President Ferdinand Bongbong Marcos Jr. recently signed the Real Property Valuation and Assessment Reform Act (RPVARA) into law. The aim of this new legislation is to standardize real property valuation across the Philippines. It seeks to establish a uniform valuation for real properties based on internationally accepted principles. RPVARA is designed to enhance transparency and foster a more stable and attractive real estate market by creating a consistent benchmark for taxation.
Reforms to improve the efficiency of real property assessment
The RPVARA requires local government units (LGUs) to update their property and tax assessment policies. Provincial, municipal, and city assessors must adopt a Schedule of Market Values (SMVs), which will be updated every three years and approved by the Secretary of Finance. This reform aims to improve the efficiency of real property assessment, reducing confusion and disputes stemming from multiple valuations by different government agencies. As a result, property buyers can expect a clearer understanding of property values, while property owners can anticipate a more streamlined and predictable tax assessment process.
Impact on real property taxes might include tax increase
An important concern for property buyers and owners is whether the RPVARA will cause an increase in real property taxes. The law states that the new and updated SMVs will be utilized for real property transactions involving both national and local governments. Considering that the existing zonal values of the Bureau of Internal Revenue (BIR) are generally higher than the SMVs used by LGUs, it is probable that the revised SMVs will lead to higher real property taxes. However, the RPVARA limits any increase in real property taxes to 6% for the first year of its validity, which may help reduce the immediate financial impact on property owners.
Centralized real property transactions database
The Bureau of Local Government Finance (BLGF) under the Department of Finance (DOF) will create and manage a centralized electronic database for real property transactions to support the implementation of the RPVARA. This database will contain information on sales, leases, mortgages, donations, and other real property transactions, ensuring accessibility to all relevant and up-to-date information.
The establishment of this centralized database aims to enhance transparency and efficiency in the real estate market, providing a trustworthy source of property information that will benefit both property buyers and owners.
Practical implications for property buyers and owners in the Philippines
The implementation of the RPVARA in the Philippines brings significant changes to how property taxes are assessed for foreign buyers and current property owners. For example, a property owner with a 300-square-meter residential land in Quezon City, previously valued at ₱ 25,500 ($434) per square meter by the BIR in 2016, might see this value adjusted to ₱ 44,000 ($748) per square meter in 2024. This increase in property valuation will directly impact the amount of real property tax owed. However, local assessors have the ability to manage assessment levels and tax rates to lessen the impact of higher property values on taxpayers.
