Question & AnswerQ&A (BIR REVENUE AUDIT MEMORANDUM ORDER NO. 2-91)
The objective is to amend RAMO 1-88 regarding the determination of the tax base for sales, transfers, or other dispositions of real property including improvements thereon for internal revenue tax purposes, specifically to update the tax base.
Agricultural land is devoted principally to the raising of crops such as rice, corn, sugarcane, tobacco, coconut, etc., or to pasturing, dairying, inland fishing, salt-making and other agricultural uses, including timber lands and forest lands.
Commercial land is devoted principally to commercial purposes and generally for the object of profit. Improvements on such land are also classified as commercial.
A condominium is an interest in real property consisting of a separate interest in a unit in a residential, industrial, or commercial building and an undivided interest in common, directly or indirectly, in the land on which it is located and in other common areas of the building.
An improvement is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital, and intended to enhance its value, beauty or utility or to adopt it for new or further purposes.
The tax base is determined by adding the zonal value of the land to the higher value between the value of the improvement derived from the selling price less the zonal value of the land, and the market value of the improvement based on construction cost plus 10% per year after the year of construction or the market value per latest tax declaration plus 100%/150%.
When zonal value is not established, the tax base is the higher value between the total selling price of the land and improvement, and the total market value of land and improvement. The land's market value is the latest tax declaration plus 100% or 150% depending on the classification, and improvement value is based on construction cost or market value plus similar percentages as provided.
One hundred fifty percent (150%) is added to the market value for properties classified as commercial, industrial, and agricultural devoted to fishpond/prawn farms.
The market value is based on the construction cost from the building or occupancy permit plus 10% thereof for every year after the year of construction, except for improvements constructed in 1991 where this does not apply. If there is no building permit, the latest tax declaration market value plus 100% is used, with 150% added for commercial, industrial, or agricultural (fishpond) properties.
An affidavit of the taxpayer and/or a certification from the Provincial/City/Municipal Assessor stating that there is no existing improvement on the property is required.