A lot of individuals consider it a blessing and an unforgettable experience when they are finally able to buy an asset of real estate or move into a condominium for the first time. A deed of sale is widely regarded as the ultimate symbol of success for people who have worked hard their entire lives in the hopes of one day leading a comfortable life. However, it is important for everyone to understand that buying a home comes with a wide range of responsibilities.
You, as a property owner, are responsible for a number of ongoing responsibilities. One of the most important responsibilities you have as a citizen is to educate yourself on the many taxes and fees you are required to pay. Consider, for example, the tax in the Philippines on real estate. The valuation of the property is used to determine how much money is collected for the real estate tax. One that is based on the worth of the property is one way to describe this type of tax.
It is important to have an adequate knowledge of the financial effects that buying property might have on you. According to Republic Act No. 7160 (RA 7160), the local government is in charge of collecting and administering property taxes. This responsibility was given to the government.
Real Property Tax Philippines
Now that we’ve discussed that, you might be wondering: what exactly is a real estate property tax? Local government units (LGUs) are the entities that impose a tax known as a real property tax and are responsible for collecting payments from property owners. Real estate property tax, also known as real estate tax or real property tax, is the tax that is collected on real estate. This tax is also referred to as amilyar.
A bit of trivia: the slang term ‘amilyar’ comes from the Spanish word ‘amillaramiento,’ which literally translates to ‘assessment of a tax.’ Taxation was first implemented during the Spanish colonization of the Philippines. At that time, the datu (or head) of a barangay was responsible for collecting taxes within his authority in exchange for providing protection and safety.
The real property tax applies to all types of properties across the country, including residential, commercial, and agricultural land and buildings.
Why should you be responsible for paying the real property tax?
There is no doubt that you are wondering why you are required to pay such a high property tax. Local government units (LGUs) were granted the ability to impose and collect property taxes as a means of generating internal revenue and funding local government programs as a result of Republic Act 7160, often known as the Local Government Code. The person responsible for making the payment of this tax is either the owner of the property or the person whose name is included on the land title or certificate.
Real property tax rates in the Philippines
According to Section 233 of Republic Act 7160, the tax rates on real property tax in the Philippines will differ depending on the assessed value of the property as well as the location of the property itself. Taxes on real estate are calculated as a percentage of a property’s overall assessed value and are set at 2% in Metro Manila. In each regional municipality within a province, the property tax rate is 1% of the property’s assessed value. The assessment levels that are applied to arrive at an estimate of the value of the real property tax rate are governed by ordinances.
To determine the real property tax for your property, multiply the RPT rate by the assessed value of the property. A list of different levels of evaluation can be found in Section 218 of RA 7160.
In addition, local governments could levy additional taxes in order to contribute to the Special Education Fund. It is possible that they will add an additional 1% to the property’s assessed value. This sum of money will be sent to the general fund of the community’s educational institutions.
In addition to the regular real estate tax in the philippines, the government imposes an additional tax of up to 5% of the property’s assessed value of the property that are not being used for any purpose. Keeping this in mind, you ought to consistently put your land to productive use and derive cash from it.
When must the tax on real property be paid?
Every year, on the 31st of January, the tax on real property is collected. Taxpayers also have the option of making quarterly payments to the government in the months of March, June, September, and December. The following dates serve as the cutoffs for quarterly payments:
- First-quarter: ending date is March 31
- 2nd quarter: June 30
- When the third quarter ends: September 30
- end of fourth quarter: 31st of December
If taxpayers pay the basic real property tax as well as the supplementary tax for public education, also known as the Special Education Fund tax, in advance, they are eligible to obtain a reduction of up to twenty percent (20%) of the annual tax liability.
The Treasurer’s Office of the municipality is in charge of the collection of the tax on real property. Regardless of the form of payment that the taxpayer opts to use, they are required to present their most current tax declaration as well as legitimate receipts. The developer or the bank will offer tax declarations and official receipts to first-time buyers as part of the unit handover or loan clearance documents, respectively, in order to be of assistance.
Take into consideration that it is always possible to pay the tax before the due date. In point of fact, a number of municipalities offer tax reductions in exchange for tax payments made in advance. Talk to the treasurer of your municipality for any additional information you may require.
What happens if you don’t pay your real property tax?
Failure to pay real property taxes, or amilyar, not only results in the imposition of high penalties, but it also puts your home at risk of being sold by the government, either in part or in its entirety.
The initial investment in real estate is not the end of the financial obligations associated with property ownership. In fact, one could argue that this is only the beginning of things to come. In addition to the regular payments that must be made to the lender for the mortgage that was taken out in order to purchase the property, there are also the costs that must be paid at some point in the future for things like maintenance, improvements, or repairs, as well as the premiums that must be paid for the insurance that is required in order to safeguard the financial interests of the property.
If you fail to pay the real estate tax associated with your property, you are subject to a variety of consequences, the most urgent of which is the accumulation of interest on top of the taxes that remain due. According to Section 255 of the Local Government Code of the Philippines, you will be subject to a 2% monthly penalty if you are late in paying your real property tax on the dates when it is due on a quarterly or annual basis. This will continue as long as your payments are not completely paid off. That being said, if you put off making payments on your real property tax for a longer period of time, the amount that you owe will eventually increase. It is in your best interest to pay the bill as quickly as possible to prevent incurring any penalties.
According to Section 258, if after the said 36 months you still fail to pay your annual real estate property tax in the Philippines and the maximum interest of 72 percent has accrued on top of it, In this scenario, the tax may be levied on the property through the issuance of a warrant. Your local government unit has a number of options available to it, one of which is to put up for auction either the entirety of your property or a section of it that is still in useable condition in order to pay off the delinquent and cover the costs associated with the sale.
How do you pay your real estate taxes?
There are two methods to pay real estate tax: it can be paid in person at your LGU’s City Hall or, if the LGU has set up an online payment system,
Online payment
The payment of real property tax can be made simpler through the use of the numerous online portals made available by LGUs. Logging onto the portal and following the instructions that appear once you do so will accomplish everything that needs to be done; the specific instructions that are provided may change depending on the LGU.
Payment to the City Hall
If you want to pay your taxes at the City Hall of your LGU, you will need to bring the receipt for your most recent official tax payment, the title to your property, the tax declaration number, and a valid form of identification. The next step is to search for the Assessor’s Office, Taxpayer’s Lounge, or any other designated facility where LGU employees may evaluate your property and calculate the amount of taxes you are required to pay.
Following the completion of the assessment, the personnel in charge will communicate with you regarding the amount of the real property tax. After that, proceed to the billing section and make the necessary payment. Keep the receipt safe for the next time you make a payment.
If you pay on a quarterly basis, you will need to go through this process once every three months.
For the First-time payment:
If this is your first time making a payment toward your real estate tax in the Philippines, you will be required to carry out some additional processes, including the preparation of the following documents:
- Declaration of Taxes
- Clearance certificate from the BIR for taxes
- A True and Certified Copy of the Title
- Certificate that allows registration to take place
- Photocopies of a valid ID
- Payments of the most recent real property tax
- Statement under oath regarding the accurate and fair market value of the property
Keep in mind that your local government unit may have additional criteria pertaining to basic real property tax; therefore, you should seek these out to ensure that the payment procedure goes well. Wait for City Hall to verify and appraise your property after you have handed in the necessary paperwork.
After the LGU has reviewed and accepted the records that you have provided, the personnel at the LGU will enter your information into their system. This will include the amount that you are required to pay. After that, you will be able to return when the municipal clerk calls you to let you know that your paperwork has been approved.
You will receive your real property tax declaration once your dues have been paid, and you can use this document to make your subsequent payment when the time comes.
The purchase of real estate requires a significant amount of careful thought and deliberation, not only due to the substantial sum of money involved but also due to the fact that the property in question will remain in the buyer’s hands for the rest of their lives and will be their responsibility throughout that time. A property’s potential worth, as well as its location and time, are all highly essential factors. Despite the fact that the majority of us are not familiar with the procedures, fees, or laws that are involved, However, as citizens of the Philippines, it is our responsibility to pay our taxes, despite the fact that doing so can be quite a hassle and expensive. Increasing your knowledge of real property taxes gives you more power, making it less difficult for you to pay your taxes and allowing you to exercise your rights as a citizen of the country and a property owner in a more unrestricted manner.
This article is certain to help you gain a better understanding of real property taxes, regardless of whether you currently own property or plan to in the near future.
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Written by Darlene Semera
