Fundamental Principles of Real Property Taxation
- Real property appraised at current fair market value.
- Uniform appraisal within each local political subdivision.
- Classification based on actual use.
- Assessment based on a uniform standard of value within subdivisions.
- No private person may conduct appraisal, assessment, or tax collection.
- Goal is equitable tax burden distribution.
Key Definitions in the Code
- Actual Use: Principal utilization of the property.
- Ad Valorem Tax: Levy based on fixed proportion of property value.
- Various land classifications: agricultural, commercial, industrial, residential, mineral lands.
- Market Value: Highest estimated price under normal sale conditions.
- Appraisal vs. Assessment: Appraisal is valuation process; assessment includes discovery, listing, and valuation.
- Replacement/Reproduction Cost, Economic Life, and Depreciated Value defined for machinery and improvements.
Administration of Real Property Tax
- Department of Finance responsible for administration.
- Develop comprehensive appraisal system for fair valuations.
- Establish uniform methods to equalize property values.
- Promote maximum tax collection efficiency at local level.
- Secretary of Finance exercises direct oversight over assessment and treasury officials.
Appraisal and Assessment Procedures
- All real properties appraised at current market value.
- Owners must file sworn declaration of property value every 5 years.
- Assessors may declare and assess properties if owners fail to do so.
- Assessment rolls prepared listing all real properties with ownership details.
- Tax-exempt properties require proof within 30 days of declaration.
- Uniform real property identification system maintained.
- Transfer of ownership must be notified within 60 days.
- Registers of Deeds to aid assessors by providing abstracts and certificates.
- Building permits and machinery registration copies must be furnished to assessors.
- Schedule of Market Values prepared for general revisions.
- Assessors empowered to summon witnesses and take evidence.
Property Classification and Valuation
- Property classified as residential, agricultural, commercial, industrial, mineral, or special use.
- Mineral lands further sub-classified into metallic and non-metallic.
- Actual use is the basis for assessment.
- Specified assessment levels: e.g., 30% for residential land, 40% agricultural, 50% commercial/industrial.
- Buildings and machinery assessed with prescribed levels up to maximum 80% of market value.
- Special classes (educational, cultural, scientific, hospital not government-owned) have lower assessment levels.
- General reassessment every 5 years or earlier if property values shift significantly.
Appeals Process
- Property owners may appeal assessments within 60 days to Local Board of Assessment Appeals.
- Local Board composed of Register of Deeds (Chair), Provincial/City Auditor and Engineer; conducts hearings.
- Appeals decided within 120 days based on substantial evidence.
- Decisions appealable to Central Board of Assessment Appeals composed of high-ranking government officials.
- Central Board has authority to summon witnesses and issue subpoenas.
- Appeals do not suspend tax payment.
Imposition and Rates of Real Property Tax
- Annual ad valorem tax on land, buildings, machinery, and improvements (except exempt).
- Provinces: Tax rate between 0.25% to 0.5% of assessed value.
- Cities: Tax rate between 0.5% to 2%.
- Local legislative bodies enact tax ordinances; approval or veto procedures specified.
Exemptions from Real Property Tax
- Government-owned properties except those granted to taxable persons.
- Non-profit cemeteries, religious and charitable institutions.
- Properties with low assessed valuation (<= 500 pesos).
- Land converted into dairy farms for five years.
- Machinery of new preferred industries for first three years.
- Perennial economic trees/plants except when land is principally planted for such growth.
- Other exemptions as per law.
Special Levies
- Additional 1% tax for Special Education Fund except for small taxpayers.
- Authorization for additional tax (up to 2%) on idle private lands exceeding prescribed thresholds.
- Definitions and exemptions for idle lands detailed.
- Local governments may impose special levies for infrastructure benefiting specific areas (not exceeding 60% of costs).
- Procedural requirements for imposing special levies including publication and protest hearings.
- National Government may also impose special levies related to public works.
Collection of Real Property Tax
- Tax accrues and becomes due on January 1 each year, becomes lien on property.
- Tax collection responsibility vested with local treasurers.
- Assessment rolls submitted annually by assessor to treasurer.
- Tax notices posted and published; option for payment in four installments.
- Discounts available for prompt payment in initial years; subject to future presidential discretion.
- Tax payments under protest allowed with specific procedures.
- Refunds for excessive assessments may be claimed for up to 3 years.
- Courts limited in declaring tax invalid; payment under protest required before suit.
- Delinquency notices and penalties: 2% per month up to 24% total.
- Enforcement remedies cumulative; include distraint of personal property.
- Lists of exempt personal property from distraint specified.
- Public auction procedures for sale of distrained property and delinquent real property outlined.
- One year redemption period for sold properties by taxpayer.
Disposition and Use of Tax Proceeds
- Tax proceeds accrue to local government units where property is situated.
- Barrios receive a share: 5-10% of collections depending on locality.
- Allocation rules for proceeds defined, including educational fund shares.
- Proceeds from delinquent taxes also accrue to local governments.
Organizational Structure and Personnel
- Separate assessment office headed by provincial or city assessor appointed by President.
- Assessors and assistants must have specified educational and experience qualifications.
- Deputies appointed for field assessment; municipal deputy assessors created.
- Secretary of Finance exercises direct supervision over local assessment offices.
- Assessment offices required to maintain real property identification systems and conduct continuous surveys.
Special Provisions
- Market value used as basis for just compensation in expropriation.
- Non-stock or non-profit educational institutions with assessed value <=30,000 pesos exempt.
- Assessment Revolving Fund created to finance regular general revisions.
- Local governments to appropriate funds for assessment expenses.
Miscellaneous Provisions
- Tax remission possible by local boards or President under specified conditions.
- All government officers are mandated to assist assessors.
- Insurance companies required to provide assessment data.
- Fees for court actions and document registrations relating to real property tax exempted.
- Secretary of Finance empowered to promulgate implementing rules.
Penal Provisions
- Penalties for failure to file or for false declarations: fines up to 1,000 pesos, imprisonment up to 1 year, or both.
- Similar penalties and corporate fines for corporate violations.
- Penalties for assessment officers who neglect or under-assess properties.
- Penalties for officials delaying assessment or appeals.
- Lesser fines and imprisonment for other violations.
Transitory Provisions
- Pre-existing sales and forfeitures governed by prior laws.
- Pending assessment cases and records transferred to new Boards.
- Previous inconsistent laws repealed or modified.
Effectivity
- The Code takes effect June 1, 1974.