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The Complete Guide to Manila Real Property Tax

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property tax PhilippinesManila is not only the capital of Philippines but the second largest city in the country following the Quezon City. Being a large city, it is no surprise that there are lots of opportunities to invest in real estate. However, real investment is not a piece of cake. There are many financial and legal requirements to be fulfilled. One of the requirements is the real property tax, which has to be paid every year to protect the property against auction by the local government.

The tax requirements are varying according to different parts of the world when it comes to real property. In this post, we discover a detailed guide to the Manila property tax.

 

Who, Where, and When?

According to the Philippines property tax laws, the tax is liable to be paid by the owner or administrator of the property. It is submitted at the City or municipal treasurer’s office. The Manila property tax law does allow some flexibility when it comes to the time and method of paying the tax. Taxpayers can choose to pay the entire year’s worth of tax but on or before January 31. For an easier payment, taxpayers can choose to pay in installments. The installments are quarterly and each is due on or before the last day of the quarter ending. This means that the tax is paid on or before March 31, June 30, September 30 and December 31.

 

What are the Real Property Tax Rates?

In terms of maximum rates, the rate for cities and municipalities within the Metro Manila is 2% and that of provinces is 1%.  There is a special education fund (SEF), which required 1%. This is the additional annual tax on the real property tax. The ad valorem tax on idle lands requires a rate of 5%. This is again an additional amount that is collected from idle land and percentage depends on the assessed value of the property.

 

Calculation the Real Property Tax Rate

While the basic rate remains the same, the final calculation may vary according to the assessed value of your property. The final amount you will pay as Manila property tax will be according to the following formula:

RPT = RPT Rate x Assessed Value

You may get confused about what is the assessed value of your property, especially if you are new to this process. The assessed value is the product of the fair market value and assessment level:

Assessed Value = Fair Market Value x Assessment Level

Now, you need to understand what are the fair market value and the assessment level. According to the legal definition, fair market value is the price of the property at which a seller with no intention to sell will sell and a buyer not compelled to buy will buy.  However, the fair market value is based on the assessment of the municipal or city assessor. This is according to the Tax Declaration.

The assessment level depends on the varying legislatures that are working within Metro Manila area. For this purpose, you will have to search tax ordinance that particularly applies to the city or municipality your property is located in.

 

Special Categories of the Real Property

The real property includes various types of properties. All lands, buildings, and other improvements that are directly, actually and exclusively used for cultural, scientific, or hospital purposes come under the real property of Manila. The Manila real property tax is also applicable on all lands owned and used for local water districts, governmental purposes, or controlled operations for essential public services in the supply and distribution of water. This also included the usage of these lands for the generation or transmission of electric power.

The accessed level for each category is different as well. The assessment level is 15%, 15%, 15%, and 10% for the cultural, scientific, hospital, and local water districts respectively. On the other hand, the assessment level for government-owned or controlled organizations that are involved in the supply and distribution of water is 10%.  A similar rate if applied for similar lands used for the generation and transmission of electric supply.

 

Good News for Real Property Taxpayers

This year, the real property taxpayers can enjoy some relief. The Manila government has decided to eliminate the increase in Manila property tax. The mayor of the city, Joseph Estrada, admitted that they no longer have the need to for additional taxation. They would have introduced a 40% increase but the City Hall has already settled its debts and finances have been stabilized.

When the mayor had taken office in 2013, the City of Manila was burdened with the debts it owed to varying creditors. To deal with the situation, the government had decided to impose a 60% tax increase on the city’s real property in 2014. Additional 40% was to be imposed this year but Manila property tax will, fortunately, remain free of it now.

The mayor has publicly given a statement that says that they are debt free so there is no need to add more taxation burden on the citizens. A councilor, Anna Katrina Yupangco, said that the ordinance also comes in response the various complaints of the citizens. The citizens of the city have been worried and constantly mentioned in public hearings that the increase will be too much for them.

manila - property taxThe first round of tax increase definitely made it difficult for Philippines property tax payers. However, if the government had gone through the second round of increase, the situation may have become direr. Therefore, despite already facing a bit of burden in terms of real property tax, property owners don’t have to worry about another increase at least.

If you are fairly new to the entire Philippines property tax, it is better to consult a professional to guide you. Always remember that paying your property tax can prevent you from lots of hassle and is your social responsibility as well.

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