A lot of good things have a price, including the things you think are free. Even your very stay in the country is without cost, and you’ll pay for it one way or another – this is called tax. And your future home sweet home? Yes, it’s also taxed. So if this is your first time to buy a house, then you should know that other than paying for the lot, construction materials, and labor, you also have to set aside a good amount of money for real property tax.
And if you’d rather buy one of our condos for sale along EDSA, then depending on the policy, you might or might not have to pay it. Either way, it’s best that you’re prepared. Here’s a short guide to this rather complicated part of financial and national responsibility.
What Exactly is Real Property Tax?
Real Property Tax is the tax on real property, a certain measure of land that has a man-made structure, which is usually a house or a living space. This tax is issued by the local government units, and the legal basis behind it can be found in Title II of Republic Act number 7160.
Real Property Tax is usually paid at the city or municipal treasurer’s office.
This one will depend on how you wish to pay your real property tax. If you wish to save yourself from the hassle of going to the city/municipal hall, you may pay for the entire year on or before January 31. Do note that if the Real Property Tax plus the Special Education Fund (more on that later on) is paid in advance, you may be granted a discount not exceeding 20% of the annual tax due.
On the other hand, if you wish to pay in an installment basis, you have to pay on or before the following dates: March 31, June 30, September 30, and December 31. Failure to pay on time will warrant a 2% interest rate per month until paid. The maximum number of months is thirty-six months, which means that the highest possible interest rate would be 72%.
The person who owns the property should be the one to pay.
How Much Will You Pay?
The amount you have to pay can easily be computed with this simple formula:
Real Property Tax = Real Property Tax Rate x (Fair Market Value x Assessment Level)
Real Property Tax Rate is determined by the following:
- Cities/municipalities – 2%
- Provinces – 1%
Depending on your local government, you may get an additional 1% for the Special Education Fund.
Fair Market Value, which is defined by Sec 199 (1) of the LGC as the price to which the property may be sold by a seller who is not compelled to sell to a buyer who is not compelled to buy, is determined by your municipal or city assessor as indicated in your Tax Declaration.
Assessment Level is a fixed rate, which is determined by the Sangguniang Panlalawigan, Panglungsod, or Pambayan. Since the kind of property talked about in this article is in the residential areas, the Assessment Level is 20%. For a more detailed computation, follow this link.
Hopefully, with everything mentioned above, the questions you have regarding Real Property Tax have been answered. Now you can move on to the more important questions, like where to live and how to decorate it.