What You Need to Know About Real Property Tax (RPT)

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Real Property Tax (RPT) is a tax that owners of real property need to pay every year so that the local government unit (LGU) will not auction off their property.

There are some investors who buy tax-delinquent real properties and participate in auctions held by LGU’s, and this is one of the ways one can buy properties at low prices. We also publish schedules and lists of tax-delinquent real properties of different cities – they are classified under the category tax-delinquent properties.

In the past, we have discussed what happens during these LGU auctions. You may want to read them should you be interested in this type of investment:

In this post, I will discuss the legal bases for RPT and how to compute it.

What is Real Property Tax?

Real Property Tax is the tax on real property imposed by the Local Government Unit (LGU). The legal basis is Title II of the Local Government Code (LGC), Republic Act (R.A.) no. 7160. The implementing rules and regulations of R. A. 7160 can be found here.

The RPT for any year shall accrue on the first day of January and from that date it shall constitute a lien on the property which shall be superior to any other lien, mortgage, or encumbrance of any kind whatever, and shall be extinguished only upon payment of the delinquent tax.

If you have prior years’ delinquencies, interests, and penalties, your RPT payment shall first be applied to them. Once they are settled, your tax payment may be credited for the current period.

Who should pay the RPT

The owner or administrator of the property

Where to pay

At the City or municipal treasurer’s office

When to pay

If you choose to pay for one whole year, the payment is due on or before January 31. If the basic RPT and the additional tax accruing to the Special Education Fund (SEF) are paid in advance, the sanggunian concerned may grant a discount not exceeding twenty percent (20%) of the annual tax due. Jay wrote about the discount on RPT recently in his post How To Get A 20% Discount on Real Property Taxes.

If you choose to pay in installments, the four quarterly installments shall be due on or before the last day of each quarter, namely: March 31, June 30, September 30, and December 31.

In case of failure to pay the basic RPT and other taxes when due, the interest at the rate of two percent (2%) per month shall be imposed on the unpaid amount, until fully paid. The maximum number of months is thirty-six (36) months, so effectively, the maximum interest rate is seventy-two percent (72%).

How do you compute real property tax (RPT)?

RPT = RPT Rate x Assessed Value

What are the RPT rates?

Maximum RPT rates:

Coverage

RPT rate

Cities and Municipalities within Metro Manila

2%

Provinces

1%

Special Education Fund (SEF) – 1%

In addition to the basic RPT, the LGU’s may levy and collect an annual tax of one percent (1%) which shall accrued exclusively to the Special Education Fund (SEF).

Ad Valorem Tax on Idle Lands – 5%

In addition to the basic RPT, the LGU’s may collect a maximum idle land tax is 5% assessed value of the property.

How do you compute the Assessed Value?

Assessed Value = Fair Market Value x Assessment Level


Sec. 199 (l) of the LGC defines “Fair Market Value” as the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy. In practice, however, the Fair Market Value is based on the assessment of the municipal or city assessor as written in the Tax Declaration.

The Assessment Level shall be fixed through ordinances of the Sangguniang Panlalawigan, Sangguniang Panglungsod, or the Sangguniang Pambayan of the municipality within the Metro Manila area. To get this data, look for the tax Ordinance of the city or municipality where your property is located.

Maximum Assessment Level rates

I.   Land

Class

Assessment Level

Residential

20%

Timberland

20%

Agricultural

40%

Commercial

50%

Industrial

50%

Mineral

50%

-

II.   Building and Other Structures

  1. Residential

FMV Over

But Not Over

Assessment Level

0.00

175,000.00

0%

175,000.00

300,000.00

10%

300,000.00

500,000.00

20%

500,000.00

750,000.00

25%

750,000.00

1,000,000.00

30%

1,000,000.00

2,000,000.00

35%

2,000,000.00

5,000,000.00

40%

5,000,000.00

10,000,000.00

50%

10,000,000.00

60%

-

2.  Agricultural

FMV Over

But Not Over

Assessment Level

300,000.00

25%

300,000.00

500,000.00

30%

500,000.00

750,000.00

35%

750,000.00

1,000,000.00

40%

1,000,000.00

2,000,000.00

45%

2,000,000.00

50%

-

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3.   Commercial/Industrial

FMV Over

But Not Over

Assessment Level

300,000.00

30%

300,000.00

500,000.00

35%

500,000.00

750,000.00

40%

750,000.00

1,000,000.00

50%

1,000,000.00

2,000,000.00

60%

2,000,000.00

5,000,000.00

70%

5,000,000.00

10,000,000.00

75%

10,000,000.00

80%

-

4.  Timberland

FMV Over

But Not Over

Assessment Level

300,000.00

45%

300,000.00

500,000.00

50%

500,000.00

750,000.00

55%

750,000.00

1,000,000.00

60%

1,000,000.00

2,000,000.00

65%

2,000,000.00

70%

-

II.   Machineries

Class

Assessment Level

Agricultural

40%

Residential

50%

Commercial

80%

Industrial

80%

Sample Computation

Data:

Actual use of property: Residential

Location: City within Metro Manila

FMV per assessor’s officer (based on Tax Declaration):

Land – P350,000
Improvement – P350,000

Assessment Level for Land: 20%

Assessment Level for Improvement: 20%

Note: The assessment levels are fixed through ordinances of the Sangguniang Panlalawigan, Sangguniang Panglungsod, or the Sangguniang Pambayan of the municipality within the Metro Manila area. We will be using the maximum rates for sample computation purposes.

Computation

Assessed Value of Land = P350,000 x 20% = P70,000

Assessed Value of Improvement = P350,000 x 20% = P70,000

Basic Real Property Tax for Land and Improvement

= (P70,000 + P70,000) x 2% = P2,800

Special Education Fund (SEF) for Land and Improvement = (P70,000 + P70,000) x 1% = P1,400

Special Classes of Real Property

All lands, buildings, and other improvements thereon actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and those owned and used by local water districts, and government-owned or controlled corporations rendering essential public services in the supply and distribution of water and/or generation and transmission of electric power

What are the assessment levels for special classes of real property?

Actual Use

Assessment Level

Cultural

15%

Scientific

15%

Hospital

15%

Local water districts

10%

Government-owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power

10%

What are Idle Lands?

1. Agricultural lands more than one (1) hectare in area, suitable for cultivation, dairying, inland fishery, and other agricultural uses, ½ of which remain uncultivated or unimproved.

  • Exceptions

i.      Lands planted to permanent or perennial crops with at least 50 trees to a hectare; and

ii.    Lands used for grazing purposes (Note: put goats or cows on your property).

2.   Lands Other than Agricultural, located in a city or municipality, more than 1,000 sqm. in area, ½ of which remain unutilized or unimproved

3.   Residential lots in subdivisions, regardless of land area

~~~

Aside from real property owners, I hope this also helps those studying for the 2013 real estate brokers exam. Do you have any questions, comments or reactions? Just let me know by leaving a comment below, thanks!

~~~

Cherry Vi M. Saldua-Castillo

Real Estate Broker, Lawyer, and CPA
PRC Real Estate Broker License No. 3187
PRC CPA License No. 0102054
Roll of Attorneys No. 55239

Text by Jay Castillo and Cherry Castillo. Copyright © 2008 – 2013 All rights reserved.

Full disclosure: Nothing to disclose.

Image courtesy: of  renjith krishnan / FreeDigitalPhotos

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About Cherry Castillo

is a Real Estate Broker (PRC Real Estate Broker License No. 3187), Lawyer (Roll of Attorneys No. 55239), and CPA (PRC CPA License No. 0102054). She is the 2013 Internal Education Head of REBAP-LMP

  • Bon

    My cousin has already paid the delinquent taxes for the improvement of their property which no longer exists since 1982 but per records of the treasurer and assessor offices in quezon city, it still exists. The said property was posted in the bulletin board of the qc hall as one of those sked for public auction on May 15, 2014. The qc inspector conducted an ocular inspection of the place of the improvement and found out that there was no structure erected on it. My cousin wants to know if on top of the delinquent taxes he paid, will he pay p4,000 for putting his name in the list sked for auction? Isnt it unreasonable to slap p4,000 when posting was placed on the bulletin board of the qc hall real property division and not in a newspaper of general circulation?

  • Cam

    Hello, what’s the purpose of SEF? Thanks!

  • janzette

    Hi Cherry, I would like to know where could I get the rates of the properties so I could compute for the tax? thank you.

  • York

    Why do condo associations pay real property tax on their common grounds when the condo units’ assessed value depend on the common grounds and get taxed on it as well? That means a condo unit value is higher because of the nice pool and gym and thus the owner gets taxed more; additionally, the owners get taxed through the association AGAIN with the common areas real estate tax. How can that be? Thanks!

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  • Curious Carlo

    Hi Atty Cherry,

    If I pay my RPT on land but not on building improvements (RPT arrears on building improvements from 8 years ago), what would be the consequence(s)? Will my land including the improvements therein be auctioned by the city government?

  • M. Ong

    Hi Ma’am Cherry,
    I purchased a house and lot on installment payable in 10 years. i am still into my 3rd year of paying and the developer turned over to me the assessment on Real Property Taxes saying that because we have already taken possession physically of the house, we are obligated to pay for the RPT even if we are not yet fully paid. am i really responsible being an installment buyer to pay for RPT? Thank you for your time and inputs. MRS. M. ONG

  • Roney Baya-on

    Hi, I just got a house and lot from a sub-division in the Philippines. The construction is just done and the moving-in is very soon. One of the requirements is, I need to pay the real property tax value for the said loaned property. My question is, do I need to pay/shoulder the real property tax despite the property is still my liability and not yet my asset?

    • http://www.foreclosurephilippines.com Jay Castillo

      Hi Roney,

      For banks, the common practice is for buyers to shoulder the real property taxes from the date they bought the property from the bank, regardless of the mode of payment (installment or cash), which means even if a property is not yet fully paid, the buyer will already shoulder the real property taxes.

      I believe the same practice is quite common to private sellers as well.

  • Alexis Fesariton

    what is the tax due? is it the assessed value multiplied by tax rate? or is it all taxes including basic, sef, idle taxes less discounts or add penalties?

    Thank you

    Hope you can help us with this because were taking the licensure exam this march..

  • Unpaid real estate tac

    Good day po! I bought a house po tpos nlaman ko na 15 yrs ng tax delinquent ang house and lot? Kailangan ko po b bayaran lhat ang 15 yrs unpaid rpt? thanks po!

  • ching

    hello’

    thank you very much for your blog, (been searching for quite sometime)

    i have a question regarding a certain property located in project 4 q.c.

    it is a 200 m2 lot with 4 small door apartment (2 storey at 33 m2 each) which is now being rented out and are currently occupied, and a 3 storey residential house (around 80 m2 per floor), and are occupied by the owner, at this stage the whole property is around 98 % completed

    the payment of taxes for the lot is updated (the house and lot is under a bank loan)

    when it was about 85 % completed a QC assessor knocked on its door and talked to the owner and she claims that based on her calculation the yearly payment of tax would cost around 60 thousand pesos.

    however she claims that she can reduce it to more than half (20K to 30K) provided that the owner pay the first 60K to her and then for the next year it will be 20 to 30K, this time, payment will now to be made by the owner directly to the QC assesor office.

    my question is the tax for the above property would really cost that much?

    the owner tried to deal directly with the assessor office in QC hall and upon seeing the Lady Assessor inside the office, the owner have backed out, since the owner is being directed to see her since the owners property belong to the Lady Assessor jurisdiction.

    your reply to the my question is greatly appreciated while for the other concerns (how to deal with lady assessors) will be highly appreciated.

    thanks

  • Lavinia Kua

    I am inquiring on the Machinery being subject to real property tax. Does this mean all PC of a call center company and BPO would need to pay for such tax? I am assuming that Machinery refer to equipment being used by Manufacturing Firm. Your assistance is much appreciated.

  • mark

    Is it possible that a city assessor can issue a tax declaration over a land considered as timberland? within the geothermal reservation block? and declared as national park? What are the bases to consider it(tax dec) as legal or illegal?

  • Irene l. Monasterial

    Who will pay for the rpt of the common area in a subd.the property is not yet turned over in the association..the homeowner association does not have the tct of the common area.the owner declared in the receipt are still under the developers name not on the homeowners assoc. name.

  • Ahyen Panganiban

    For example I bought a house and lot in Cavite for installment. Is the RPT still separate from my monthly payments? Or is it already included?

    Thanks!

  • nobuhiko

    Hi! i’m just curious how much is the RPT for a condo unit roughly 27 sqm? thanks in advance!

  • Kagay

    How soon is a land auctioned if no realty tax is paid particularly for one unused land in one of the villages in Las Pinas City? Is there an online system where i can check it myself since i’m living abroad.

  • grace

    hello po, I find this blog of yours educational, Can I ask if there’s a chance that a residential owner would have to pay 9,000 for her real property tax if the house is not yet fully furnished (1st floor is the only part which is completed) and the land area is only 32sq.m?

  • http://none Johnson Caballero

    Hello Cherry and Jay,

    First, I’d like to express my appreciation for your blog which I find both enlightening and educational.

    I narrowly missed joining the December auction of RPT-delinquent properties in QC as I was out of the country, but an old friend was successful in joining and was able to win one lot from the auction.

    With this experience, I was wondering if LGUs have a regular schedule of auctioning off RPT-delinquent properties? I’ll find this useful in case there is so I do not miss the next scheduled ones.

    Thanks!

    • http://www.foreclosurephilippines.com Jay Castillo

      Hi Johnson, so far only Quezon City does this quarterly, for other LGU’s you will have to call regularly to know if they have a schedule. I believe if they knew they can submit their schedules, just like how most banks do so, we will have regular schedules posted here. As of now, I post all schedules I see, and I also get tips from other investors and post them as well. :-)

  • Rico Santos

    in addition to our association dues, the Property Management Office for our Condo (Dansalan Gardens in Mandaluyong) is asking us to pay for Property Tax for the land, the building and machinery. Is this right?

    • Wilfredo L. Segovia

      It depends on the practice of your condo corporation. In many condos, RPT for the land, building and machinery (which are parts of the common areas of your condo) are usually paid by the Condo Corporation because it is a fixed cost that is already built-in the association dues. However, in some condos, RPT is separately assessed as a special assessment not part of the regular dues. You must ask the condo’s management body or Board of Directors. But regardless how it is to be assessed, RPT is a cost that will ultimately be shared by all the unit owners. :)

  • Jules

    Hi Cherry,

    If the TCT is already under the name of Juan dela Cruz but the Tax Declaration under Juan dela Cruz is still not available (still under the name of the developer), who should be paying the RPT?

    thanks,
    jules

    • Wilfredo L. Segovia

      It depends on whether the lot has already been delivered by the developer to, and accepted by, the Buyer. If so, the Buyer is liable to pay RPT the year after delivery since the title is already in the name of the Buyer. Even if the title is not yet in the name of the Buyer (as in the case of an amortizing buyer), the Buyer will also be liable to pay RPT if he has accepted delivery and taken possession of the property. In some cases, the Developer advances payments for the RPT and requests a refund from the Buyer who has accepted delivery and is already in possession of the property.

  • Alfred SA

    How do you get discounted RPT when you have more than 1 hectare unused/ idle land? Is it true that you need to declare some part of the land as loan to get discount? Thanks in advance.

    • http://www.foreclosurephilippines.com Cherry Castillo

      Hi Alfred,

      I’m not sure if I understood your question correctly. Make sure you fall under the exceptions to idle land.

      Re: loan, I have never heard of that. I don’t see any legal basis for it.

      Best regards,
      Cherry

  • Darren Noway

    Hello

    Is a Condo “real property” ? and thus pays RPT?

    • http://www.foreclosurephilippines.com Cherry Castillo

      Hi Darren,

      Yes.

      Best regards,
      Cherry

  • Rico moraga

    Is it true that private schools dont have real property tax?

    • http://www.foreclosurephilippines.com Cherry Castillo

      Hi Rico,

      Under Sec. 234 (b) of RA 7160, all lands, buildings, and improvements actually, directly, and exclusively used for educational purposes are exempt from RPT.

      Best regards,
      Cherry

      • Mhay

        Being exempt from RPT, why are private school still required to declare real properties? What are the consequences of failure to declare? Thanks much.