Clarification on valuation of real property improvements for tax purposes

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BIR REVENUE AUDIT MEMORANDUM ORDER NO. 1-2001: Clarification on valuation of real property improvements for tax purposes

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Title Source: Supreme Court: Clarification on valuation of real property improvements for tax purposes

Law: Bir Revenue Audit Memorandum Order No. 1-2001

Decision Date: Feb 15, 2001

The BIR Revenue Audit Memorandum Order No. 1-2001 clarifies the procedures for valuing improvements on real property for internal revenue tax purposes, establishing uniform guidelines to ensure that the valuation aligns with the fair market value as reflected in the latest tax declaration.

Law Summary

Rationale

Addresses conflicting interpretations between Revenue Audit Memorandum Order No. 1-2000 and earlier BIR Rulings regarding valuation basis.
Affirms that the basis for internal revenue taxes on the sale or transfer of real property is the fair market value (FMV) as reflected in the latest tax declaration.
Ensures uniform application of rulings and audit handbook provisions.

Amendment to Handbook Section 6.1.1 (Valuation Formula)

The value of improvements shall be computed by deducting the zonal value of land from the total selling price/consideration stated in the deed of sale.
The resulting value of improvement cannot be lower than the FMV shown in the latest tax declaration covering the improvement at the time of transaction.

Use of Fair Market Value from Tax Declaration

FMV must be based on the latest tax declaration certified by the city or municipal assessor at the time of sale/disposition.
No additional adjustments to the FMV shall be made if the tax declaration reflects the upgraded FMV pursuant to Section 219 of RA No. 7160 (Local Government Code of 1991) and the Local Assessment Regulations No. 1-92.

Requirements for Older Tax Declarations

If the tax declaration used is three or more years old from the sale date, the seller/transferor must submit certification from the city/municipal assessor confirming whether it is still the latest.
If not the latest, the seller/transferor must obtain and submit a copy of the latest tax declaration, duly certified.

Repealing Clause

This Order supersedes all previous revenue issuances or parts thereof inconsistent with these provisions.

Effectivity

The Order takes effect immediately upon approval, dated February 15, 2001.

END