In the Philippines, real property tax is crucial to economic improvement. The government uses this taxation system to fund public services, infrastructure development, and social welfare.

As property ownership and investments continue to thrive, it’s in your best interest to comprehend the intricacies of real property tax. Understanding its whys and wherefores allows you to manage your finances and comply with tax obligations more efficiently.

What is Real Property Tax?

Real property tax or “amilyar” is the tax imposed on Philippine real properties based on the property’s fair market value. Local government units (LGUs) mandate it through Republic Act No. 7160 (1), the Local Government Code of the Philippines, Sections 197 through 283.

According to this legislation, LGUs can levy taxes on the following real properties:

• Land

• Buildings

• Projects related to land or building improvements

While it may seem there are few items LGUs have broad categories for these assets, meaning they cover many property types. Meanwhile, selected organizations and sectors have privileges of real property tax exemptions, such as:

• Environmental and pollution protection

• Cooperatives

• Government property

• Charities

• Educational institutions

• Religious institutions

It’s also worth mentioning that real property tax differs from estate tax, although some use them interchangeably. As mentioned, LGUs impose a real property tax on Philippine properties. On the other hand, descendants of a deceased person pay an estate tax for inheriting a property and transferring its ownership.

Indeed, taxation can be a complex matter. For instance, if you’re an estate owner, you’ll also have tax obligations for possessing property. As such, you must know crucial information regarding real property tax in the Philippines.

6 Things You Need to Know About Real Property Tax in the Philippines

Real property tax in the Philippines has applicable policies, from rates to penalties and collection periods to special levies.

1. Rates

Real property tax rates in the Philippines vary depending on the classification of your property and its assessed value based on the Local Government Code, Section 233 (2). For properties based within Metro Manila, the real property tax rate is 2% of the estimated property value annually, while it’s 1% for estates in provincial areas.

2. Collection period

Real property taxes accumulate on January 1st of every year (3). You must pay in full before January 31st to receive real property discounts. However, you may choose to pay in quarterly installments, which are due on the last days of March, June, September, and December.

3. Penalties

Failure to make timely payments will result in fines. You must pay an additional 2% interest rate (4) for each month that passes you don’t settle your outstanding balance.

In more severe cases, such as failing to pay in three consecutive years, the LGU can charge you a 72% interest rate fee or auction off the property and collect the profits.

4. Discounts and exemptions

The government offers discounts and exemptions on real property tax. For instance, 5% to 20% payment discounts may be available if you settle your taxes within the specified period or before the due date.

As mentioned, some properties may receive exemptions, such as those owned by the government, religious organizations, and charitable institutions. It is advisable to check with the LGU or consult law experts governing property tax exemptions to determine eligibility.

5. Special levies and special education fund

In addition to real property tax, some LGUs may impose special levies or fees for specific purposes (5). These levies are collected to fund projects or services like environmental protection or infrastructure development.

Furthermore, the LGU may allocate a portion of the real property tax collected to the Special Education Fund (SEF), which supports local public education initiatives.

6. Property classification

Philippine properties fall under different categories, such as residential, commercial, industrial, agricultural, and special. Each type has its tax rates and regulations.

The Reality of Real Property Tax

Property ownership is a lucrative income source, which is why many aspire to it. However, owning property comes with tax obligations you must comply with. Otherwise, you might encounter repercussions that can cause you to lose your investment or face severe consequences.

Since real property tax regulations and procedures vary across Philippine LGUs, it’s best to consult with the local assessor’s offices for specific guidelines and updates regarding real property tax in your area.

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Sources

1. “Ownership of Land Can Be Taxing! A Guide to Real Property Tax in the Philippines - Law Firm in Metro Manila, Philippines: Corporate, Family, IP Law, and Litigation Lawyers.” Law Firm in Metro Manila, Philippines | Corporate, Family, IP law, and Litigation Lawyers, May 11, 2020. https://ndvlaw.com/ownership-of-land-can-be-taxing-a-guide-to-real-property-tax-in-the-philippines/.

2. The Local Government Code of the Philippines. Accessed June 23, 2023. https://officialgazette.gov.ph/downloads/1991/10oct/19911010-RA-7160-CCA.pdf.

3. Features of real property taxation in the Philippines - Tax and Accounting Center, Inc.. Accessed June 23, 2023. https://taxacctgcenter.ph/features-of-real-property-taxation-in-the-philippines/.

4. Isla, Rouselle. “A Property Owner’s Guide to Real Property Tax in the Philippines.” A Property Owner’s Guide to Real Property Tax in the Philippines, December 15, 2022. https://www.moneymax.ph/government-services/articles/real-property-tax.

5. 486 !II~R~.I~lvim - legacy.senate.gov.ph. Accessed June 23, 2023. https://legacy.senate.gov.ph/lisdata/79786776!.pdf.