Real Property Tax (RPT) is the tax due on real property in the Philippines. The New Civil Code defines real property, or immovable property, as those items enumerated in Article 415 of the New Civil Code. RPT is levied by the Local Government Unit (LGU) where the real property is situated, as per the Local Government Code of 1991 (LGC).
Application of RPT
The application of this tax, however, is not absolute. The 1987 Constitution and the National Internal Revenue Code (NIRC), as amended, provides for several types of real property that may not be charged RPT, examples of which include: (i) lands, buildings, and improvements actually, directly, and exclusively used for charitable or educational purposes; or (ii) real property owned by the Republic of the Philippines or any of its political subdivisions, among others.
Computation of RPT
Generally speaking, the amount of tax due is usually computed by multiplying the base, or the “value” of the object or act being taxed, against the tax rate fixed by law. In RPT, the tax due is determined by multiplying the assessed value against the RPT rate, which is 2% for cities and municipalities in Metro Manila and 1% for provinces.
The assessed value of real property is determined by multiplying the fair market value of the property, as described in Sec. 199 of the LGC, against the assessment level fixed by ordinance of LGU where the property is situated. The assessment levels vary depending on the classification of the land, whether it be residential, mineral, or agricultural, among others, as the case may be.
Collection of RPT
The LGU may also levy 1% of the assessed value for the Special Education Fund and 5% for Idle Lands Tax when the RPT accrues on the first day of January, according to Section 246 of the LGC. The RPT shall constitute a lien on the property which shall be superior to any other encumbrance on the same, and such lien shall only be extinguished upon payment of the delinquent amount.
Appealing Collections and Assessments
There is a fine line between contesting the assessment of RPT and the collection of the same.
Assessment ultimately refers to the amount of RPT due on real property. When contesting the assessment of the same, an appeal shall be filed with the Local Board of Assessment Appeals (LBAA). It is important to take note that any appeal on the assessment of real property does not suspend the collection of the corresponding RPT.
On the other hand, an appeal regarding the collection refers to mistake in the payment of the RPT. In instances where there is an excess amount paid or if there is error in the computation of the amount due, a written claim for tax refund or credit may be filed with the local municipal or city treasurer, as the case may be.
Such claims must be made within 2 years from the time the taxpayers becomes entitled to the relief sought, and the LBAA or the treasurer shall have 60 days from receipt to decide.