Common Questions When It Comes to Real Property Tax in the Philippines

Do you own a piece of real estate property in the Philippines? Whether you have a vacant lot just waiting to have a house built on it, a townhouse in the city of Manila you’re renting out, or a commercial establishment in the province, you should be paying your real property tax.

Q: What is real property tax?

It is tax levied on Philippine Real estate property. The applicable rate depends on the location. A city or municipality in Metro Manila may impose 1 percent while cities and municipalities outside Metro Manila may levy the tax at the rate not exceeding 2 percent. The owner of the real estate property in the Philippines has the option to pay the tax in four equal installments on or before the last day of each calendar quarter.

Q: Payment of Real Property Tax

Payment is made at the Municipal hall of the area your property is located. If you have a property in Ayala Alabang, by all means, visit the beautiful Municipal hall of Muntinlupa where they have made it easy to pay your real estate tax – by way of a nice, comfortable building, and signs/directions everywhere so you won’t get lost. Add to that the friendly staff ready to assist you.

Q: Is there any discount?

Normally, cities give discounts to early payers. For example, if you plan to pay for the whole due for the following year, you can pay as early as November-december of the current year so you’ll get a discount. This does not hold for all cities – so visit your municipal hall to make sure.

Q: Do I have to pay if I have no title and yet im occupying the property already?

Yes, you have to pay the real property tax from the time you moved in to-date or almost one year. With or without title.

Q: If my property is under the name of my husband who is a foreigner, does he still have to pay the real property tax?

Yes! Even if the property is under the name of your foreigner husband, real property tax is still imposed and should definitely be paid to the local government where the property is located.

Q: I just bought a real estate property from auction and found out the owner has 3 years worth of unpaid real property tax! Do I pay it?

Most properties from auction are on an “As is where is basis”, which means you should have done due diligence. Investigated the background of the property before you dove in. In other words, yes, you will have to pay unless you made prior arrangement with the auctioneer before bidding on the property.

Q: Yikes I didn’t get to pay my real property tax last year, what could happen?

The tax payer is subject to pay interest at the rate of 2 percent per month but not to exceed 36 months.

Here’s a quick recap of how to pay real property tax in the Philippines:

Visit your Real Property Tax Section in the Treasurers Office located usually in the City hall. Secure an order of payment(OP) from the assessors office, proceed to the realty tax section and present the OP with the latest official receipt (OR) and new tax declaration for new transferred properties. The collection officer then computes tax and informs you, the tax payer, how much you have to pay. After payment, an official receipt is issued and payment is posted on the property tax card. After which, you just pay at the cash register upon validation of the official receipt. Finished!

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Personal Property Vs Real Property – Understanding the Difference, Avoiding the Lawsuits

Let’s take a look at Personal Property as it compares to Real Property. This is a topic that comes up a lot when a real estate transaction gets difficult and the two parties (buyer and seller) begin to argue over what stays in the house and what doesn’t according to the contract and law.

Personal property is defined as all property that can be owned and does not fit the definition of real property. In other words, if it is not real property then it is personal property. An important distinction between the two is that personal property is movable. Personal property is also referred to as chattels. For those of you who like to work on expanding your vocabulary.

Next let’s look at some examples of personal property including manufactured housing, plants, crops, and classifications of fixtures.

Manufactured Housing is defined as dwellings that are not constructed at the home site. These are normally trucked in and placed on the property. For those of you breaking down the word manufactured, and wondering why all homes aren’t considered manufactured, since they are after all “manufactured” think of mobile homes as manufactured. Here’s the tricky part, if the manufactured home has been attached to the property then it is REAL property, if it is just sitting there and hooked up to utilities then it is PERSONAL property. Why would it matter? well, if it is REAL property, then the property taxes are higher because the government sees the homes as essentially adding value to the land it sits on.

Plants and Crops: There are two categories here and both have their differences. Trees, perennials, shrubbery and grass that do not require annual cultivation are considered real property or real estate. And these transfer with the sale of the property. Crops on the other hand that are harvested on an annual basis, are considered emblements. Or personal property and in the sale of the property, the crops that are being produced stay with the seller for that current harvest.

Here are some additional details… if an item on the land, lets say a tree (which is real property) is cut down and separated from the land (called severance), then it becomes personal property. It is also possible to do the same thing but the other way. If the tree that was cut down is used to build a home on the property, through annexation, it become real property.

Fixtures – these are often the hot topic in the sale of a home because sellers often take their fixtures with them when they move, and that is against the agreement set out by the contract. Knowing what a fixture is, will help you understand what to expect stay with the home and what does not. A fixture is personal property that has been affixed (attached) to the land or building and it becomes real property. Remember real property stays with the home when it is sold.

How do you test if an item is a fixture or personal property? Here are the three basic tests the court will use to decide.

1. Method of Annexation – how permanent is the method of attachment? Can the item be removed without damaging the surrounding property?

2. Adaptation to Real Estate – Is the item being used as real property or personal property? For example a fridge is normally considered personal property because it can be removed easily. However if the refrigerator has been adapted to match the kitchen cabinetry, it become a fixture.

3. Agreement – Have the parties agreed on whether the item is real or personal in a purchase offer.

The overall rule is to determine, what is the purpose of the fixture? Is it’s function to be personal property or a real property.

Trade Fixtures are the exception to the rule. A trade fixture is property used in the course of business. Often it will be attached to the property and resemble real property. However, if it is something used as part of the seller’s trade, it is considered personal property and does not stay with the home.

Often home buyers will be looking at homes and what draws them to the home will be certain aspects of the home. Fixtures such as entertainment centers, backyard gazebos and surround sound speakers are often considered fixtures and real property that will stay with the home. However a home owner may consider those items of great value and may be planning on taking them to their new home. It is very important to identify what fixtures you want and expect to stay in the home and put those items in the purchase agreement so everyone will be on the same page and in agreement from early on.

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