Real property tax 101: Why it pays to own property

June 28, 2022

The average Filipino family dreams of owning a house and lot, a place that they can call ‘home.’ For many, it is a measure of success, a real and tangible reminder for themselves that they’ve made it. That is why new homeowners feel a great sense of accomplishment after they sign and finalize the deed of sale. But with great property, comes great responsibility. Owning real estate in the Philippines means that you are obliged to pay Real Property Tax (RPT) on a yearly basis, as stated in the Local Government Code of 1991 or Republic Act no. 7160 (Book II, Title II). That’s why it pays to know the basics of what is involved when it comes to paying real estate taxes. Here’s a quick guide on RPT for new homeowners: Who needs to pay:

Anyone (individual or corporation) who owns or administers a property, whether it is idle, or used for residential or commercial purposes, is required to pay RPT.

However, the following are exempt from paying RPT: Charitable institutions; All properties that are exclusively used for religious, charitable or educational purposes, including churches, mosques, convents, parsonages, and non-profit/religious cemeteries;

Cooperatives;

Government-owned or controlled properties; Those that are used by local water districts, or used to generate/transmit electricity; Machinery and equipment used for pollution control and environmental protection;

What is covered:

RPT covers or applies not only to the lot (or land) itself, but also includes the structures (the house or building), any improvements on the property, and any machinery and equipment located on it. When to pay: There are two payment options: (1) full payment; or (2) quarterly installments. For those paying in full, the deadline is the 31st of January of each year. For those paying on installment, the quarterly deadline is as follows: 1st quarter: on or before March 31 2nd quarter: on or before June 30 3rd quarter: on or before September 30 4th quarter: on or before December 31

Failure to pay the RPT on time will result in penalties at the rate of two percent (2%) per month on the unpaid amount, up to a maximum of 72% or thirty-six (36) months. Keep in mind though that if you become very delinquent in paying your RPT, the local government can actually sell or auction your property! So make sure to pay your taxes on time. On the flip side, paying your RPT in advance allows you to avail of discounts of up to a maximum of 20%, so always check for announcements from your local government. Where to pay:

Payments should be made to the local Treasurer’s office of the corresponding city or municipality. How much to pay:

The basic RPT is computed by multiplying the RPT rate with the assessed value of the property. The RPT rate for cities and municipalities in Metro Manila is two percent (2%), while properties located in the provinces have one percent (1%) rate. The assessed value (or taxable value) is the fair market value of the real property multiplied by the assessment level. The assessment level is a fixed rate set by the city or provincial government through an ordinance and can be as high as 20% for residential lands and 60% on residential buildings/structures. The assessment level for commercial lots can be as high as 50%, and 80% of commercial buildings and structures. So for example, if your residential lot in Metro Manila is valued at P1 million, applying the maximum assessment level of 20%, your assessed value or taxable value will be P200,000. Applying the 2% RPT rate for Metro Manila, your basic real property tax will be P4,000. Sample Basic Real Property Tax (RPT) Computation Fair Market Value (FMV) of Metro Manila Residential Property P1,000,000 Assessment Level 20% Assessed Value (FMV x Assessment Level) P200,000 RPT Rate (Metro Manila) 2% Basic RPT (Assessed Value x RPT Rate) P4,000

On top of the basic RPT, the local government can add an annual tax of one percent (1%) on the assessed value of the real property which will go to a Special Education Fund (SEF). Moreover, if your lot is undeveloped or considered ‘idle,’ an additional 5% annual tax on the assessed value of your property may be imposed by the local government. Protect the Value of Your Property Paying real estate taxes is part of being a responsible homeowner, and a responsible Filipino citizen, of course. Making sure that your property has the right real estate insurance coverage is another. Good thing there’s Cocogen Home Excel Plus! Home Excel PLUS is just what you need for your home. It is a unique and comprehensive home insurance plan that will help you rebuild your home in case the unthinkable happens. It covers not only the building, but also the structures detached from it, such as your garage, perimeter fence, guard house, gates, overhead tanks, and swimming pool, against any of these perils: Fire and Lightning Earthquake Typhoon Flood Extended Cover Riot, Strike, and Malicious Damage Broad Water Damage Burglary and Robbery

Moreover, Home Excel Plus comes with extra benefits and services, such as Home Assist, a 24/7 call assistance hotline for customers who may encounter house-related problems–including the replacement of house locks. It also comes with free Kasambahay Coverage, which includes medical expenses due to accidental bodily injury, as well as coverage for your kasambahay’s property, such as clothing and other personal belongings. Home Excel Plus also provides Lodging and Rental Allowance should your home suddenly become unlivable or uninhabitable due to a flood, earthquake, or fire. Customers also get Household Contents Coverage for their furniture, appliances, electrical fixtures, and even clothes and other personal items, in the event that these are damaged or stolen. Last but not least, Home Excel Plus also has Personal Liability Coverage to protect you from possible lawsuits in case someone gets accidentally injured on your property, or if a family member unintentionally breaks your neighbor’s window or damages their property in another way. To know more about Cocogen Home Excel Plus, click here. You may also call our customer service hotline at 8830-6000, or email us at client_services@cocogen.com. You can also drop us a note here.

*** The views expressed are the author’s own and do not necessarily reflect the views of Cocogen Insurance.

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