JUNE 13, 2024 marked a pivotal day in Philippine taxation as this was when President Ferdinand Marcos Jr. signed into law Republic Act 12001, also known as the Real Property Valuation and Assessment Reform Act (RPVARA). The groundbreaking legislation is set to revolutionize the country’s previous real property tax system.
The RPVARA aims to upgrade the previous valuation system and establish a uniform valuation standard for real property assessments. Under the new law, the Bureau of Local Government Finance (BLGF) is tasked with developing, adopting, maintaining, and implementing uniform valuation standards to be used by all appraisers and assessors in local government units (LGUs) and other concerned parties or agencies involved in property valuation for taxation and other purposes.
For valuation purposes, all real properties, whether subject to taxation or not, will be appraised based on prevailing market values in their respective localities in accordance with the standards set by the RPVARA. The approved Schedule of Market Values (SMV) will serve as the basis for property assessment by the local assessor and for adjustments in assessment levels and tax rates of LGUs. It will also be used to determine the market value for various property-related taxes, such as local transfer tax, sand and gravel tax, community tax, and other fees and charges.
Additionally, the Commissioner of Internal Revenue (CIR) will utilize the SMV or the actual gross selling price of the real property, whichever is higher, in computing internal revenue taxes. Moreover, the SMV will be the foundation for real property appraisals across all government agencies, instrumentalities, and government-owned or controlled corporations.
To bolster the implementation of the RPVARA, the BLGF, in coordination with the Philippine Tax Academy, will develop and conduct the necessary training for local assessors, local officials and staff, and other concerned personnel on the preparation of SMVs in accordance with the Philippine Valuation Standards (PVS). The PVS is based on the International Valuation Standards, which are grounded in principles that encourage transparency and consistency and uphold a high degree of public trust in the valuation practice.
As a key objective of the RPVARA is to increase transparency and accountability in the real property tax system, LGUs are mandated to publish property valuation information and assessment procedures, empowering taxpayers to understand the basis for their tax liabilities. This increased transparency will help reduce illegalities and unethical practices, building trust between taxpayers and government agencies.
The RPVARA also addresses the need for an accurate, comprehensive, and up-to-date electronic database of all regional real property-related transactions by mandating the development of a Real Property Information System (RPIS), a database storing information on the sale, exchange, lease, mortgage, donation, transfer and all other real property transactions and declarations in the country.
Once operational, it will be the duty of the registers of deeds, the BIR, notaries public, officials issuing building permits, and geodetic engineers conducting surveys within a locality to electronically transmit relevant real property transactions data to the BLGF, free of charge, every quarter, in accordance with the rules and regulations to be promulgated by the Secretary of Finance.
For the first year of effectivity of the approved SMV, real property tax increases are capped at six percent. Moreover, a real property tax amnesty, which shall cover penalties, surcharges, and interests from all unpaid real property taxes — including Special Education Fund, idle land tax, and other special levy taxes — is granted, which may be availed of within a period of two years after the effectivity of the RPVARA.
While the RPVARA presents immense potential, its implementation, like any transformative legislation, may encounter initial hurdles, as the transition to modern valuation methods may require substantial training and resources for LGUs. Additionally, property owners may express concerns about potential increases in their tax liabilities. The penalties, which include fines and suspension, though strict, ensure that the law’s provisions are followed and that the goal of a more equitable and efficient real property tax system is achieved.
The RPVARA presents a transformative opportunity to modernize the Philippine tax system, fostering a more equitable and prosperous society through enhanced real property valuation and administration. With strategic planning and dedicated implementation, the new law can establish a foundation for a streamlined, transparent, and efficient real property tax system in the Philippines.
The author is a principal at the Tax & Legal practice of Deloitte Philippines, a member of the Deloitte Asia Pacific Network. For comments or questions, email [email protected]. Discover more insights on RPVARA and other tax reforms at Deloitte Philippines’ inaugural Tax Summit, Tax Reforms Unlocked: Opportunities and Implications for Taxpayers, on Tuesday, Nov. 19, 2024.
Be the first to comment