Paying taxes is, in fact, a necessary evil in life. Hate it all you want but a critical part about being a property owner is having an understanding of what basic real property tax is and knowing how to calculate real property tax. These are responsibilities that all real property owners cannot elude.
No matter the value of the property, whether for residential or commercial use, real property tax rates apply and property owners must be able to familiarize themselves with this basic equation:
real property tax= rpt rate x assessed value of land
Before you compute real property tax however, it is important also to know why you have to pay real property tax, when you have to pay, and how much exactly? It might be intimidating at first but once you get started, eventually you will also be able to grasp terms such as assessed value of the property, idle land tax, delinquent tax, ad valorem tax, etc.
Below is a handy guide to better understand how to pay real property tax in the Philippines:
What is real property tax (RPT) and why do you need to pay real property tax?
Real property tax is an annual tax that all real property owners must pay. It can also be paid in quarterly installments. RPT is tax levied or imposed by the local government unit under the Local Government Code, specifically the 1991 Republic Act 7160.
Under this law, the local government unit concerned has the power to generate their own revenue. Proceeds of the said funds go to public expenditures such as construction of sources of local water districts or local schools.
Why are properties being taxed?
As explained above, in the Philippines, Local Government Units (LGUs) are allowed to create and collect their own income under the local government code. Section 233 of the code established the taxes to avoid double taxation.
The law also puts limits on the taxes and provides tax bases and rules on the value of the property. Sections 293 and 283 of the said local government code permits municipalities in Metro Manila to impose property taxes on the residents.
Who should pay real estate tax?
Real estate property tax must be settled by each person or entity who owns a home or property, whose name or names are reflected on the titles or certificates of ownership of the residential property or commercial property.
How to calculate real estate tax?
When you calculate real property taxes, first, you must determine where the residential property or commercial property is located. The RPT rate for the Metro Manila area is 2% and 1% for provinces.
Real estate tax can be computed using the formula: Real Estate Income Tax = Real Estate Rate X Assessed Value, wherein the assessed value for a property is defined by the fair market price multiplied by the assessed value set in ordinances. The appraised value is defined by its taxable value.
In calculating the property value the market price must be multiplied by the value of the asset.
How to compute real estate tax:
Formula: REAL ESTATE TAX = REAL ESTATE RATE X ASSESSED VALUE OF THE PROPERTY
When do you pay Real Estate Tax?
If you want to settle payment for a full year, the payment must be made at the end of January. If you want to pay in quarterly installments, the payment will be paid quarterly on the last day of the following quarter:
- First quarter: On or before March31- (January 31 annually)
- Second quarter: On or before June 30
- Third quarter: On or before September 30
- Fourth quarter: On or before December 31
Where and how do you pay Real Estate Tax?
The property owner is allowed to pay tax by paying the city or municipal treasurer's office in full or in recurring installments. Cash aside, the property owner needs to bring the following to the municipal treasurer's office: a copy of the latest tax declaration and copies of the official receipt.
If a tenant is a first time payor, make sure to secure a copy of the last year’s tax declaration and official receipts from your condo’s developer. These are usually turned over to you upon turnover. You can also check with your bank if you applied for a loan.
You will also need to supply copies of the new (current year) tax declaration or declaration of real property and copies of the official receipts or certification. Don't forget to bring valid IDs too.
Online Payment Portals For Paying Real Property Tax
- Makati City: MakatiOnline Payments
- Mandaluyong City: Mandaluyong City Online Services
- Manila City: Go Manila
- San Juan City: Makabagong San Juan
- Caloocan City: Caloocan City Web Portal
- Muntinlupa City: Muntinlupa Online Real Property Payment System
- Quezon City: QC E-Services
- Pasig City: Pasig City’s Online Services
- Valenzuela: Valenzuela City Online Services
Local Government Units typically offer discounts to early filers that do not exceed 20% of the annual tax owed. Additionally, the town or city where the property is located may have different discount rates.
Rate of Real Estate Tax: Fair Market Value and Assessment LevelTax rates vary depending on where the building is located. For cities and municipalities in Metro Manila property taxes and provincial taxes will not exceed one percent. The appraised value is determined using the property value multiplied by the assessed value. Assessing levels can vary according to local administration unit determination.
How do you calculate the assessed value?
Assessed value = Fair market value. However the fair market value in practice reflects the assessment done by a municipality or town assessor in accordance with the tax declarations and other documents relating to the taxes.
Assessed levels are determined via municipal ordinances in the Sangguniang Panlalawigan, Sangguniang Panglungsod or Sangguniang Pambayan in Metro Manila. For more information on these taxes, check the city's ordinance.
What Are The Penalties For Not Paying Real Property Taxes?Late payers incur penalties. Penalty is at 2% interest per month on the unpaid amount, and can incur a maximum of 72% if unpaid for 36 months or 3 years. It is your responsibility to settle financial dues on time.
Avoid these penalties by paying land taxes on time.
FAQsHow do you calculate real property tax?
To calculate real property tax, remember to use the formula: REAL ESTATE TAX = REAL ESTATE RATE X ASSESSED VALUE OF THE PROPERTY
How much is real property tax in the Philippines?
Real estate taxes in Metro Manila are at 2% of the assessed value of the property in question while provincial areas have a tax rate of 1% of the assessed value of the real estate.
What is Amilyar?
Amilyar is often used by Filipinos to refer to real property tax.
How is Amilyar calculated?
Amilyar or real property tax is computed by using the formula: REAL ESTATE TAX = REAL ESTATE RATE X ASSESSED VALUE OF THE PROPERTY
The article dives into the complexities of real property taxes in the Philippines, covering various facets such as what real property tax is, why it's required, who needs to pay, when and how to pay, calculations involved, penalties for late payments, and even FAQs related to the topic. Let's break down the key concepts:
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Real Property Tax (RPT): It's an annual tax levied on real property owners by local government units. The tax amount is determined based on the property's assessed value and a set RPT rate.
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Local Government Code (1991 Republic Act 7160): This law grants local government units the authority to impose and collect taxes, providing guidelines and limitations to prevent double taxation.
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Who Should Pay: Property owners reflected on property titles or certificates of ownership are responsible for paying real estate tax.
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Calculation of Real Estate Tax: It involves multiplying the assessed value of the property by the RPT rate. The assessed value is derived from the fair market value of the property as determined by ordinances.
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Payment Schedule: Real estate tax can be paid annually by the end of January or in quarterly installments throughout the year, with specific deadlines for each quarter.
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Payment Process: Property owners can pay taxes at the city or municipal treasurer's office, either in full or through installments, accompanied by necessary documents like tax declarations and official receipts.
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Online Payment Portals: Several cities offer online payment portals for convenient tax payment.
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Rate of Real Estate Tax: Rates vary based on location, with Metro Manila having a different rate (2%) compared to provincial areas (1%).
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Assessed Value Calculation: Assessed value equals the fair market value, determined by municipal assessors based on tax declarations and related documents.
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Penalties for Late Payments: Late payments incur a penalty of 2% interest per month on the unpaid amount, with a maximum penalty of 72% if left unpaid for 36 months.
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FAQs: The article covers frequently asked questions, including how to calculate real property tax, the tax rates in the Philippines, the term "Amilyar" (used for real property tax), and how it's calculated using a formula similar to the one for real estate tax.
The piece provides a comprehensive guide for property owners in the Philippines, offering insights into the tax system's intricacies, payment methods, deadlines, and potential penalties for non-compliance.
