REAL PROPERTY TAX

Real Property is property that includes land

and buildings, and anything affixed to the land.

Real property only includes those structures that are affixed to the land, not those which can be removed, such as equipment.

For a business, real property would include warehouses, factories, offices, and other buildings owned by the business.

Real property may also include:

Whatever is beneath the surface of the land, like minerals, natural gas, and oil

Rights to the use of property Leasehold Improvements(since

they cannot be removed)

Terms Assessment  — the act or process

of determining the value of a property

Assessment level — is the percentage applied to the market value to determine the taxable or assessed value of the property.

Assessed Value — the value placed on taxable property by the assessor for ad valorem tax purposes

Fair Market Value - is the highest price a property can command if put up for sale in an open market

The FMW and the assessment level are important in

determining the assessed value of real estate.

Current Assessment levels for land:

20 % for residential, 50 % for commercial, industrial,

and mineral, 40 % for agricultural, 20 % for timber, and 15 % for scientific, cultural, and

hospital.

Assessed Value

= FMW x Assessment level

Ex.

Compute the assessed value of a residential land whose fair market value is pegged at 2 million pesos by the municipal assessor.

Basic Real Estate tax

Provinces – not more than 1%

Metro Manila – not more than 2%

Basic Real Estate Tax

= Assessed value x Tax rate

The land is located in Cebu.(tax rate: 1%)

AT = AV x TR = Php 400,000

x .01 = Php 4,000