Know how amilyar, or real property tax, is computed for a residential property
Q: How do you compute for the real property tax of a residential property?
A: When the Local Government Code was enacted in 1991, the government vested power to local government units (or LGUS, which are the provinces, municipalities, and the cities) to create their own revenue sources, and one of these revenue sources is the Real Property Tax (RPT), also known as amilyar. This is the tax imposed on all forms of real property (not only land, buildings, and improvements, but also pieces of machinery).
But there are exemptions; normally LGUs do not impose RPT on real properties owned by the government, charitable institutions, churches, cooperatives, those that are used in the supply of water and electric power, and equipment for pollution control and environmental protection.
In order to compute for the RPT of a certain property, one needs to determine its assessment level, which is the value from which the tax rate will be computed. Note that the assessment level is only a fraction of the actual market value of the property; hence, there is an under-taxation built into the tax structure. However, this is compounded by the different assessment levels depending on land and property use. Below are the maximum assessment level rates depending on land use.
Maximum assessment level rates for land
Residential – 20%
Timberland – 20%
Agricultural – 40%
Commercial – 50%
Industrial – 50%
Mineral – 50%
However, the value of the land is just part of the total fair market value of a piece of property. You also need to determine the fair market value of the improvements (e.g., buildings and other structures). In this Q&A, we will only discuss residential properties and the different maximum assessment level rates depending on their fair market value.
Maximum assessment level rates for residential buildings and other structures
<Php175,000 – 0%
Php175,000–300,000 – 10%
Php300,000–500,000 – 20%
Php500,000–750,000 – 25%
Php750,000–1,000,000 – 30%
Php1,000,000–2,000,000 – 35%
Php2,000,000–5,000,000 – 40%
Php5,000,000–10,000,000 – 50%
>Php10,000,000 – 60%
To compute for RPT, the RPT rate for the property is multiplied by the property’s assessed value (land plus building and other structures). The RPT rate is 2 percent for properties located in the cities and municipality in Metro Manila and 1 percent for those in the provinces.
1. Actual use of property
House and lot
3. Fair market value of property based on Tax Declaration
Land – Php500,000
Building and structures – Php500,000
4. Assessment levels
For land – 20%
For building and structures – 20%
Assessed value of land – Php500,000 x 20% = Php100,000
Assessed value of building and structures = Php500,000 x 20% = Php100,000
RPT for land and building – (Php100,000 + Php100,000) x 2% = Php4,000
In addition to the basic RPT rate, the LGU may also levy and collect an annual tax of 1 percent, which shall be accrued to the Special Education Fund of the LGU. Furthermore, the LGU may impose a 5 percent ad valorem tax on idle lands, which is based on the assessed value of the property.
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