The Philippine government has introduced several tax reforms in recent years to modernize the country’s tax administration and improve tax rate and revenue generation, one of which is the Republic Act No. 12001 or the Real Property Valuation and Assessment Reform Act (RPVARA). Part of the Comprehensive Tax Reform Program (CTRP), RPVARA focuses on creating a fair, transparent, and uniform valuation system of real property in the Philippines.
In this blog, we’ll cover what RPVARA entails, its importance to property taxation, details on its implementation, and how it impacts taxpayers, local government units (LGUs), and investors.
What is the Real Property Valuation and Assessment Reform Act (RPVARA)?
The Republic Act No. 12001 or the Real Property Valuation and Assessment Reform Act (RPVARA) was signed into law on Jun 13, 2024. This law is designed to establish a standardized and transparent system for assessing and valuing real properties and adopt the Schedule of Market Values (SMVs) as the single real property valuation base for the assessment of real property-related taxes in the Philippines. It aims to create a consistent basis for real property taxation, which helps ensure fair property assessments across different LGUs and provides a clear framework for determining property taxes.
Prior to the enactment of RPVARA, under the Local Government Code of 1991, every LGU, each local government unit (LGU) empowers its local assessors to create a schedule of fair market values for real properties within their jurisdiction, which serves as the basis for real property valuation ordinances. Thus, each LGU may set its own property valuation standards.
Meanwhile, Section 6(e) of the National Internal Revenue Code (NIRC) authorizes the Commissioner of Internal Revenue (CIR) to establish zonal values for real properties across different areas. For internal revenue tax purposes, the applicable property value is the higher of either the CIR’s zonal value or the local assessor’s fair market value.
With the implementation of RPVARA, the Bureau of Local Government Finance (BLGF), which this agency is primarily tasked to develop, adopt, and maintain the Philippine Valuation Standards (PVS), will establish a standardized PVS for all LGU assessors and other entities conducting property valuations (Section 13). They are responsible for implementing rules and regulations and developing and maintaining an up-to-date electronic database through the Real Property Information System (RPIS).
The PVS, based on international valuation standards approved by the Secretary of Finance, ensures a single valuation method across LGUs. Using the PVS, all properties, taxable or exempt, are valued based on local market conditions, with LGU assessors preparing Schedules of Market Values (SMVs) for various property classes.
Furthermore, RPVARA terminates the jurisdiction of CIR on determining the zonal value of real properties for internal revenue tax purposes. The approval of SMVs are now transferred from the LGU to the Secretary of Finance.
Regulation on Updating SMVs
The LGUs, such as provincial, city, and municipal assessors, are mandated to regularly update their SMVs within two (2) years from the effectivity date of the RPVARA in accordance with the PVS. Moreover, LGUs are also required to conduct a general revision every three (3) years thereafter which will be reviewed by the BLGF.
Grant of Tax Amnesty on Real property under RPVARA
Section 30 of the RPVARA introduces a real property tax amnesty that waives penalties, surcharges, and interest on unpaid real property taxes accrued before the Act’s effectivity. This amnesty covers unpaid amounts, including those for the Special Education Fund, idle land tax, and other special levies, and can be claimed within two years of the Act’s implementation.
This tax amnesty may be availed only within the period of two (2) years after the effectivity of the law. Property owner has the option to avail the amnesty of the delinquent real property taxes either on one-time payment or installment payment basis within two (2) years.
However, the amnesty does not apply to certain properties: those auctioned to cover unpaid property taxes, properties under a compromise agreement for delinquency payments, and those involved in active court cases concerning real property tax delinquencies.
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