Real Property Tax Code

Section 1

Scope. This Code shall govern the appraisal and assessment of real property for purposes of taxation by provinces, cities and municipalities, as well as the levy, collection and administration of real property tax.

Section 2

Fundamental Principles. The appraisal and assessment of real property for taxation purposes shall be guided by the following fundamental principles: 1) Real property shall be appraised at its current and fair market value; 2) The appraisal of real property shall be uniform in each local political subdivision; 3) Real property shall be classified for assessment purposes on the basis of its actual use; 4) Real property shall be assessed on the basis of a uniform standard of value within each local political subdivision; 5) In no case shall the appraisal and assessment of real property for taxation purposes and the collection of the real property tax be let to any private person; and 6) The goal of property assessment shall be the equitable distribution of the tax burden.

Section 3

Definition of Terms. When used in this Code a) Actual use shall refer to the purpose for which the property is principally or predominantly utilized by the persons in possession of the property. b) Ad Valorem tax is a levy on real property determined on the basis of a fixed proportion of the value of the property. c) Agricultural land devoted principally to the raising of crops such as rice, corn, sugarcane, tobacco, coconut, etc., or to pasturing, dairying, inland fishery, salt making, and other agricultural uses, including timberlands and forest lands. d) Appraisal is the act or process of determining the value of a property as of a specific date for a specific purpose. e) Assessment the act or process of determining the value of a property, or proportion thereof, subject to tax, including the discovery, listing and appraisal of properties. f) Assessment level is the percentage applied to the market value to determine the taxable or assessed value of the property. g) Assessed Value the value placed on taxable property by the assessor for ad valorem tax purposes. The assessed value when multiplied by the tax rate will produce the amount of tax due. It is synonymous to "taxable value." h) Commercial land devoted principally to commercial purposes, and generally for the object of profit. i) Depreciated Value the value remaining after deducting depreciation from either the replacement cost or the reproduction cost. j) Economic life the estimated period over which it is anticipated that a machinery may profitably be utilized. k) Improvements Is a valuable addition made to property or an amelioration in its condition, amounting to more than more repairs or replacement of waste, costing labor or capital, and intended to enhance its value, beauty or utility or to adapt it for new or further purposes. l) Industrial land developed principally to industry as capital investment. m) Machinery shall embrace machines, equipment, mechanical contrivances, instruments, appliances and apparatus attached to the real estate. It shall include the physical facilities available for production, as well as the installations and appurtenant service facilities, together with all those not permanently attached to the real estate but are actually, directly and essentially used to meet the needs of the particular industry, business, or works, which by their very nature and purpose are designed for, or essential to manufacturing, commercial, mining, industrial or agricultural purposes. (as amended by Presidential Decree No. 1383, [May 25, 1978]) n) Market value is defined as "the highest price estimated in terms of money which the property will buy if exposed for sale in the open market allowing a reasonable time to find a purchaser who buys with knowledge of all the uses to which it is adapted and for which it is capable of being used." It is also referred to as `the price which a willing seller would sell and willing buyer would buy, neither being under abnormal pressure." o) Mineral lands are those lands in which minerals exist in sufficient quantity or grade to justify the necessary expenditures to be incurred in extracting and utilizing such minerals. p) Original cost for newly acquired machinery not yet depreciated and appraised within the year of its purchase, refers to the actual cost of the machinery to its present owner (plus the cost of transportation, handling and installation at the present site). q) Reassessment the assigning of new assessed values to property, particularly real estate, as the result of a general, partial or individual reappraisal of the property. r) Remaining economic life the period of time (years) from the date of appraisal to the date when the machinery becomes valueless. s) Remaining value the value corresponding to the remaining useful life of the machinery. t) Replacement or reproduction cost (new) the cost that would be incurred on the basis of current prices, in acquiring an equally desirable substitute property, or the cost of reproducing a new replica property on the basis of current prices with the same or closely similar material. u) Residential land principally devoted to habitation.

Section 4

Administration of the Real Property Tax. The Department of Finance shall be primarily responsible for the proper, efficient and effective administration of the real property tax and for this purpose it shall: a) Evolve a comprehensive system of real property appraisal that will ensure fair and realistic property valuations for taxation purposes; b) Establish uniform assessment methods and procedures that will equalize property values in each local political subdivision: c) Ensure that the ad valorem tax on real property shall be just, uniform and equitable; d) Adopt the necessary measures that will promote maximum tax collection efficiency at the local levels; e) Provide for the optimum utilization by the local governments of the proceeds from the real property tax; and f) Formulate and adopt policies and procedures that will improve technical skills and develop reasonable standards of performance in the local assessment and treasury services. In order to attain the foregoing objectives, the Secretary of Finance shall exercise direct executive supervision over all assessment and treasury officials and personnel in the local governments.

Section 4-A

Grant of Special Powers to the President. In the interest of local economy and the general welfare and subject to the conditions and limitations herein prescribed, the president, upon recommendation of the Minister of Finance, is hereby empowered to make adjustments in the Real Property Tax System, as regards: (a) The classification of real properties for taxation purposes; (b) The frequency of general revisions of property valuations; (c) The assessment levels or assessed values of real properties, and (d) The extent of exemption from real property tax and rates of levy. The above powers may be exercised by the President if any of the following conditions exists: 1. Where, in the light of economic, social and other relevant changes, it becomes necessary to modify or adjust the classification of real properties, their assessment levels and/or taxable values on the basis of new concepts of essentiality and modern approaches to real property valuation; 2. Whenever, by reason of fluctuation of currency value, inflation or deflation, and changing development needs of the country, the existing assessment levels and/or tax rates are no longer realistic; or 3. Where in view of new social and economic conditions, it becomes imperative to change real property assessment patterns for taxation purposes. The special powers hereinabove provided for shall, however be subject to the following specific limitations: 1. The maximum rates of levy fixed in this code may be increased by not more than two per cent of the assessed value of real property or reduced by not more than one per cent thereof; 2. For any tax year, the existing assessment level or levels may be increased or decreased by not more than thirty per cent; 3. As may be recommended by the Minister of Finance on the basis of changes in price levels, the period of general revision of property valuations for taxation purposes may be extended up to five years or reduced to two years; 4. Before any recommendation is submitted to the president by the Minister of Finance pursuant to the provisions of this section, a public hearing shall first be held, whenever practicable, where interested parties shall be afforded to a reasonable opportunity to be heard.