PART I - REAL PROPERTY TAX & LOCAL TAXES

A set of vocabulary flashcards covering key terms and concepts from the notes on real property tax and local taxes, including exemptions, assessment, classifications, rates, and LGU powers.

Real property tax

An ad valorem tax collected by a city, municipality, or province on real property such as land, buildings, machinery, and improvements affixed or attached to real property.

Ad valorem

A tax calculated based on the value of the property rather than a fixed amount.

Exemptions from real property tax (RA 1)

Real property owned by the Republic of the Philippines or its subdivisions, except when beneficial use is granted to a taxable person.

Exemptions from real property tax (RA 2)

Charitable institutions, churches, parsonages or convents, mosques, non-profit cemeteries, and lands/buildings used exclusively for religious, charitable, or educational purposes.

Exemptions from real property tax (RA 3)

Non-profit or religious cemeteries or burial grounds.

Exemptions from real property tax (RA 4)

Machineries and equipment used directly and exclusively by local water districts and GOCCs in water supply or electric power generation.

Exemptions from real property tax (RA 5)

Real property owned by cooperatives registered under RA 9520 (Cooperative Code).

Exemptions from real property tax (RA 6)

Machineries and equipment used for pollution control and environmental protection.

Fair market value (FMV)

The price at which a property may be sold by an unpressured seller to an unpressured buyer; also known as the assessor’s value for assessment purposes.

Actual use

Classification, valuation, and assessment based on the property's actual use, regardless of ownership or location.

Residential land

Land principally devoted to habitation.

Agricultural land

Land devoted principally to planting of trees, crops, livestock, poultry, dairying, fishing, and similar agricultural activities.

Commercial land

Land principally used for the pursuit of profit and not categorized as agriculture, industrial, mineral, or residential.

Industrial land

Land devoted principally to industrial activity as a capital investment.

Mineral land

Land containing mineral metallic or non-metallic deposits significant enough to justify extraction.

Special land

Land used for hospitals, cultural or scientific purposes, and land owned/used by water districts or GOCCs providing essential public services.

Assessment level

The percentage applied to FMV to determine the assessed value of a property.

Assessed value

FMV multiplied by the assessment level; the taxable value for tax purposes.

Lands assessment levels (examples)

Residential 20%, Timberland 20%, Agricultural 40%, Commercial/Industrial 50%, Mineral 50%, Special land 15%, Local water districts 10%, GOCCs 10%.

Machineries assessment levels (examples)

Residential 50%, Agricultural 40%, Commercial/Industrial 80%, Special 15%, Local water districts 10%, GOCCs 10% (Timberland and Mineral for machineries are not applicable).

Basic tax rate (province)

Not exceeding 1% of assessed value (AV).

Basic tax rate (city/municipality)

Not exceeding 2% of assessed value (AV).

Transfer tax

Tax on the transfer of real property ownership; base is selling price or FMV, whichever is higher; maximums not more than 0.5% in provinces/municipalities and 0.75% in cities.

Special Education Fund (SEF)

An additional levy of 1% of AV collected as part of real property tax.”

Situs of the tax

The tax is due at the branch or sales outlet where the transaction occurs; if none, at the principal office.

Collection authority (real property tax)

The city or municipal treasurer; may deputize a bonded barangay treasurer to collect taxes within the barangay.

Accrual date

Real property tax accrues on January 1 of each year.

Installment plan

Basic RPT and SEF may be paid in four equal installments due by March 31, June 30, September 30, and December 31.

Prompt payment discount

Up to 20% discount if the basic tax and SEF are paid in advance.

Delinquent tax interest

2% per month on unpaid tax, up to 36 months.

Condonation or reduction

Tax and interest may be condoned or reduced by ordinance or presidential action.

Local government units (fundamental principles)

Taxes must be uniform within the LGU, equitable, used for public purposes, not collected by private persons, and revenue must accrue to the LGU.

Limitations on LGU taxing power (high level)

LGUs generally cannot impose income tax (except banks/financial institutions), DST, estate tax, most customs duties, and certain other national taxes.

Taxes by province (overview)

Provinces may impose transfer tax, tax on printing/publications, franchise tax, sand/gravel tax, professional tax, amusement tax, and annual fixed tax for certain delivery vehicles.

Transfer tax (province)

Province-wide transfer tax on ownership transfers; rates and bases similar to general RPT framework.

Tax on printing and publications

Tax on annual gross receipts from printing/publication activities; exemptions apply to certain school-referenced materials.

Franchise tax (province)

Tax on businesses enjoying a franchise; base is annual gross receipts within the province.

Sand, gravel tax

Tax on sand, gravel, and similar quarry resources; base is FMV per cubic meter; rate not more than 10%.

Professional tax (province)

Tax on individuals practicing a profession; base up to P300; exemptions for government employees.

Amusement tax (province)

Tax on admission receipts from places of amusement; rate not more than 30% of gross receipts.

Delivery vehicle tax (province)

Annual fixed tax per delivery vehicle of manufacturers, producers, wholesalers, or retailers; not exceeding P500.

Taxes by cities (overview)

Cities may levy taxes similar to provinces but can exceed provincial rates by up to 50%, except for professional and amusement taxes.

Maximum city transfer tax

Cities may impose a maximum transfer tax of 0.75% of selling price or FMV.

Barangays’ revenue powers

Barangays may levy taxes on small retailers, fees for services, and clearance fees; may collect fees for barangay-owned services.

Common revenue-raising powers (LGUs)

Service fees, public utility charges, and tolls/fees for use of public roads, piers, or other facilities.

Situs and collection of branch taxes

Tax accrues at the branch/sales outlet and is paid to the local unit where the sale occurred; otherwise to the principal office.