Value?

▪ Assessed Value = Fair Market Value x Assessment Level


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Real Property Tax

Maximum RPT rates: 1-2%

Cities and Municipalities within Metro Manila – 2%

Provinces - 1%

Special Education Fund (SEF) – 1%

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


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ASSESSMENT LEVEL - Land

CLASSIFICATION Assessment Level

Residential 20% of FMV

Commercial/Industrial/Mineral 50% of FMV

Agricultural 40% of FMV

Timberland 20% of FMV


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ASSESSMENT LEVEL – Buildings and Other Structures (Residential)

FMV Over But not Over Assessment Level

0.00 175,00.00 0%

175,00.00 300,000.00 10%

300,000.00 500,000.00 20%

500,000.00 750,000.00 255

750,000.00 1,000,000.00 30%

1,000,000.00 2,000,000.00 40%

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

10,000,000.00 60%


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ASSESSMENT LEVEL – Buildings and Other Structures (Commercial or Industrial)

FMV Over But not Over Assessment Level

0.00 300,000.00 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%


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MACHINERIES



Commercial 80% of FMV

Industrial 80% of FMV

Agricultural 40%


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SAMPLE COMPUTATIONS

● Actual use of property: Residential

● Location: City within Gensan

● FMV per assessor’s officer (based on Tax Declaration):

● Land – P350,000Improvement – P350,000

● Assessment Level for Land: 20%

● Assessment Level for Improvement: 20%


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REALTY TAX REAL REAL ESTATE TAX or REAL PROEPRTY TAX

▪ ASSESSED VALUE = MV x AL (based on actual use)

▪ (Basic) = Assessed Value x Realty Tax Return use (2%)

▪ (Special Education Fund Tax/SEFT = AV x 1% fixed)

▪ Ad Valorem Tax on idle Lands – 5%

▪ In addition to the basic RPT, the LGU’s collect a maximum idle land tax of 5% of assessed value of property


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SAMPLE COMPUTATIONS

● Computation:Assessed Value of Land

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

= P350,000 x 20% = P70,000Basic Real Property Tax for Land and Improvement

= (P70,000 + P70,000) x 2% = P2,800Special Education Fund (SEF) for Land and Improvement

= (P70,000 + P70,000) x 1% = P1,400


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What are 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


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SPECIAL CLASSES OF REAL PROPERTY


Cultural 15% of FMV

Scientific 15% of FMV

Hospital 15% of FMV

Local water districts 10% of FMV

GOCC engaged in the supply and distribution of water or

generation and transmission of electric power

10% of FMV


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What are Idle Lands?

▪ Agricultural lands more than 1 hectare in area 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).


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What are Idle Lands?

▪ Lands other than agricultural, located in a city or municipality, more than 1,000 sqm. In area, ½ of which remain unutilized unimproved

▪ Residential lots in subdivisions, regardless of land area


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MORE SAMPLE COMPUTATIONS

Illustrative Example:

FMV OF LAND IN DAVAO P 2,000,000.00

ZONAL VALUE OF LAND P 2,500,000.00

CONTRACT PRICE P 3,000,000.00

ACTUAL USE RESIDENTIAL

1. How much is the ASSESSED VALUE?

2. How much is the REAL OR TAXABLE TAX?

A. BASIC

B. SEFT


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How much is ASSESSED VALUE?

ASSESSED VALUE OR TAXABLE VALUE

FMV x ASSESSMENT LEVEL

P2,000,000.00 x 20% = P400,000.00 – ASSESSED VALUE

OR TAXABLE VALUE


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ASSESSMENT LEVEL - Land



Commercial/Industrial/Mineral 50% of FMV

Agricultural 40% of FMV

Timberland 20% of FMV


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How much is the REAL PROPERTY TAX?

A. BASIC

ASSESSED VALUE x 2%

P400,000.00 x 2% =P8,000,000.00

B. SEFT

ASSESSED VALUE x 2%

P400,000.00 x 1% =P4,000,000.00

TOTAL REAL PROPERTY TAX =P12,000,000.00


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Exemptions from Real Property Tax (Sec. 284 RA 7160)

▪ Real property owned by the government or any of its political

subdivisions

▪ Charitable institutions, churches, parsonages or convents, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements used for religious, charitable or education purposes

▪ All machineries and equipment used by local water district and GOCC engaged in the supply and distribution of water or generation and transmission of electric power

▪ All property owned by cooperative under RA 6938 (Cooperative Code of the Phil.)

▪ Machinery and equipment used of pollution control and environment protection


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TRANSFER TAX

▪ Tax for the sale disposition of real estate

▪ Rate is not more than 1% in cities and not more than ½% in provinces

▪ Basis is the contract price of FMV whichever is higher

▪ Local government may also use contract price or zonal value whichever is higher

▪ Due in within 60 days from date of execution of deed or date of death of decedent

▪ Surcharge of 25% for late payment

▪ Interest of 2% per month or maximum of 275

▪ To be paid at the Treasurer’s Office of the City or Municipality


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Documents

Local Taxation RPT Cartojano2015