A Business Owner’s Guide to Real Property Tax & Declarations

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Nature and Situs

Real property tax (RPT) is an annual ad valorem tax levied on lands, buildings, machinery, and other improvements. The situs of taxation is strictly the location of the property. Only provinces, cities, and municipalities within the Metropolitan Manila Area have the legislative authority to impose RPT.

Assessment and Liability

Property appraisal is based on current fair market value, but classification and assessment strictly follow the principle of actual use (principal or predominant utilization), regardless of ownership. Tax rates are applied directly to assessed values. Tax liability generally rests on the property owner; however, under the Beneficial Use Doctrine, liability shifts to any taxable person or entity granted the actual or beneficial use of a tax-exempt government property.

Exemptions

Properties exempt from RPT under the Local Government Code include:

• Real property owned by the Republic of the Philippines or its political subdivisions, except when beneficial use is granted to a taxable person for consideration.
• Charitable institutions, churches, mosques, non-profit cemeteries, and lands/buildings actually, directly, and exclusively used for religious, charitable, or educational purposes (the test of exemption is usage, not ownership).
• Machineries actually, directly, and exclusively used by local water districts and specific GOCCs engaged in water or power distribution.
• Real properties owned by duly registered cooperatives.
• Machinery and equipment used for pollution control and environmental protection.
• Government instrumentalities vested with corporate powers (e.g., LRTA, MWSS, MIAA, Philippine Heart Center).

Tax Remedies

Taxpayer Remedies

Exhaustion of administrative remedies requires mandatory payment under protest. The taxpayer must ensure “paid under protest” is annotated on the tax receipt and file a written protest with the local treasurer within 30 days from payment. Denials or inactions are appealed to the Local Board of Assessment Appeals (LBAA), and subsequently to the Central Board of Assessment Appeals (CBAA).

Government Remedies

Local government units (LGUs) enforce delinquent tax collection through administrative actions (warrant of levy on real property) or judicial action. In cases of tax delinquency sales, the taxpayer has the right to redeem the property within one year from the date of sale.