Bureau of Local Government Finance

MODULE 1

REAL PROPERTY TAXATION

(Book 2 Local Government Code of 1991)

Skills Development Training on SMV Updating & Conduct of General

Revision
SEC. 197. Scope. - This Title shall govern the
administration, appraisal, assessment, levy and
collection of real property tax.
SEC. 198. Fundamental Principles:

a. Real property shall be appraised at its current and

fair market value.
b. Real property shall be classified for assessment
purposes on the basis of its actual use;
c. Real property shall be assessed on the basis of a
uniform classification within each LGU;
d. The appraisal, assessment, levy and collection of
RPT shall not be let to any private person; and
e. The appraisal and assessment of RPT shall be
equitable.

SEC. 199. Definition of Terms:

(a) Acquisition Cost for newly acquired machinery

not yet depreciated and appraised within the year
of its purchase, refers to the actual cost of the
machinery to its present owner, plus the cost of
transportation, handling and installation at the
present site.

(b) Actual Use refers to the purpose for which the

property is principally or predominantly utilized by
the person in possession thereof.
(e) Appraisal is the act or process of
determining the value of property as of a
specific date for a specific purpose;

(f) Assessment is the act or process of

determining the value of a property, or
proportion thereof subject to tax, including
the discovery, listing, classification, and
appraisal of properties.
(k) Economic Life is the estimated period over
which it is anticipated that a machinery or
equipment may be profitably utilized.

(m) Improvement is a valuable addition made to a

property or an amelioration in its condition,
amounting to more than a mere repair or
replacement of parts involving capital
expenditures and labor which is intended to
enhance its value, beauty or utility or to adapt it
for new or further purposes;
(o) Machinery embraces machines, equipment,
mechanical contrivances, instruments, appliances or
apparatus which may or may not be attached,
permanently or temporarily to the real property. It
includes the physical facilities for production, the
installations and appurtenant service facilities, those
which are mobile, self powered or self propelled, and
those not permanently attached to the real property
which are actually, directly and exclusively used to
meet the needs of the particular industry, business or
activity and which by their very nature and purpose
are designed for, or necessary to its manufacturing,
mining, logging, commercial, industrial or agricultural
purposes.
 ART. 290(o) of the IRR.

(o) Machinery embraces machines,

equipment, mechanical contrivances,
instruments, appliances or apparatus,
which may or may not be attached,
permanently or temporarily to the real
property.
- Physical facilities for production, installations
and appurtenant service facilities, those which
are mobile, self powered, or self propelled and
those not permanently attached to the real
property shall be classified as real property
provided that:

1. They are actually, directly, and exclusively used

to meet the needs of the particular industry,
business, or activity; and

2. By their very nature and purpose are designed

for, or necessary to manufacturing, mining,
logging, commercial, industrial, or agricultural
purposes.
- Machinery which are of general purpose use
including but not limited to office equipment,
typewriters, telephone equipment, breakable or
easily damaged containers (glass or cartons), micro
computers, fax, telex machines, cash dispensers,
furnitures and fixtures, freezers, refrigerators,
display cases or racks, fruit juice or beverage
automatic dispensing machines, which are not
directly and exclusively used to meet the needs of a
particular industry, business or activity shall not be
considered within the definition of machinery under
this Rule
 LOCAL FINANCE CIRCULAR NO. 1-2002

1. Machinery that is permanently attached to land and buildings

is subject to the real property tax, even though this is actually,
directly and exclusively used for religious, charitable or
educational purposes

2. Machinery that is not permanently attached to real estate is:

a. subject to real property tax if it is an essential and principal

element of an industry, work or activity without which such
industry, work or activity cannot function; and

b. not subject to rpt if it is not an essential and principal element

of an industry, work or activity.
3. Notwithstanding rules 1 and 2, machinery of
non-stock, non-profit educational institutions
used actually, directly and exclusively for
educational purposes is not subject to real
property tax.
SEC. 200. Administration of the Real Property Tax.
The provinces and cities including municipality within
MMA shall be primarily responsible for the proper,
efficient and effective administration of the real
property tax, subject to the rules and regulations
governing the classification, appraisal and
assessment of real property issued by the DOF.
(Implemented under Art. No. 291)

DOF and provincial governments shall exercise the

authority to review and examine on continuing basis
property assessment, and real property tax records to
ensure the proper implementation of this Rule.(IRR)
 BLGF MEMO CIRCULAR NO. 01-98 DATED
JANUARY 27, 1998

Only Provincial Assessors are authorized to:

a) approve/issue TDs; b) delegate to the municipal assessors

within his jurisdiction the approval/issuance of TDs with certain
limitations.

“Tax declarations issued/approved by Municipal Assessors

without authorization/proper delegation from his Provincial
Assessor are, therefore not valid and the same could not be
considered as official assessment records, hence, collection of
rpt could not be based therefrom. The Provincial and Municipal
Treasurers are, therefore, hereby enjoined to ensure that all rpt
collections are based on valid and authorized real property
assessments.”
SEC. 201. Appraisal of Real Property. - All real property,
shall be appraised at the current and fair market value
prevailing in the locality where the property is situated, The
DOF shall promulgate the necessary rules and regulations
for the classification, appraisal, and assessment of real
property pursuant to the provisions of this Code.

SEC. 202. Declaration of real property by the owner or

Administrator. – It shall be the duty of all persons, natural
or juridical, owning or administering real property, including
the improvements therein within the city or municipality, or
their duly authorized representative, to prepare, or cause to
be prepared, and file with the Provincial, city or municipal
assessor, a sworn statement declaring the true value of
their real property whether previously declared or
undeclared, taxable or exempt x x x x.
SEC. 204. - Declaration of real property by the
Assessor. –When any person, natural or juridical
by whom real property is required to be declared
under Section 202 hereof, refuses or fails for any
reason to make such declaration within the time
prescribed, the P/C/M assessor shall himself
declare the property in the name of the defaulting
owner, if known, or against an unknown owner, as
the case may be, and shall assess the property
for taxation in accordance with the provisions of
this Title.
SEC. 205. - Listing of real property in the
Assessment Rolls. – (a) In every province
and city, including the municipalities within
MMA, there shall be prepared and maintained
by the P/C/C assessor an assessment roll
wherein shall be listed all real property,
whether taxable or exempt, located within the
territorial jurisdiction of lgu concerned. Real
Property shall be listed, valued and assessed
in the name of the owner or administrator, or
anyone having legal interest in the property.
SEC. 206. – Proof of Exemption of Real Property
from Taxation. – Every person by or for whom real
property is declared, who shall claim tax exemption for
such property under this title file with the P/C/M
assessor within thirty (30) days from the date of the
declaration of real property sufficient documentary
evidence in support of such claim.

If the required evidence is not submitted within the

period herein prescribed, the property shall be listed as
taxable in the AR. However, if the property shall be
proven to be tax exempt, the same shall be dropped
from the AR.
PROOF OF EXEMPTION OF RPT (Sec. 206)

 1. Corporate Charters

 2. Title of Ownership

 3. Articles of Incorporation

 4. By-Laws, Contracts, Affidavits

 5. Certifications and Mortgage deeds

 6. Similar documents
SEC. 207. Real Property Identification
System. – All declarations of real property
made under the provisions of this Title shall
be kept and filed under a uniform
classification system to be established by the
Provincial, City, or Municipal Assessor.
SEC. 208. Notification of Transfer of Real
Property Ownership.
 The Notice of transfer of Real Property to the
Provincial/City Municipal Assessor shall be made by
any person, natural or juridical, which include:

1. The mode of conveyance (Deeds of Sale, Deed

of Donation, Extra-Judicial Settlement/Partition,

2. Description of property alienated

3. Name and address of the transferee

ART. 299 (IRR). The Notice of transfer shall include
the mode of conveyance, description of property
alienated, and the name and address of the transferee.

The previous owner shall likewise surrender to the

P/C/M assessor concerned, the TD covering the
subject property in order that the same may be
cancelled from the assessment records of the LGU
SEC. 209. Duty of Registrar of Deeds to Apprise
Assessor of Real Property Listed in Registry.

The Registrar of Deeds shall prepare and submit to the

P/C/M assessor within six (6) months from the date of
effectivity of this code and every year thereafter, an
abstract of his registry, which shall include brief but
sufficient description of the real properties entered
therein, their present owners, and the dates of their
most recent transfer or alienation accompanied by
copies of corresponding deeds of sale, donation, or
partition or other forms of alienation.
It shall also be the duty of the Registry of
Deeds (ROD) to require every person who
shall present for registration a document of
transfer, alienation, or encumbrance of real
property to accompany the same with a
certificate to the effect that the real property
subject of transfer, alienation, or encumbrance,
as the case may be, has been fully paid of all
real property taxes due thereon.
SEC. 210. Duty of Building Official to transmit copy of
permit or certificate of registration of machinery to the
Assessor.
• A permit for construction, addition, or renovation of a
building

• Permanent improvement on land, or

• Certificate of registration for any machinery, including

machines, mechanical contrivances, and apparatus
attached to the land or to another property

- Shall transmit within thirty (30) days of its issuance, to

the assessor of the province, city or municipality where the
property is located.
SEC. 211. Duty of Geodetic Engineers to Furnish
copy of Plans to Assessor.

To furnish free of charge to the assessor of the

province, city or municipality where the land is located
with a white or blue print copy of each of all approved
original or subdivision plans or maps of surveys
executed by them within thirty (30) days from receipt of
such plans from the LMB, the LRA, or the HLURB, as
the case may be.
SEC. 212. Preparation of Schedule of Fair Market
Values. – Before any general revision of property
assessment is made pursuant to the provisions of this
Title, there shall be prepared a schedule of fair
market values by the P/C/M assessor of the MMA for
the different classes of real property situated in their
respective lgu for enactment by the ordinance of the
sanggunian concerned.

The SMV shall be published in a newspaper of

general circulation in the province, city or municipality
concerned, or in the absence thereof, shall be posted
in the provincial capitol, city or municipal hall and in
two other conspicuous public places therein.
SEC. 213. Authority of Assessor to Take Evidence

For the purpose of obtaining information on which

to base the market value of any real property, the
assessor of the province, city or municipality or his
deputy may summon the owners of the properties to
be affected or persons having legal interest therein and
witnesses, administer oaths, and take deposition
concerning the property, its ownership, amount, nature,
and value.
SEC. 215. Classes of Real Property for
Assessment Purposes. – For purposes of
assessment real property shall be classified
as Residential, Agricultural, Commercial,
Industrial, Mineral, Timberland, or Special
(RACIMTS)
SECs. 216 and 218(d)
SPECIAL CLASSES OF REAL PROPERTY

1. Cultural 15%
2. Scientific 15%
3. Hospital 15%
4. Local Water District 10%
5. GOCC engaged in the supply
and distribution of water and/or
Generation and transmission of
electric power. 10%
SEC. 217. Actual use or Real Property as Basis for
Assessment. – Real property shall be classified,
valued and assessed on the basis of its actual use
regardless of where located, whoever owns it, and
whoever uses it.

SEC. 218. Assessment Levels:

On Lands: Class AL

Residential 20%
Agricultural 40%
Commercial 50%
Industrial 50%
Mineral 50%
Timberland 20%
SEC. 219. General Revision of Assessments and
Property Classification.

The Provincial, city or municipal assessor shall

undertake a general revision of real property
assessment within two (2) years after the effectivity of
this Code and every three (3) years thereafter.

ART. 310 (IRR) - The general revision of real property

assessment and property classification shall commence
upon the enactment of the SMV but not later than two
(2) years from the effectivity of the Code.
 Thereafter, the provincial, city or municipal
assessor shall undertake the general revision
of real property assessments and property
classification once every three (3) years.
SEC. 220. Valuation of Real Property.
In cases where:

(a) real property is declared and listed for taxation

purposes for the first time;
(b) there is an ongoing general revision of property
classification and assessment; or

(c) request is made by the person in whose name the

property is declared, the P/C/M assessor or his duly
authorized deputy shall, in accordance with the
provisions of this chapter, make a classification,
appraisal and assessment of the real property listed
and described in the declaration irrespective of any
previous assessment or taxpayers valuation thereon.
PROVIDED, HOWEVER, THAT THE ASSESSMENT OF
REAL PROPERTY SHALL NOT BE INCREASED
OFTENER THAN ONCE EVERY THREE (3) YEARS
EXCEPT IN CASE OF NEW IMPROVEMENTS
SUBSTANTIALLY INCREASING THE VALUE OF SAID
PROPERTY OR OF ANY CHANGE IN ITS ACTUAL
USE.
SEC. 221. Date of Effectivity of Assessment or
Reassessment. - All assessments or re-assessments
made after the 1st day of January of any year shall take
effect on the first (1st) day of January of the succeeding
year: Provided, however, That the reassessment of real
property due to the following:
•partial or total destruction; or
•to a major change in its actual use, or
• to any great sudden inflation or deflation of real
property values, or
• to any great sudden inflation or deflation of real
property values, or
 to the gross illegality of the assessment when
made, or

 any other abnormal cause

 SHALL BE MADE WITHIN NINETY (90) days from

the date any such cause or causes occurred, and
shall take effect at the beginning of the quarter next
following the reassessment.
SEC. 222. Assessment of Property Subject to Back
Taxes. - Real property declared for the first time shall
be assessed for the taxes for the period during which it
would have been liable but in no case for more than ten
(10) years prior to the date of initial assessment:
Provided that:

 Taxes shall be computed on the basis of the

applicable schedule of values in force during the
corresponding period
 If such taxes are paid on or before the end of
the quarter following the date the notice of
assessment was received by the owner, no
interest for delinquency shall be imposed,
otherwise such taxes shall be subject to an
interest at the rate of two percent (2%) per
month or a fraction thereof from the date of the
receipt of the assessment until such taxes are
fully paid.
SEC. 223. - When real property is assessed for the first
time or when an existing assessment is increased or
decreased, the provincial, city or municipal assessor
shall within thirty (30) days give written notice of such
new or revised assessment to the person in whose
name the property is declared. The notice may be
delivered personally or by registered mail or thru the
assistance of the barangay to the last known address of
the person to be served.
SEC. 224. Appraisal and Assessment of Machinery.

(a) The fair market value of a brand new machinery shall

be the acquisition cost. In all other cases, the FMV
shall be determined by dividing the remaining economic
life of the machinery by its estimated economic life and
multiplied by the replacement or reproduction cost.

(b) If the machinery is imported, the acquisition cost

includes freight, insurance, bank and other charges,
brokerage, arrastre and handling, duties and taxes, plus
cost on inland transportation, handling, and installation
charges at the present site. The cost in foreign
currency of imported machinery shall be converted to
peso cost on the basis of foreign currency exchange
rates as fixed by the Central Bank.
SEC. 225. Depreciation Allowance for
Machinery. – For purposes of assessment, a
depreciation allowance shall be made for
machinery at a rate not exceeding five (5) percent
of its original cost or its replacement or
reproduction cost, as the case may be, for each
year of use: Provided, however, That the remaining
value for all kinds of machinery shall be fixed at not
less than twenty (20%) of such original,
replacement, or reproduction cost for so long as the
machinery is useful and in operation.
SEC. 226. Local Board of Assessment Appeals.
– Any owner or person having legal interest in the
property who is not satisfied with the action of the
Provincial, City or Municipal Assessor in the
assessment of his property may, within sixty (60)
days from the date of receipt of the written notice of
assessment, appeal to the Board of Assessment
Appeals of the province or city by filing a petition
under oath in the form prescribed for the purpose,
together with copies of the TD and such affidavits
or documents submitted in support of the appeal.
CONSOLIDATED AND REVISED RULES OF
PROCEDURES BEFORE THE LOCAL BOARD OF
ASSESSMENT APPEALS (LBAA) AND THE CENTRAL
BOARD OF ASSESSMENT APPEALS (CBAA) (JULY 9,
2013)
COMPOSITION OF THE LBAA OF THE PROVINCE
OR CITY:
Registrar of Deeds as Chairman

Prov’l or City Prosecutor

Prov’l or City Engineer as members

 If no provincial or city engineer, the district
engineer shall serve as member of the LBAA.

 In the absence of the ROD or the Prov’ or city

prosecutor or the Prov’ or City engineer, or the
district engineer, the persons performing their
duties, whether in acting capacities or as duly
designated OICs, shall automatically become the
chairman or member, respectively.
Jurisdiction of the LBAA
Shall have original jurisdiction to hear and
decide appeals of owners/administrators of real
property from the actions of the provincial, city or
municipal assessors in the assessments of their real
properties.

 ACTION BY THE LBAA

 Shall decide the appeal within 120 days from the

date of receipt of such appeal

 Aggrieved parties may file an appeal to the CBAA

within thirty (30 days from notice of said decision
or final resolution.
WHO MAY APPEAL TO THE LBAA:

Any owner or person having legal interest in the

property a) who is not satisfied with the action of the
assessor in the assessment of his property, or b) who
is not satisfied with the action or inaction of the
treasurer on his claim for refund or credit of taxes paid
under protest, or c) who is not satisfied with the action
or inaction of the treasurer on his claim for refund for
credit of taxes paid but found to be illegal or erroneous
by competent authority.
WHEN TO APPEAL:

 If the appeal is the perceived errors in the assessment

of the property shall be filed within sixty (6) days from
the appellants receipt of the written notice of
assessment from the assessor.

 Petitioner-Appellant or Respondent Appellant (party

appealing)

 Respondent-Appellee or Petitioner-Appellee (opposing

parties)
HOW APPEAL IS TAKEN:
 By filing with the LBAA a petition under oath in the
form prescribed for the purpose together with
copies of TDs and such affidavits or supporting
documents.

 LEGAL FEES

 From as low of 300.00 (less than 50 thousand

amount of disputed realty tax assessment
involved) to as high as 10,200.00 for the 1ST
10,000,000.00 plus 100.00 for every 100,000.00
or fraction thereof, in excess of 10,000,000. In
no case, however, shall the total fees exceed
12,000 per case.
 PROCEDURE BEFORE THE CBAA:

• Composition of the CBAA

 Chairman shall serve for seven (7) yrs.

 2 members to be appointed by the President, and shall serve

for a term of seven (7) years, without reappointment. One
member for 5 yrs and the other member for three (3) yrs.

• Jurisdiction of the CBAA

Exclusive jurisdiction to hear and decide all appeals from the

decisions, resolutions and final orders of the LBAA.
PERIOD TO DECIDE:

 SHALL DECIDE CASES WITHIN NINETY (90) days

from submission thereof.

 Withdrawal of Appeal – The appellant may withdraw his

appeal at any time before the resolution by the CBAA,
after furnishing a copy thereof to the adverse party. Shall
then enter a memorandum upon the docket of the case.
The parties shall forthwith be advised in writing by the
CBAA of such withdrawal. No further proceedings shall
be taken on the appeal, the withdrawal having the same
effect as that of dismissal of the appeal.
LEGAL FEES PAYABLE TO THE CBAA:

 From a low of P500 (with properties less than

P50,000 to as high as P12,000 for the first
P10,000,000 plus P500 for every P500,000, or
fraction thereof, in excess of P10,000,000. In no
case, however, shall the total fees exceed P15,000
per case.

 LEGAL RESEARH FUND (LRF)- Sec. 4, RA 3870,

as amended, the additional amount of 1% of the
applicable filing fees imposed above but not lower
than ten pesos in each case, shall be collected for
the benefit of the UP Law Center.
EFFECTIVITY CLAUSE :

 Shall take effect fifteen (15) days after the filing of

three (3) certified copies of these Rules with the UP
law center or fifteen (15) days after complete
publication of these Rules in a newspaper of
general circulation and in the Official Gazette,
whichever comes later.
SEC. 232. Power to Levy Real Property Tax. –
Province, City or Municipality within MMA may levy the
annual ad valorem tax on real property such as land,
buildings, machinery, and other improvements not
hereinafter specifically exempted.
SEC. 233. Rates of Levy. – A province or city or
municipality within MMA shall fix a uniform rate of
basic real property tax applicable to their respective
localities as follows:

(a) In the case of a province, at the rate not

exceeding one percent (1%) of assessed
value of real property; and

(b) In the case of a city or a municipality within

the MMA, at the rate not exceeding two (2%)
percent of the assessed value of real
property.
SEC. 234. Exemptions from Real Property Tax. – The
following are exempted from payment of the real property tax:

(a)Real property owned by the Republic of the Philippines,

or any of its political subdivisions except when the
beneficial use thereof has been granted, for consideration
or otherwise, to a taxable person;

(b)All charitable institutions, churches, parsonages or

convents appurtenant thereto including mosques, nonprofit
or religious cemeteries and all lands, buildings, and
improvements which are actually, directly and exclusively
used for religious, charitable or educational purposes.
(c) All machineries and equipment that are
actually, directly and exclusively used by local
water districts and GOCCs engaged in the
supply and distribution of water and/or
generation and transmission of electric power;

(d) All real property owned by duly registered

cooperatives as provided under RA no 6938;
and

(e) Machinery and equipment exclusively used for

pollution control and environmental protection .
 EXCEPT AS PROVIDED HEREIN, ANY
EXEMPTION FROM PAYMENT OF REAL
PROPERTY TAX PREVIOUSLY GRANTED TO, OR
PRESENTLY ENJOYED BY, ALL PERSONS,
WHETHER NATURAL OR JURIDICAL, INCLUDING
ALL GOCCs ARE HEREBY WITHDRAWN UPON
THE EFFECTIVITY OF THIS CODE.
SEC. 235. Additional Levy on Real Property for
the Special Education Fund (SEF).

A province or city, or a municipality in the MMA

(pateros), may levy and collect an annual tax of one
percent (1%) on the assessed value of real property
which shall be in addition to the basic real property
tax. The proceeds thereof shall exclusively accrue to
the Special Education Fund (SEF)
SEC. 236. Additional Ad Valorem Tax on Idle
Lands.

A province or city, or a municipality in MMA

(Pateros), may levy an annual tax on idle lands at
the rate not exceeding five (5%) of the assessed
value of the property which shall be in addition to
the basic real property tax.
Idle Lands, Coverage:

(a) Agricultural lands, more than 1 hectare in area,

suitable for cultivation, dairying, inland fishery,
and other agricultural uses, one half (1/2) of
which remain uncultivated or unimproved by the
owner of the property or person having legal
interest therein. Agricultural lands planted to
permanent or perennial crops with at least fifty
(50) trees to a hectare shall not be considered
idle lands. Lands actually used for grazing
purposes shall likewise not be considered idle
lands.
SEC. 276. Condonation or Reduction of Real
Property Tax and Interest. – In case a general
failure of crops or substantial decrease in the price of
agricultural or agribased products or calamity in any
province, city or municipality, the sanggunian
concerned, by ordinance passed prior to the first (1st)
day of January of any year and upon
recommendation of the Local Disaster Coordinating
Council (LDCC), may condone or reduce, wholly or
partially, the taxes and interest thereon for the
succeeding year or years in the city or municipality
affected by the calamity.
SEC. 277. Condonation or Reduction of Tax by
the President of the Philippines. – The President of
the Philippines may, when public interest so requires,
condone or reduce the real property tax and interest
for any year in any province or city or a municipality
within Metropolitan Manila Area (MMA)
SEC. 1. of Executive Order No. 27 of the President of
the Philippines entitled “Reduction and Condonation of
Real Property Taxes and Interest/penalties Assessed
on the Power Generation Facilities of Independent
Power Producers under Build-Operate-Transfer
Contracts with GOCC in the Province of Quezon.
SEC. 1. All liabilities for rpt on property, machinery and
equipment (including any special levies accruing to the
SEF actually and directly used by the IPPs for the
production of electricity under BOT contracts (whether
denominated Power Purchase Agreements) with GOCCs,
particularly the NPC and PSALM assessed by the
Province of Quezon for all years up to 2011, are hereby
reduced to an amount equivalent to the tax due if
computed based on an assessment level of fifteen
percent (15%) of the fair market value of said property,
machinery and equipment depreciated at the rate of two
percent (2%) per annum, less any amounts already paid
by the IPPs. All fines, penalties and interest on such
deficiency real property tax liabilities are also hereby
condoned and the concerned IPPs are relieved from
payment thereof.
THANK YOU…

M.N. Santos