How To Understand The Real Property Taxes In The Philippines

You’ve just purchased your dream home and tediously paid the taxes plus fees needed to put it under your name. As much as you would want to enjoy it entirely, there is still a recurring tax payment you should know about that you need to mark in your calendar. Most new homeowners and a couple of previous owners tend to forget that this is a very important aspect in home ownership. This is the Real Property Tax (RPT).

Let’s start off with its definition. The Real Property Tax is a property ownership tax paid annually to the Local Government Unit (LGU) where it is located. The RPT is an important tax revenue of the local governments as this partially funds their public expenditures and projects to run their municipality/city. These taxes collected are also used for the betterment of the city namely with its infrastructure and maintenance along with its peace and order.

The amount is based on the property’s assessed value which is multiplied by the Real Property Tax Rate. This RPT Rate is two (2%) percent for Metro Manila cities and municipalities while provincial Rate is one (1%) percent only. Aside from this, the LGU also charges an additional one (1%) for its Special Education Fund (SEF). This fund as its name states, is for the LGU’s school programs budget. So that’s a total of 2-3% depending where the property is located.

As mentioned, this is an annual tax best paid as a whole and early so you may avail a discount. As early as December the previous year, LGUs are already collecting this to prepare for their budget the incoming year. If you decide to settle this in installments, just remember the quarterly dates to guide you in your payments.  Failure to do so will merit some penalties. I have clients who forgot and failed to acknowledge this and got heavily penalized. Sometimes the LGU gives a Tax Amnesty period for non-payments though there is no definitive date given for this. It is still best to just get those discounts they offer. The amount you save can accrue in time.

In conclusion, Real Property Tax is just like paying rent every year to the local government for the land you are using. That is why pundits always say you never really fully own the property, the government does. If left unpaid for a certain amount of time, they may even legally get it from you. In defense of the LGUs, they have done wonders in doing what’s needed to provide us a safe and comfortable place to live in. This RPT payment is just our share to the society to have a continuous civilized way of living outside the perimeter lines of the property we own.

By: Peter Norrdell

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