Real Property Tax in the Philippines: Important FAQs
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- by Rebusel Duphilco Admin,
- January 08, 2022
Real Property Tax in the Philippines: Important FAQs
Being a property owner entails a series of never-ending responsibilities. For one, it is your civic
duty to know about the fees and taxes we need to pay. One of which is called the real property
tax. What is the meaning of real estate tax? It can be defined as a tax that is based on the value
of buildings or land.
Below are the frequently asked questions on real property tax in the Philippines.
What is Real Property Tax?
Real property tax is a kind of tax levied by the local government on properties and should be
paid by property owners. Properties that are taxable include land, building, improvements on
the land and/or the building, and machinery.
Why are properties being taxed?
In 1991, Republic Act 7160, also known as the Local Government Code was passed. Under this
law, local governments are given the authority to create and collect their own source of
revenue to fund public expenditure. These sources of income include real property
taxes among others.
Who should pay for real property tax?
People who own or whose names are on titles and certificates of ownership are required to pay land taxes in the Philippines, whether the real estate property is for residential or
commercial use.
What are the real property tax rates in the Philippines?
The exact tax rates depend on the location of the property in the Philippines. The real property
tax rate for Metro Manila, Philippines is 2% of the assessed value of the property, while the
provincial rate is 1%.
The real property tax rates in the Philippines are discussed in Section 233 of the Local
Government Code of 1991. The following rates of basic real property tax are prescribed based
on assessed values of real properties in the Philippines: 2% for a city or municipality within the
Metro Manila area. Meanwhile, expect 1% for those in provinces.
Are there other taxes levied by the government that I should know of?
Apart from the basic real property tax, local governments also charge additional tax for the
Special Education Fund. An additional 1% is levied on the assessed value of the real property,
and proceeds of which go to the budget of local schools.
If properties become idle, the government also charges a maximum of 5% of the assessed value
in addition to the basic real property tax. That’s why it is always prudent to put your land to
good use and generate income for you.
How do I compute the real property tax?
Remember that the RPT rate in Metro Manila is 2% and for provinces, it is 1%. To get the real
property tax computation, use this formula: RPT = RPT rate x assessed value.
To compute how much in total real property tax (RPT) needs to paid, we multiply the RPT rate
by the assessed value. The assessed value can be defined as the fair market value of the real
estate property multiplied by the assessment level, which is fixed through ordinances.
Assessed value may be interpreted as the property’s taxable value. To get the taxable value of a
property, we must first multiply the market value by the assessment level. Assessment levels
differ per property, based on their area and/or their usage. Assessment levels are prescribed
by Section 218 of the Local Government Code.
For example, a residential property located in Makati City, Metro Manila, owned by Jesus
Gulapa, is said to have a market price of Php10,000,000.00. The property consists of a parcel of
land valued at Php6,000,000, while the structure of the house itself, also known as building or
improvement, is valued at Php4,000,000.
Learning how to compute the real property tax starts with determining the total assessed value
of the property. Do this by simply adding the assessed value of the residential land and
assessed value of the building.
(A) Assessed Value of Land: Residential land (Php6,000,000) x Assessment Level (20%) =
Php1,200,000
(B) Assessed Value of the Building: House (Php4,000,000) x Assessment Level (40%) =
Php1,600,000
(C) Total Assessed Value of the Property: (A) + (B) = Php 2,800,000
Now that we have the total assessed value of the property, we multiply it by the applicable real
property tax rate to get the tax amount to be paid by Jesus Gulapa.
(D) Real Property Tax: (C) x Metro Manila RPT rate (2%) = Php56,000
The total basic real property tax to be paid by Jesus Gulapa is Php56,000.
However, we must also add the tax for the Special Education Fund.
(E) Special Education Fund (SEF) levy: (C) x SEF levy = Php28,000
Therefore, the total tax to be paid by Jesus Gulapa (D + E) is Php 84,000. Real property tax
computations may seem like a lot the first time, but as you become more familiar with the
assessed value of the property, you can calculate with ease.
How often are real property taxes paid in the Philippines? Is there a deadline?
Property owners can opt to pay for their real property taxes in full or through
quarterly installments.
For those who choose to pay it in full, the deadline is before January 31 of each year. For those
who choose to pay it in quarterly, deadlines are as follows:
First quarter: On or before January 31 annually
Second quarter: On or before June 30
Third quarter: On or before September 30
Fourth quarter: On or before December 31
How to pay real property tax in the Philippines?
Owners may pay their taxes at the Land Tax Division of the Treasurer’s Office of the Local
Government Unit. Online modes of payment may be available, too. For instance, real property
tax in Quezon City can be paid on the QC e-services website. You have to register first to use the
virtual payment services.
Q: What happens if I pay my taxes in advance?
Some cities offer tax discounts to those who pay before their prescribed deadlines. It’s best to
check with your municipal or city treasurer for more information about land taxes in the
Philippines.
What happens if I pay the tax later than the deadline?
Penalties are imposed on late payments. Penalty is at 2% interest per month on the unpaid
amount, and can reach a maximum of 72% if unpaid for 36 months or 3 years.
Being a property owner comes with financial responsibilities. Pay your land taxes on time to
avoid hefty, headache-inducing penalties.
What is the penalty when you do not have a building permit in the Philippines?
If you are caught building a house without a building permit, you will be forced to stop the
construction until your building permit is issued.
According to Section 213 of the National Building Code of the Philippines (PD 1096), here are
the penal provisions or penalties to be imposed:
“It shall be unlawful for any person, firm or corporation, to erect, construct, enlarge, alter,
repair, move, improve, remove, convert, demolish, equip, use, occupy, or maintain any building
or structure or cause the same to be done contrary to or in violation of any provision of the
Code."
“Any person, firm or corporation who shall violate any of the provisions of the Code and/or
commit any act hereby declared to be unlawful shall upon conviction, be punished by a fine of
not more than twenty thousand pesos or by imprisonment of not more than two years or by
both such fine and imprisonment; Provided, that in the case of a corporation firm, partnership
or association, the penalty shall be imposed upon its officials responsible for such violation and
in case the guilty party is an alien, he shall immediately be deported after payment of the fine
and/or service of his sentence.”
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