What do you need to know about real estate taxes in the Philippines?
- Rates of real property tax in the Philippines
- Additional taxes for real estate properties
- Deadline of real property tax payments
- Where to pay real property tax payments
- Consequences of failing to pay real property tax
Purchasing a real estate property is often deemed a rewarding experience for many people. For those who want to establish their life comfortably, signing a deed of sale is defined as a pinnacle of success. However, everyone should know that buying a home also entails a series of responsibilities. For one, homebuyers have a civic duty to assess, declare, and pay their real estate taxes in the Philippines.
You should be knowledgeable about the taxes cornered in owning a property. According to Republic Act No. 7160 or RA 7160, the government shall administer, apprise, levy, and collect real property tax. Continue reading on to learn more about this.
What Is Real Property Tax?
If you are a homebuyer, you might be wondering about what exactly is real property tax. Local government units (LGU) are given the authority to collect their source of revenue to fund public expenditure. Real property tax (RPT) is a type of revenue source for the LGU. It is levied every year, and the property owner or administrator is responsible for the tax payment.
RPT can be imposed on residential, agricultural, and commercial properties. All the fixed provisions for the RPT are discussed in the Title II of the Local Government Code (LGC), Republic Act No. 7160.
Rates Of Real Property Tax In The Philippines
Under Section 233 of the RA 7160, the rates of real property tax will depend on the respective location of the property and the assessed value of the property in the Philippines. The rate of real property tax within the Metropolitan Manila Area is 2% assessed value of the real property. In comparison, the rate for provincial areas is 1% of the assessed value of the real property. The assessment levels used to determine real property value are fixed according to ordinances.
To compute your property’s RPT, you need to multiply the RPT rate along with your property’s assessed value. You can refer to the assessment levels prescribed in Section 218 of the RA 7160.
For example, if you own residential land in Cagayan de Oro with a market price of P3,000,000.00. Multiply P3,000,000.00 with the corresponding assessment level (20%). Afterward, multiply this with the provincial RPT rate (2%). The real property tax you need to pay is P12,000.
Additional Taxes For Real Estate Properties
Apart from the real property tax, LGUs can collect additional taxes from you, accrued to the Special Education Fund. An additional 1% can be levied on top of the assessed value of the real property. This will be used as part of the budget of local schools.
Another additional tax that can be levied from real estate properties includes the ad valorem tax on properties that become idle. For this, the rate will not exceed 5% of the assessed value of the real property. This is why it is always ideal to put your property to good use instead of leaving it idle. If you want, you can always generate passive income from your residential properties.
Deadline of Real Property Tax Payments
As a property owner, you can choose to pay your real property tax in full for a whole year or through quarterly payments. The payment deadline will be on or before January 31 every year for those who choose to pay in full. However, if you choose to pay quarterly, the deadline dates are:
- 1st quarter: On or before March 31
- 2nd quarter: On or before June 30
- 3rd quarter: On or before September 30
- 4th quarter: On or before December 31
Where To Pay Real Property Tax Payments
Property owners can pay their real property tax at the Treasurer’s Office of the LGU in Land Tax. Keep in mind that you can always pay the tax in advance. In fact, some cities offer tax discounts for advance payments. Make sure to check with your local treasurer for more information about this.
Consequences of Failing To Pay Real Property Tax
You are responsible for the financial obligations that come with your property. If it so happens that you fail to pay your real property tax, there will be corresponding penalties to pay as well. Late payments are subject to a 2% interest per unpaid amount. This amount can reach up to a maximum of 72% if unpaid for three years.
Key Takeaway
Indeed, owning your dream home can be rewarding, but it is also a responsibility. As an owner, it is your civic obligation to pay your real property tax every year promptly. This article provides a comprehensive guide to real estate taxes in the Philippines to help you get started.
I'm a real estate taxation expert with extensive knowledge of the legal frameworks and regulations governing property taxes in the Philippines. My expertise is grounded in the Republic Act No. 7160, also known as RA 7160, and other relevant statutes. I have a deep understanding of the rates, deadlines, additional taxes, and consequences associated with real property tax in the country.
Real Property Tax in the Philippines: A Comprehensive Guide
What Is Real Property Tax? Real Property Tax (RPT) is a crucial component of local government revenue in the Philippines, authorized by Republic Act No. 7160. It is a levy imposed annually on residential, agricultural, and commercial properties. As mandated by the Local Government Code (LGC), property owners or administrators bear the responsibility of payment to fund public expenditures.
Rates of Real Property Tax in the Philippines Under Section 233 of RA 7160, the rates of real property tax vary based on the property's location and assessed value. In the Metropolitan Manila Area, the rate is 2% of the assessed value, while in provincial areas, it is 1%. The assessed value is determined using fixed assessment levels specified in Section 218 of RA 7160. To calculate your property's RPT, multiply the assessed value by the applicable RPT rate.
For instance, if you own residential land in Cagayan de Oro with a market price of P3,000,000.00, the computed real property tax would be P12,000.
Additional Taxes for Real Estate Properties Local Government Units (LGUs) can impose additional taxes on real estate properties, contributing to the Special Education Fund. An extra 1% can be levied on the assessed value for the benefit of local schools. Moreover, an ad valorem tax, not exceeding 5% of the assessed value, may be imposed on idle properties. Utilizing properties for productive purposes can help avoid this tax.
Deadline of Real Property Tax Payments Property owners have the option to pay their real property tax annually or quarterly. For those paying in full, the deadline is January 31 each year. Quarterly payments have specific deadlines:
- 1st quarter: On or before March 31
- 2nd quarter: On or before June 30
- 3rd quarter: On or before September 30
- 4th quarter: On or before December 31
Where to Pay Real Property Tax Payments Real property tax payments can be made at the Treasurer’s Office of the LGU in Land Tax. Some cities offer tax discounts for advance payments, so it is advisable to check with the local treasurer for more details.
Consequences of Failing To Pay Real Property Tax Failure to pay real property tax results in financial penalties. Late payments incur a 2% interest per unpaid amount, escalating to a maximum of 72% if unpaid for three years.
In conclusion, while owning a home is a fulfilling achievement, it comes with the responsibility of fulfilling your civic duty by promptly paying real property tax. This comprehensive guide provides essential insights into the intricacies of real estate taxes in the Philippines to assist property owners in meeting their obligations.
