Taxation is the lifeblood of the country; hence, taxes may be collected in a sovereign country even in the absence of law conferring the authority. It is money for the government that must be used not for their own benefit or to conceal it, but to produce employment, security, and meet the fundamental requirements of their people. As a result, owning a home in the Philippines is a luxury as well as a duty. It is a privilege because you have the ability to offer safety and security for yourself and your family members. At the same time, it is a responsibility because you are obligated by the government to pay taxes on your real estate here in the Philippines. Meanwhile, Bria Homes had been envisioning to provide the Filipino people affordable house and lot. Check our website to know more.
Taxation is one of the major topics that should have been taught in schools. It is one of the most difficult things for an adult to perform since no one teaches us how to do it, and we shun specialists like accountants because we consider their services to be expensive. Now, to assist you with your tax requirements, here are some facts regarding real estate taxes to help you comprehend this subject. As a disclaimer, we are not tax specialists, thus this post is intended to provide general conceptual assistance only. This essay is not intended to be an alternative tax opinion. It is nevertheless recommended that you speak with tax professionals such as Certified Public Accountants, who deliberately studied such matter.
Definition and Scope of Real Property in the Philippines
Now, how can you know if your personal property in the Philippines is considered “Real Property”? The Philippine legislation specifies which properties are to be regarded “Real.” According to Civil Code Article 415, the following are to be considered as “Real Property.”
Land, buildings, roads and constructions of all kinds adhered to the soil;
Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable;
Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object;
Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements;
Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works;
Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included;
Fertilizer actually used on a piece of land;
Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant;
Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast;
Contracts for public works, and servitudes and other real rights over immovable property.
In addition, the Supreme Court ruled in the case of Benguet Corporation vs Central Board of Assessment Appeals, 218 SCRA 271 that ‘real properties’ could also be under general principles personal properties.
What is Real Property Taxes or “Amilyar” in the Philippines?
Have your parents ever mentioned the word “Amilyar” to you? or have you ever been faced with paying anything called “Amilyar” at your local municipal hall? Well, “Amilyar” is a Filipino term used for Real Property Taxes here in the Philippines. It is a colloquial term for the Filipino phrase “millaramiento,” which is derived from the Spanish word “amillaramiento.”
Republic Act No. 7160, generally known as the Local Government Code of the Philippines, Chapter IV, Section 232 bestowed power upon a province, city, or municipality within Metropolitan Manila to collect an annual ad valorem tax on the real properties of its population. Its purpose is to be able to cater local government unit expenses for public use.
After understanding what Real Properties are, it is essential to understand that such properties are subject to taxes. As a result, it is a person’s responsibility to pay such taxes; otherwise, penalties and criminal consequences may be imposed upon the taxpayer.
Are There Types of Properties Exempted from Real Estate Taxes?
Yes. Under Chapter IV Section 234 of Republic Act 7160 provides in its provision that the following are properties shall be exempted from payment of the real property tax:
Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration or otherwise, to a taxable person;
Charitable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings, and improvements actually, directly, and exclusively used for religious, charitable or educational purposes;
All machineries and equipment that are actually, directly and exclusively used by local water districts and government-owned or -controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power;
All real property owned by duly registered cooperatives as provided for under R.A. No. 6938; and
Machinery and equipment used for pollution control and environmental protection.
When Do You Pay Real Property Taxes?
The government provided us with two options for paying our tax liabilities: full payment and installment payments. Every January 1 of the year is the start of the accrual of tax liabilities for the owner of real property. You can pay it in one time for the whole year or you can avail the installment method. Here are the important dates to note for installment quarterly payments:
First quarter: On or before March 31, 2022
Second quarter: On or before June 30, 2022
Third quarter: On or before September 30, 2022
Fourth quarter: On or before December 31, 2022
In accordance with this, it is also important to know that there are reductions ranging from 10% to 20% for early tax payments, which vary for every local government unit.
How Do You Compute Real Property Taxes?
First, the local government must appraise the worth of your actual property, which may be done using a variety of valuation methodologies. The property’s fair value is calculated, and an assessment of that value should be considered. The value of real property is subject to a periodic appraisal by the government. There are several elements that might raise the value of your home. One method is by infrastructure development, which you may read about here: What increases your home’s value?
Furthermore, Bria Homes is one of the organizations that has continually benefited from infrastructural developments that raise the value of real estate properties, which is detailed here: Infrastructure developments to drive value appreciation in BRIA Homes.
After determining the fair market value, the assessor would categorize the property as either residential, industrial, commercial, or agricultural. This is now known as the “assessed value,” and it is often lower than the zonal value reported by the Bureau of Internal Revenue (BIR). The assessed value will now be used as the gross amount for the tax due, and it will be multiplied by the applicable tax rate. There are two sorts of tax rates, depending on where the property is located. If the property is located within Metro Manila, the tax rate will be 2%, while the provincial rate will be 1%.
Assessed Value (determined by ordinances) x Tax Rate (1% or 2%) = Real Property Tax
To Illustrate the computation, Juan Dela Cruz is the owner of a residential property which consists of both house and lot in Pasig City. The fair market value of the lot is at P5,000,000, while the house is at 8,000,000.
Assessor categorizes the property depending on its assessment level
Residential lots and timber lands are valued at 20%, agricultural lots at 40%, commercial, industrial, and mining lands at 50%, special classes such as cultural, scientific, and hospitals at 15%, and water and electricity utilities at 10%. It is based on the primary usage when there are many uses.
For the land of Juan Dela Cruz:
5,000,000 (Fair Market Value of Land) x 20% (Assessment Level) = 1,000,000
For the house of Juan Dela Cruz:
8,000,000 (Fair Market Value of House) x 40% (Assessment Level) = 3,200,000
Next, add both to get the total assessed value of the property 1,000,000 + 3,200,000 = 4,200,000
Total Assessed Value = 4,200,000 multiply it to 2% (since the property is located in Metro Manila).
The Total Real Property Tax to be paid by the owner shall be P84,000
Aside from that, various properties are subject to additional tax obligations depending on the circumstances. There are also other taxes levied, such as the Special Education Fund, which is a 1% tax on property, with the proceeds going to local schools. Other circumstances may necessitate the imposition of extra property taxes on the property.
For the additional Special Education Fund an additional 1% (P42,000) shall be added, hence, the total Real Property Tax to be paid by Juan Dela Cruz shall be P126,000 (84,000 +42,000)
Also Read: A Beginner’s Guide to Filing Taxes in the Philippines
Where do you pay Real Property Taxes?
Real Property Taxes should be paid at the municipal treasurer’s office. Physical payments to municipalities have been disallowed due to the Covid-19 pandemic. As a result, local governments have imposed deadline extensions while simultaneously developing online platforms for people to pay their payments. On their websites, you may look for your local government’s online payment center. For example, for Pasig City, go to this link: Pasig City Business Online Portal and follow these steps:
Create an account and provide the required information on the sign-up form.
Register your property using the latest Official Receipt and the date when the registration was made.
Get your property assessed to determine the amount to be paid.
Proceed with your payment.
What Do You Need to Prepare?
If you are the owner of the property and it is your first time to be a real property taxpayer then it is advised that you bring the following:
Original Certificate of Title/Transfer Certificate of Title/Condominium of Title
Tax Declaration Number
Submit the following documents and an assessment shall be provided with the amount of tax to be paid. Then, you must proceed to the cashier to pay your real property taxes.
On the other hand, if you had paid your real property tax before then you will only need to bring your previous Property Tax Official Receipt.
What is a Tax Declaration? How to get a copy of tax declaration in the Philippines?
Tax declarations for real property are records, which is a typical assessment document kept by province, city, or municipal assessors that shows, among other things, the market and assessed values of the property as the premise for real property tax collection. It is usually updated every three years. It serves a lot of purposes including tracing back its previous owners.
The procedure for obtaining a copy of your tax declarations is determined by your local government entity. As a result, it is recommended that you first consult with the authorities and prepare the following documents:
Certificate Authorizing Registration
BIR Tax Clearance Certificate
Transfer Fee Receipt
Updated Real Property Tax payment
Sworn Statement of True and Fair Market Value of the Property
What Will Happen If You Don’t Pay Your Real Property Taxes?
If the whole year has passed and you have not paid your Real Property Taxes, Section 255 of RA 7160 specifies that fines will be imposed on taxpayers who fail to pay taxes. Until the responsibility is entirely paid, the taxpayer must pay a 2% interest penalty every month on the outstanding percentage. If the unpaid status has lapsed for 36 months or three years and a maximum of 72 percent interest has accrued, the government shall have the ability to litigate the stated property subject to auction as a whole or in part to fulfill the overdue status of unpaid taxes.
Written By Vincent Sanchez