7.

Real Property Taxation

I. II. III. IV. V. VI. Fundamental Principles Nature Imposition Administration of Real Property Tax Remedies of LGUs Taxpayers remedies

5. 6.

It attaches on the property (i.e., a lien) and is enforceable against it. With respect to LGUs, it is levied thru a delegated power

III. Imposition of Real Property Tax

1. Coverage a. For a Province, or a City or Municipality within Metro Manila (i) Land (ii) Building (iii) Machinery (iv) Other improvements not specifically exempted (Sec. 232, LGC)
The rate shall be as follows: Province: not exceeding one percent (1%) of the assessed value of real property; and City or municipality within Metro Manila: not exceeding two percent (2%) of the assessed value of real property. (Sec. 233, LGC)

I. Fundamental Principles
(CAPUE) 1. Current fair market value is the basis for assessment All real property, whether taxable or exempt, shall be appraised at the CURRENT AND FAIR MARKET VALUE prevailing in the locality where the property is situated. (Sec. 201, LGC) basis of

2.

Actual use shall be the classification for assessment

Real property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it, and whoever uses it. Actual Use- refers to the purpose for which the property is PRINCIPALLY or PREDOMINANTLY utilized by the person in possession thereof (Sec. 199(b), LGC) MCIAA v. Marcos (G.R. No. 120082, Sept. 11, 1996)- Usage means direct, immediate and actual application of the property

3. 4. 5.

Private persons cannot be left to the appraisal, assessment, levy and collection of real property tax. Uniform classification within each local government unit shall be observed. Equitable appraisal and assessment is required. (Sec. 197, LGC)

II. Nature of Real Property Tax

1. 2. 3. 4. It is a direct tax on the ownership or use of real property It is an ad valorem tax. Value is the tax base. It is proportionate because the tax is calculated on the basis of a certain percentage of the value assessed. It creates a single, indivisible obligation

b. Special Levy on Idle Lands A province, or city or municipality within Metro Manila may levy an annual tax on idle lands at the rate not exceeding five percent (5%) of the assessed value of the property in addition to the basic tax Lands covered Agricultural Lands More than one (1) hectare in area suitable for cultivation, dairying, inland fishery, and other agricultural uses, one-half (1/2) of which remain uncultivated or unimproved Other than Agricultural More than one thousand (1000) square meters in area one half (1/2) of which remain unutilized or unimproved (Sec. 236 and 237, LGC) Exempt Idle Lands Lands exempt by reason of force majeure, civil disturbance, natural calamity or any cause or circumstance which physically or legally prevents improving, utilizing

or cultivating the same. (Sec. 238, LGC) c. Special Levy for Public Works A tax ordinance shall describe with reasonable accuracy the nature, extent and location of the public works to be undertaken, the estimated cost, the metes and bounds by monuments and lines and the number of annual installements which should not be less than five (5) nor more than ten (10) years. The sanggunian may fix different rates for different parts or sections thereof, depending on whether such land is more or less benefited by the proposed work. (Sec. 241, LGC) d. Special Education Fund (SEF) A province, or city or municipality within Metro Manila may levy and collect an annual tax of one percent (1%) on the assessed value of real property which shall be in addition to the basic real property tax.

234(e) should be supported by evidence that the property sought to be exempt is actually, directly and exclusively used for pollution control and environmental protection. Proof of Exemption 1. Documentary evidence such as affidavits, by-laws, contract, articles of incorporation 2. Given to local assessor 3. Within 30 days from date of declaration 4. Failure to file, will be listed as in Assessment Rolls as taxable GOCCs Philippine Ports Authority vs. City of Iloilo (G.R. No. 109791, July 14, 2003): GOCCs are NOT covered by the exemption since the exemption only refers to instrumentalities without personalities distinct from the government. Mactan Airport v. MIAA cases Provision involved Sec 133 (o), LGC. LGUs not allowed to levy (o) taxes/fees/char ges of any kind on the national govt, its agencies, instrumentalitie s and LGUs. Sec 234 (a), LGC. Properties exempt from RPT: (a) real properties owned by the Republic or any of its political subdivisions Sec 133 (o), LGC Sec 234 LGC) (a), SC Ruling Airport Authority is a GOCC, not exempt from RPT. Legislature in amending the law specifically deleted GOCCS from the enumeration in Sec 234(a).

2. Exemption from real property tax

1. Owned by the Republic of the Philippines or any of its political subdivisions except when beneficial use is granted for a consideration or to a taxable person. 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. Machinery and equipment actually, directly and exclusively used by local Water utilities and GOCCs engaged in the supply and distribution of water and/or generation and transmission of electric power. Real property owned by duly registered Cooperatives as provided for under Republic Act No. 6938 (Cooperative Code of the Philippines). Machinery and equipment used for Pollution control and Environmental protection. (Sec. 234, LGC) Provincial Assessor of Marinduque v. CA (G.R. No. 170532, Apr. 30, 2009)A claim for exemption under Sec.

Mactan Airport Authority vs. Marcos (1996)

2.

3.

4.

5.

Manila Airport Authority vs. CA (2006)

MIAA falls under the term instrumentali ty outside the scope of LGSs local taxing powers under Sec 133(o).

Charitable Institutions LUNG CENTER of the PHILS vs. QUEZON CITY (G.R. No. 144104, June 29, 2004): A charitable institution doesn't lose its character and its exemption simply because it derives income from paying patients so long as the money received is devoted to the charitable object it was intended to achieve, and no money inures to the benefit of persons managing the institution. Property leased to private entities is NOT exempt from RPT, as it is not actually, directly and exclusively used for charitable purposes. Portions of the land occupied by the hospital and portions used for its patients, whether paying or non-paying, are EXEMPT from real property taxes.

c.

Declaration by the Provincial or City or Municipal Assessor When the person required to file the sworn declaration refuses or fails to make sich declaration, the provincial, city or municipal assessor shall declare the property in the name of the defaulting owner. Notice of Transfer of Real Property Any person who shall transfer real property ownership to another shall notify the provincial, city or municipal assessor within sixty (60) days from the date of such transfer. The notification shall include: o Mode of transfer, o Description of the property alienated, and o Name and address of the transferee (Sec. 208, LGC)

d.

IV. Administration of Real Property Tax

1. Declaration of Real Property
a. Declaration by the Owner or Administrator Prepare a sworn statement declaring the true value of the property which shall be the current and fair market value of the property. It must contain a sufficient description of the property to enable the assessor or his deputy to identify the same for assessment purposes The declaration must be filed with the assessor once every three (3) years during the period from January 1 to June 30. (Sec. 202, LGC) Declaration by Any Person Acquiring Real Property or Making Improvements The sworn statement declaring the true value of the property must be filed to the provincial, city or municipal assessor within sixty (60) days after the acquisition or upon completion or occupancy of the improvement, whichever comes ealier. (Sec. 203, LGC)

2. Listing of Real Property in the Assessment Rolls

a. The local assessor must maintain an assessment roll wherein all real property, whether taxable or exempt, located within the territorial jurisdiction of the LGU, is listed. Real property in general Shall be listed, valued and assessed in the name of the owner or administrator, or anyone having legal interest in the property. For undivided real property May be in the name of the estate or of the heirs and devisees, or in the name of one or more coowners Real property of a corporation, partnership or association Same manner as an individual Real property owned by the Republic of the Philippines, its instrumentalities, political subdivision, the beneficial use has been granted to a taxable person In the name of the possessor, grantee or of the public entity if such property has been acquired or held for resale or lease. (Sec. 205, LGC)

b.

c.

d.

b.

e.

3. Appraisal and Valuation of Real Property

a. Land The assessor of the province, city or municipality or his deputy may summon the owners or persons having legal interest therein and witnessses, administer oaths, and take deposition concerning the property, its ownership, amount nature, and value. (Sec. 213, LGC) Before any general revision of property assessment is made, there shall be prepared a schedule of FMV by the provincial, city or municipal assessors; which shall be published in a newspaper of general circulation or in the absence thereof, shall be posted in the provincial capitol, city or municipal hall and in two other conspicuous public places therein. (Sec. 212, LGC) Classes o o o o o o o of real property Residential Agricultural Commercial Industrial Mineral Timberland Special all lands, buildings and other improvements actually, directly and exclusively used for hospitals, cultural, or scientific purposes, and those owned and used by local water districts, and GOCCs rendering essential public services in the supply and distribution of water and/or generation and transmission of electric power (Sec. 216, LGC)

duties and taxes, plus cost of inland transportation, handling, and installation charges at the present site. (Sec. 224, LGC) All other Cases FMV is determined by dividing the remaining economic life of the machinery by its estimated economic life and multiplied by the replacement/reproduction cost. (Sec. 224, LGC) Ratenot exceeding five percent (5%) of its original cost or replacement cost, for each year of use The remaining value shall be fixed at not less than twenty percent (20%) of such original, replacement or reproduction cost for so long as the machinery is useful and in operation. (Sec. 225, LGC)

Depreciation Allowance

4. Assessment of real property

a. Assessment levels "Assessment Level" is the percentage applied to the fair market value to determine the taxable value of the property (Sec. 199(g), LGC) Assessment levels shall be fixed by ordinances of the sanggunian at rates not exceeding those prescribed in Sec. 218 b. General revisions of assessments and property classification The local assessor shall undertake a general revision of real property assessments every three (3) years. (Sec. 219, LGC) c. Date of effectivity of assessment or reassessment All assessments or reassessments made after the first (1st) day of January of any year shall take effect on the first (1st) day of January of any year

b.

Machinery The FMV is the acquisition cost If the machinery is imported, the acquisition cost includes freight, insurance, bank and other charges, brokerage, arrastre and handling,

Brand New

Exceptions: reassessments due to 1) partial or total destruction; 2) major change in actual use; 3) great and sudden inflation or deflation of real property values; 4) gross illegality of the assessment when made; or 5) any other abnormal cause shall be made within ninety (90) days from the date of any cause and shall take effect at the beginning of the quarter next following the reassessment. (Sec. 221, LGC)

the city or municipal hall. The notice shall also be published in a newspaper of general circulation in the locality once a week for two (2) consecutive weeks. (Sec. 249, LGC) Prescriptive Periods for Collection Within five (5) years from the date they become due Within ten (10) years from discovery of fraud, in case there is fraud or intent to evade 1. Local treasurer is legally prevented to collect tax. 2. The owner or property requests for reinvestigation and writes a waiver before expiration of period to collect. 3. The owner of property is out of the country or cannot be located (Sec. 270, LGC) The local treasurer. He may deputize the barangay treasurer to collect all taxes upon filing of a bond. (Sec. 247, LGC)

d. Assessment of property subject to back taxes Property declared for the first time: assessed for taxes for the period during which it would have been liable but in no case for more than ten (10) years prior to the date of initial assessment (Sec. 222, LGC) e. Notification of new or revised assessment When real property is assessed for the first time or when an existing assessment is increased or decreased, the local assessor shall within thirty (30) days give written notice of the new or revised assessment to the person in whose name the property is being declared. o Notice may be given personally or by registered mail or through the assistance of the punong barangay to the last known address of the person to be served. (Sec. 223, LGC)

Instances for Suspension of Prescriptive Period

Collecting Authority

Special rules on payment

1) Payment of real property tax in installments Payment of real property tax and the additional tax for the Special Education Fund, without interest, may be made in four (4) equal instalments: o 1st : March 31st o 2nd : June 30th o 3rd : September 30th o 4th : December 31st This shall not apply to special levies which shall be governed by ordinance of the sanggunian concerned. Payments of real property taxes shall first be applied to prior years delinquencies, interests and penalties, if any, and only after the delinquencies are settled may tax payments be credited for the current period. (Sec. 250, LGC) 2) Interests on unpaid real property tax

5. Collection of Real Property Tax

Date of Accrual Real property tax for any year shall accrue on the first day of January. (Sec. 246, LGC) On or before the 31st of January or on any date prescribed, the local treasurer shall post the notice of the dates when the tax may be paid without interest at a conspicuous and publicly accessible place at

Notice for Collection

In case of failure to pay the basic real property tax or any other tax when due shall subject the taxpayer to the payment of interest at the rate of two (2%) percent per month on the unpaid amount or a fraction thereof until the delinquent tax shall have been fully paid. But the total interest on the unpaid tax shall not exceed thirty-six (36) months. (Sec. 255, LGC)

3) Condonation of real property tax By SANGGUNIAN: in case of general failure of crops or substantial decrease in the price of agricultural or agri-based products or calamity in any LGU (Sec. 276, LGC) By the PRESIDENT of the Philippines: when public interest so requires (Sec. 277, LGC)

Register of Deeds where the property is located o The Register of Deeds must annotate the levy on the tax declaration and certificate of title (Sec. 258, LGC) Failure to issue or execute the warrant of levy within one year from the time the tax becomes delinquent or within thirty days from the date of the issuance thereof shall be dismissed from service (Sec. 259, LGC)

Purchase by LGU for Want of Bidder

When Available There is no bidder; or The highest bid is for an amount insuffient to pay the real property tax and the related interest and costs of sale The local treasurer conducting the sale shall purchase the property in behalf of the LGU to satisfy the claim and within two (2) years thereafter shall make a report of his proceedings. Within one (1) year from the date of forfeiture

V. Remedies of LGUs for Collection of Real Property Tax

1. Administrative
a. Local Governments Lien
The basic real property tax shall constitute a lien on the property subject to tax, superior to all liens, charges or encumbrances in favour of any person, irrespective of the owner or possessor thereof, enforceable by administrative or judicial action and may only be extinguished upon payment of the tax and the related interests and expenses. (Sec. 257, LGC)

Duty of the Local Treasurer

Redemption Period

2. Judicial
The LGU may enforce the collection by civil action in any court of competent jurisdiction. o Must be filed by local treasurer within five (5) to ten (10) years. (Sec. 266 in relation to Sec. 270, LGC)

b. Levy
Upon the failure to pay the tax when due, the local treasurer shall issue a warrant levying the real property subject to tax. The warrant shall include a duly authenticated certificate showing the name of the owner or person having legal interest therein, description of the property, amount of the tax due and interest thereon. o Warrant must be mailed or served to owner or person having legal interest in the property o Written notice of levy must be mailed or served to the assessor and the

VI. Taxpayers remedies

1. ADMINISTRATIVE a. Protest
i) Appeal to the Local Board of Assessment Appeals (LBAA) Appeal must be filed within 60 days from the date of receipt of the written notice of assessment

By filing a petition under oath in the form prescribed for the purpose Copies of tax declarations and other affidavits or documents must be submitted (Sec. 226, LGC) The LBAA shall decided the appeal within 120 days from the date of receipt of such appeal The LBAA shall have the power to summon witnesses, administer oaths, conduct ocular inspection, take depositions, and issue subpoena duces tecum and/or subpoena The LBAA must furnish the appellant a copy of the decision of the board. (Sec. 229, LGC) Fels Energy v. Province of Batangas (G.R. No. 168557, Feb. 16, 2007)Under Section 226 of R.A. No 7160, the last action of the local assessor on a particular assessment shall be the notice of assessment; it is this last action which gives the owner of the property the right to appeal to the LBAA. The procedure likewise does not permit the property owner the remedy of filing a motion for reconsideration before the local assessor. Victorias Milling v. CTA (G.R. No. L24213, Mar. 13, 1968)- The failure to appeal within the statutory period renders the assessment final and unappealable.

No protest shall be entertained unless the tax is first paid. The protest must be in writing and filed within 30 days from payment of the tax to the local treasurer. o Meralco v. Nelia Barlis (G.R. No. 114231, May 18, 2001): The trial court has no jurisdiction to issue a writ of prohibition which seeks to set aside the warrant of garnishment over petitioners bank deposit in satisfaction of real property taxes without paying first under protest the tax assessed and without exhausting available administrative remedies. The local treasurer shall decide the protest within 60 days from receipt.

ii) Appeal to the LBAA Appeal must be filed within 60 days from the date of receipt of denial of protest or upon lapse of 60 days to decide By filing a petition under oath in the form prescribed for the purpose Copies of tax declarations and other affidavits or documents must be submitted (Sec. 226, LGC) The LBAA shall decided the appeal within 120 days from the date of receipt of such appeal (Sec. 229, LGC) iii) Appeal to the CBAA Appeal must be filed within 30 days from the receipt of the decision of LBAA (Sec. 229, LGC) iv) Appeal to the CTA En Banc Appeal must be filed through a petition for review within 30 days from the receipt of the decision of CBAA (Sec. 11, R.A. 1125 as amended) v) Appeal to the SC Appeal must be filed within fifteen (15) days from receipt of decision of the CTA (Rule 45, Rules of Court)

ii) Appeal to the Central Board of Assessment Appeals (CBAA) Appeal must be filed within 30 days from the receipt of the decision of LBAA (Sec. 229, LGC) iii) Effect of payment of tax Appeal on assessments of real property shall NOT SUSPEND the collection of the corresponding realty taxes on the property involved as assessed by the provincial or city assessor without prejudice to the subsequent readjustment depending upon the final outcome of the appeal. (Sec. 231, LGC)

2. JUDICIAL
a. Question on the legality of a tax ordinance Any question on the constitutionality or legality of a tax

b. Payment of real property under protest

i) File protest with local treasurer

ordinance may be raised on appeal within thirty (30) days from effectivity tp the Secretary of Justice who shall render a decision within sixty (60) days from the date of receipt of the appeal. The appeal shall not have the effect of suspending the effectivity of the tax ordinance and the accrual and payment of the tax. Within thirty (30) days after receipt of the decision or the lapse of the sixty-day period without the Secretary of Justice acting upon the appeal, the aggrieved party may file appropriate proceedings with a court of competent jurisdiction. (Sec. 187, LGC)

b. Assailing the validity of a tax sale No court shall entertain any action assailing the validity of any sale at public auction until the taxpayer shall have deposited with the court the amount for which the real property was sold, together with interest of two percent (2%) per month from the date of sale to the time of the institution of the action. (Sec. 267, LGC)

Flowchart V: Procedure for Assessment of Land Value for Real Property Tax Purposes-Local Govt Code
For purposes of this flowchart owner means owner or administrator of real property or any person having legal interest thereto Owner declares real property once every 3 years (sec. 202) w/n Jan 1 to June 30 Assessor declares real property if owner/ administrator fails to do so (sec. 204) Assessor prepares assessment rolls wherein real property shall be listed, valued and assessed (sec. 205)

START

Required Documents submitted w/in 30 days? Yes No Property shall be listed as taxable in the assessment roll (sec. 206)

Submit documents supporting exemption w/ in 30 days from declaration (sec. 206)

Owner may claim for tax exemption (sec. 206)

Yes

Is real property tax exempt?

Property proven as tax exempt?

Yes

Property shall be dropped from assessment roll (sec. 206)

No
END

Within 30 days from assessment, assessor sends notice to owner (sec. 223) Owner may protest assessment within 60 days from receipt of notice to the Local Board of Assessment Appeals (LBAA) (Sec. 226)

No

LBAA must decide within 120 days from receipt of appeal (sec. 229)

If LBAA rejects protest, owner may appeal to the Central Board of Assessment Appeals (CBAA) w/in 30 days from receipt of notice (Sec. 229)

END

Appeal to the Supreme Court w/ in 15 days

If CBAA rejects protest, owner may appeal to the CTA en banc within 30 days from receipt of decision

Flowchart VI: Taxpayers Remedies Involving Collection of Real Property Tax-Loc Govt Code
For purposes of this flowchart owner means owner or administrator of real property or any person having legal interest thereto LT- Local Treasurer LGU - Local Government Unit LBAA- Local Board of Assessment Appeals CBAA- Central Board of Assessment Appeals CTA- Court of Tax Appeals

START

Assessor submits assessment roll to local treasurer (sec. 248)

LT posts notice of deadline for payment at a conspicuous place at the LGU hall OR publish the same in a newspaper of general circulation in the LGU 1x a week for 2 consecutive weeks (sec. 249)

LT collects the tax starting Jan 1 of the calendar year. (Sec. 257)

Owner pays the tax. Written protest must be filed with the local treasurer w/in 30 days from payment. (sec. 252)

Amount of tax protested shall be refunded or applied as tax credit (Sec. 252)

Yes

LT grants protest?

Yes

LT decides w/in 60 days?

LT must decide w/ in 60 days from receipt of protest (sec. 252)

No Refund or tax credit must be claimed with the local treasurer w/in 2 years from the date taxpayer is entitled to such (sec. 253) Taxpayer may appeal within within 60 days from receipt of notice (or expiration of 60 days) to the LBAA (Sec. 226) LBAA must decide within 120 days from receipt of appeal (sec. 229) LT grants refund/tax credit?
Taxpayer happy. END

No

LT acts on claim for refund/tax credit w/in 60 days?

Yes

Yes

No Taxpayer may appeal w/in 60 days from receipt of notice (or expiration of 60 days) to LBAA (Sec. 226) Appeal to the Supreme Court w/ in 15 days

If LBAA rejects protest/ refund, owner may appeal to the CBAA w/ in 30 days from receipt of notice (Sec. 229)

No

END

If CBAA rejects protest/ refund, owner may appeal to the CTA en banc within 30 days from receipt of decision (Rule 43, ROC)

Flowchart VII: Procedure for Levy for Purposes of Satisfying Real Property Taxes-Local Govt Code
START

For purposes of this flowchart owner means owner or administrator of real property or any person having legal interest thereto Warrant of Levy issued by the Local Treasurer (LT), which has the force of legal execution in the LGU concerned. (sec. 258)

Tax constitutes a lien on the property superior to all liens & may only be extinguished upon payment of the tax and charges. (sec. 257)

Time for payment of real property taxes expires

Warrant is mailed to or served upon the delinquent owner (sec. 258)

Before the date of sale, the owner may stay the proceedings by paying the delinquent tax, interest & the expenses of sale.

Sale is held: 1. at the main entrance of the LGU building, OR 2. on the property to be sold, OR at 3. any other place specified in the notice

30 days from service of warrant, local treasurer shall advertise sale of the property by: 1. posting notice at main entrance of LGU hall/bldg and in a conspicuous place in the barangay where prope is located AND 2. by publication once a week for 2 weeks (sec. 260) (Note: In cases of levy for unpaid local taxes publication is once a week for 3 weeks)

written notice of the levy & the warrant is mailed/served upon the assessor and the Registrar of Deeds of the LGU (sec. 258)

No

LT shall purchase the property in behalf of the LGU (sec. 263) (Note: in cases of levy for unpaid local taxes, LT may purchase if there is no bidder or if the highest bid is insufficient-sec. 181)

Is there a bidder?

Yes Bidder pays & 30 days after the sale, the LT shall report the sale to the sanggunian

w/in 1 year from sale, owner may redeem upon payment of the 1. delinquent tax, 2. interest due, 3. expenses of sale (from date of delinquency to date of sale) and 4. addl interest of 2% per month on the purchase price from date of sale to date of redemption. (sec. 261) Delinquent owner retains possession and right to the fruits (sec. 261)

Registrar of Deeds shall transfer the title of the forfeited property to the LGU w/o need of a court order (sec. 263)

W/n 1 year from forfeiture, the owner, may redeem the property by paying to the local treasurer the full amount of the tax and the related interest and the costs of sale otherwise the ownership shall be vested on the local government unit concerned. (sec. 263)

LT shall deliver to purchaser certificate of sale

LT returns to the purchaser/bidder the price paid + interest of 2% per month (sec. 261)

Sanggunian concerned may, by ordinance sell and dispose of the real property acquired under the preceding section at public auction. (sec. 264)

Proceeds of sale in excess of delinquent tax, interest & expenses of sale remitted to the owner (sec. 260)

If property is not redeemed, the local treasurer shall execute a deed of conveyance to the purchaser (sec. 262)

Levy may be repeated until the full amount due, including all expenses, is collected. (sec. 265)

END