Real Property Taxes

Nature and purpose of Property Taxes.

Property taxes are assessed on all property, or all property of a certain class located within a certain territory on a specified date in proportion to its value or in accordance with some other reasonable method of apportionment.

In the Philippines, a real property tax is an annual AD VALOREM TAX imposed by LGU’s on real property within their jurisdiction, determined on the basis of a fixed proportion of the value of the property.

The function of a property tax is to raise revenue. Such tax does not impose any condition nor does it place any restriction upon the use of the property taxed.


Fundamental Principles Governing Appraisal And Assessment Of Real Property:

a.) Real property shall be appraised at its current and fair market value.
b.) Real property shall be classified for assessment purposes on the basis of its actual use.
c.) Real property shall be assessed on the basis of a uniform standard within each local government unit.
d.) The appraisal, assessment, and collection of real property tax shall not be let to any private person; and
e.) The appraisal and assessment of real property shall be equitable.


Appraisal and assessment of Real Property:

Steps in assessment of Real Property

1. Listing of all properties subject to the tax; and
2. The valuation of such properties.

Duty to declare Real Property

It shall be the responsibility of the owner, administrator or their representatives to declare, under oath, the true value of real property, taxable or exempt, within 60 days after the acquisition. The sworn declaration shall be filed once every 3 years before June 30th of the year commencing 1992. The failure or refusal to make that declaration within the prescribed period would authorize the provincial or city assessor to declare the property in the name of the defaulting owner, if known, or against an unknown owner as the case may be, and to assess the property for taxation.(Secs. 201-204 LGC). In the case of Testate Estate of Concordia Lim V. City of Manila, it was held that the unpaid tax attaches to the property and is chargeable against the person who had actual or beneficial use and possession of it regardless of whether or not he is the owner. To impose the real property tax on the subsequent owner who was neither the owner nor the beneficial user of the property during the designated periods would not only be contrary to law but also unjust.


Imposition of Real Property tax

The real property tax has been considered and held to be national, despite the fact that in practice it is local in its imposition and utilization.


Real property taxation covers the levy, assessment and collection of:

Annual ad valorem tax.
Special levies by LGUs
a) Additional 1% for special education fund.
b) Additional 5% on idle lands
c) Special assessments on property benefited by improvements undertaken by the government.

Real properties subject to this tax include:

Lands, buildings, machinery and other improvements, not otherwise specifically exempted under the Local Government Code.

- Improvements include valuable additions made to a property or an amelioration in its condition, amounting to more than a mere repair or replacement of parts involving capital expenditures and labor, which is intended to enhance its value, beauty or utility or to adopt it for new or further purposes.
- Machinery embraces machines, equipment, mechanical contrivances, instruments, appliances or apparatus, which may not be attached, permanently or temporarily, to the real property.


Exceptions from Real Property tax:

1. 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;
2. 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.
3. All pieces of machinery 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.
4. All real property owned by duly registered cooperatives as provided for under RA 6938, and
5. Machinery and equipment used for pollution control and environmental protection.


Remedies against a special Levy
An owner of real property or any person having a legal interest therein, affected by a special levy may, upon receipt of the written notice of assessment thereof, avail himself of the same remedies of appeal that may be taken from assessments of the provincial, city or municipal assessor calling for the payment of the real property tax (sec 244, LGC)

Note that even the tradition exemptees (Religious, educational, charitable institutions) are required to pay special assessments and to be exempted, it must first obtain certificate of exemption.


Payment of real property tax:


- The RPT for any year shall attach and become due and payable on the 1st day of January and taxes levied under the title on real property taxation shall be from the date of accrual, and constitute as lien upon the property subject to such tax.

- Payment however, may be made on or before January 20.


- Payment by installment may be made at the discretion of the taxpayer, without penalty in four equal installments, the 1st to be due and payable on or before March 31; and the 2nd on or before September 30 and the 4th on or before December 31, except special levies which shall be governed by the local ordinance imposing the same (SEC 250.LGC).

- In case of delinquency, an interest of 2% per month on the unpaid tax shall be imposed. If the basic real property tax and the additional tax accruing to the special education fund are paid in advance, the Sanggunian may grant a discount not exceeding 20% of the annual tax due.

COLLECTION REMEDIES:

1. judicial

2. administrative (extra-judicial)

· The basic real property tax and any other related taxes levied shall be collected within five (5) years from the date they become due. No action for collection can be had beyond this period, except:

1. If the local treasurer is legally prevented from collecting.
2. If the owner requests for reinvestigation and signs a waiver.
3. If the owner is out of the country or cannot be located.

PROCEDURES IN EFFECTING LEVY OF REAL PROPERTY:

a.) Notice of delinquency
b.) Issuance of a warrant of levy
c.) Advertisement
d.) Auction sale


TAXPAYER’S REMEDIES

ON ASSESSMENTS:

Any owner or person having legal interest in the property who is not satisfied with the action of the provincial, city, or municipal assessor may, within 60 days from the date of receipt by him of the written notice of assessment, may appeal to the local board of assessment appeals of the province or city concerned by a petition under oath together with the supporting documents thereof.

The Board shall decide the appeal within 20 days from receipt of the appeal, based on substantial evidence. The decision may be appealed within 30 days from receipt thereof by the taxpayer to the Central Board of Assessment Appeals.

The decision of the Central Board of Assessment Appeals shall be final and executory.


Note that an appeal does not suspend the collection of the tax as assessed, without prejudice to a later adjustment depending on the outcome of the appeal.

PAYMENT UNDER PROTEST:

No protest shall be entertained unless the tax is first paid. When a taxpayer desires for any reason to pay his tax under protest, he shall indicate the amount or portion thereof which he is contesting and such protest shall be annotated in the tax receipts by writing thereon the word “paid” under protest, within 30 days. In the case of manila Electric C. V. Barlis, 357 SCRA 832, the Supreme Court ruled: “Payment of the tax assessed under protest, is a condition sine qua non before the trial court could assume jurisdiction over the petition and for failure to do so, the RTC has no jurisdiction to entertain it.” It further stated: “Under the doctrine of primacy of administrative remedies an error in the assessment must be administratively pursued to the exclusion of ordinary courts whose decisions would be void for lack of jurisdiction.”

The amount or portion of the tax contested shall be held in trust by the treasurer and the difference shall be treated as revenue.

In the event that the protest is finally decided in favor of the protestant, the amount or portion of the tax protested against may either be:
a.) refunded to the protestant
b.) applied as tax credit to any other existing or future tax liability of the said protestant.