How To Compute Your Real Property Tax?

How To Compute Your Real Property Tax?

Every one of us aspires to own a home and private land property. All the years of hard work will have paid off when we reach our objective and obtain our Transfer Certificate of Title. However, being a landowner has its consequences. Being a homeowner requires a never-ending list of obligations.

For starters, it is your civic responsibility to be aware of the fees and taxes that you must pay. One of them is known as the real estate tax or “amelyar.” If you don’t, your land may be sold off by the local government. To prevent an unfortunate circumstance like this, it’s wise to read up a bit on the real estate tax information.

What is Real Property Tax?

Property owners must pay real property tax, which is a type of tax collected by the local government on properties. Land, buildings, improvements to the land and/or buildings, and machinery are all taxable properties. Whether the real estate property is for residential or commercial use, those who possess or whose names are on titles and certificates of ownership are obligated to pay land taxes in the Philippines.

The ability of local government entities to levy Real Property Tax is governed by Republic Act No. 7160, or the Philippine Local Government Code, especially Sections 197 to 283 which discusses real property tax rates in the Philippines. The actual tax rates are determined by the property’s location in the Philippines. The real property tax rate in Metro Manila, Philippines is 2% of the property’s assessed value, whereas the province rate is 1%.

How To Compute The Real Property Tax Of A Residential Property?

To calculate the RPT of a property, one must first identify its assessment level or the valuation from which the tax rate will be calculated. It’s worth noting that the assessment level is merely a fraction of the property’s true market value, implying that the tax structure is under-taxed. This is exacerbated by the fact that multiple assessment levels apply based on land and property usage. The maximum assessment levels, based on land use, are shown below.

Maximum assessment level rates for land:

  • Residential – 20%
  • Commercial – 50%
  • Timberland – 20%
  • Industrial – 50%
  • Agricultural – 40%
  • Mineral – 50%

Use the formula RPT = RPT rate x assessed value to calculate real property taxes.

The value of the land, on the other hand, accounts for just a small portion of a piece of real estate’s overall fair market value. You must also assess the fair market worth of the upgrades.

Sample Computation

For example, a residential property located in Muntinlupa City, Metro Manila, owned by Joshua Rodrigo, is said to have a market price of Php 20,000,000.00. The property consists of a parcel of land valued at Php 10,000,000.00 while the structure of the house itself, also known as building or improvement, is valued at Php 8,000,000.00

Learning how to compute the real property tax starts with determining the total assessed value of the property. Do this by simply adding the assessed value of the residential land and the assessed value of the building.

  • (1) Assessed Value of Land: Residential land (Php10,000,000) x Assessment Level (20%) = Php 2,000,000.00
  • (2) Assessed Value of the Building: House (Php8,000,000) x Assessment Level (40%) = Php 3,200,000.00
  • (3) Total Assessed Value of the Property: (1) + (2) = Php 5,200,000.00

Now that we have the total assessed value of the property, we multiply it by the applicable real property tax rate to get the tax amount to be paid by Joshua Rodrigo.

(4) Real Property Tax: (3) x Metro Manila RPT rate (2%) = Php 104,000.00

The total basic real property tax to be paid by Joshua Rodrigo is Php 104,000.00

When is it acceptable to pay Real Property Tax?

The real property tax for any year begins to accrue on January 1st and becomes a lien on the property as of that day. It can be paid in whole or quarterly, in which case certain local government units provide savings. It is paid to the treasurer’s office of the city or municipality.

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