For foreigners seeking to buy property in the Philippines, understanding the fundamentals of real estate investment is important. This includes conducting thorough due diligence when considering buying a house and land for investment purposes. More specifically, the inherent understanding of the zonal value in the Philippines is essential.
Being familiar with the basics of real property taxes, property prices, and the workings of property transfers aids in navigating the real estate landscape correctly. Moreover, acquiring knowledge about additional property-related taxes is beneficial. It promotes effective management of personal real estate properties and can open avenues for investing in various real estate units.
What is zonal value?
Zonal value refers to the assigned value on real estate properties intended for taxation purposes. This assignment is a principal function of the Bureau of Internal Revenue (BIR) in the Philippines, made possible by Republic Act No. 8424’s Section 6 (E) – also known as the Tax Reform Act of 1997. This Act authorized the Commissioner of BIR to establish the zonal value schedule and help in realizing the meaning of the zonal value.
Zonal valuation is a predefined schedule of fair market values for various real estate sectors adopted by the Internal Revenue Service. As per Republic Act No. 10963, also recognized as the TRAIN Law or Tax Reform for Acceleration and Inclusion, the Commissioner of BIR has the jurisdiction to partition the Philippines into distinctive zones or territories. The purpose of this partition is to calculate the fair market value in each region, thereby determining the zonal value of land in the Philippines. Moreover, these values undergo review every three years, maintaining accurate BIR land value assignments.
As a valuable note, the Corporate Recovery and Tax Incentives for Enterprises Act, practical since April 11, 2021, continues to be in force. This showcases the evolving nature of land zonal value in the Philippines, prominently seen in critical areas such as the zonal value in Manila.
To learn how our legal agents can assist you with checking the zonal value in the Philippines, please enter your information below or contact us directly at [email protected].
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What is the purpose of zonal value and why is it important?
The declaration of property valuation serves dual purposes. It is used for calculating taxes and as the basis for determining the fair market value of the property. The Bureau of Internal Revenue (BIR) in the Philippines uses this zonal value as the foundation for computing internal revenue taxes. These taxes include Capital Gains Tax (CGT) and Documentary Stamp Tax (DST). Such a symbolic scale is an officially approved zonal schedule of fair market values for real property, essentially serving as the zonal valuation BIR employs.
In real estate transactions, it’s important to note that if the zonal value in the Philippines is less than the selling price, it doesn’t imply that the property is overpriced. If the zonal value in the Philippines exceeds the selling price, it doesn’t automatically indicate that the property on sale is undervalued. This factor might vary, mainly when the land is situated in central business zones like the zonal value in Manila.
The significance of understanding the zonal value of land can’t be stressed enough, as it designates a civic responsibility to pay the associated taxes with a property sale transaction. Prospective buyers must familiarize themselves with the property’s zonal value as part of the due diligence process. The aim is to minimize the potential for tax fraud, including the underpayment of taxes and any subsequent interest and penalties. Such discrepancies can become a burden for the next buyer, complicating the process and affecting the overall BIR land value. Thus, understanding the land zonal value in the Philippines is essential in successful real estate transactions.
What is the difference between market value and zonal value?
The market value of a property in line with the Philippine Valuation Standards, reflecting International Valuation Standards, is set through arm’s-length transactions. In such transactions, the buyer and seller willingly participate, acting sensibly, informed, and free from coercion, based on comprehensive marketing reflecting the property’s true value.
Differently, the zonal value in the Philippines is determined and proclaimed by the Commissioner. It may vary significantly from the market value, primarily influenced by factors such as land enhancements and existing infrastructure. For due diligence, a property of similar market value can serve as a reference. This discrepancy necessitates the application of three primary property valuation methods:
- Cost approach
- Market approach
- Income approach
While the zonal and market values of a property can greatly differ, there are rare times when they match up perfectly.
Fair market value vs. zonal value
The fair market value is an estimated property price in the market. These transactions usually involve a willing buyer and seller, with thorough knowledge of all necessary facts, neither being obliged to sell nor buy.
The zonal value in the Philippines, on the contrary, is defined by the Bureau of Internal Revenue (BIR) for the primary purpose of calculating property taxes. The zonal value in the Philippines considers average values within specific zones, influenced by aspects like location, accessibility, land use, and demand.
Assessed value versus zonal value
Another property value, the assessed value, is assigned by the local government units’ (LGU) assessor’s office for real property tax purposes. This value represents a particular percentage of the fair market value, subject to periodic amendments due to changes in local tax laws or property assessments.
As established previously, the zonal value in the Philippines is used to determine national taxes payable and is set by the zonal valuation of the BIR. Remember, the zonal value classification is a determinant that can significantly affect the zonal value of a property.
To learn how our legal agents can assist you with checking the zonal value in the Philippines, please enter your information below or contact us directly at [email protected].
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Get to know the zonal value of a property in the Philippines in 5 steps
Knowing the zonal value in the Philippines can be difficult if foreigners are unfamiliar with the process. However, with correct knowledge and guidance, it can be simplified. In this guide, we will walk through the process of determining the zonal value of a property in the Philippines.
- Step 1: The first step in determining the zonal value in the Philippines is to have a clear understanding of the meaning of zonal value. The Bureau of Internal Revenue (BIR) defines zonal value as the average price of properties within specified zones.
- Step 2: To begin the process, visit the BIR’s official website. They provide a complete list of zonal values for various locations.
- Step 3: Look for the zonal value classification section on the BIR’s website. Select the region of the property to access the zonal values for different areas.
- Step 4: Find the exact location on the list, then take note of the corresponding zonal value. This is the zonal value that pertains to the property.
- Step 5: Zonal values are subject to change, so watch for updates. Frequent changes in zonal values in the Philippines mean that the zonal value classification can alter quite often, so staying informed is important.
Remember that the zonal value in the Philippines is essential when calculating property taxes. Understanding how to determine the zonal value in the Philippines is an essential aspect of managing real estate.
3 ways to compute the zonal value of a property in the Philippines
Getting the zonal value of the property in the Philippines may appear to be complex, mainly because it differs largely from the process of market value appraisal. Unlike the market value, which can be estimated using various property computation techniques, the zonal value in the Philippines cannot be calculated using a general formula.
So, how is the zonal value calculated in the Philippines? This guide will explain how to compute the zonal value of land using the guidelines provided by the Bureau of Internal Revenue (BIR).
1. Identify the Revenue District Office (RDO) Code
The first step to compute the zonal value of land begins with identifying the Revenue District Office (RDO) code. In the zoning system used by the BIR in the Philippines, each RDO holds taxpayer records within its territory. Since there’s no centralized system and the Philippines contains multiple RDOs, knowing the RDO code is essential for tax purposes.
If you are unsure of your RDO code, hotlines are available for inquiries. However, if the lines are busy, visit the local municipality’s RDO. Then, get the TIN verification slip, fill in your full name, birth date, and address (for married women, include your maiden name), and present it to the BIR officer, who will give you your TIN, RDO code, and RDO location.
2. Visit the BIR’s website for zonal valuation
Next, visit the BIR’s official website, where the zonal value classification for cities, municipalities, and provinces, including the zonal value in Manila, is listed. Entering the site, use the RDO number to navigate the various RDOs.
3. Download the Excel file
The website provides a ZIP file you can download. This file contains an Excel sheet, which houses the appropriations and annual valuations, together with the historical zonal valuation (BIR land value) from 1988.
After downloading and extracting the ZIP file, you’ll find a Department Order (bearing the signatures of the Commissioner of Internal Revenue and Secretary of Finance), definitions of pertinent terms, property classification legends, and tables showing values for different property types based on their locations.
Remember that you can also visit or call the nearest BIR office to receive this information.
Get assistance with finding your property’s zonal in the Philippines
Do you want to find the zonal value of your property in the Philippines? This can be daunting, especially if you don’t know where to begin. Fortunately, our legal team is available to assist you. With our expertise and experience in the Philippines, we can guide you through the legal requirements and processes related to real estate, such as finding or calculating the zonal value, obtaining a land title, and other real estate matters.
To learn how our legal agents can assist you with checking the zonal value in the Philippines, please enter your information below or contact us directly at [email protected].
Find the zonal value of your property
Frequently Asked Questions (FAQs)
Where can I find the zonal value of property in the Philippines?
The zonal property value in the Philippines can be obtained from the Bureau of Internal Revenue (BIR) website or at local BIR offices. You can also contact us directly at [email protected] to get assistance with finding your property’s zonal value in the Philippines.
What is the difference between assessed value and zonal value in the Philippines?
The assessed value is the fair market value of a property as determined by the local assessor for taxation purposes. Zonal value, on the other hand, is set by the BIR and represents the average market value within specific zones or areas. It’s used mainly for computing taxes on property sales or transfers.
What is the average zonal value of land in the Philippines?
The average zonal value of land in the Philippines varies by location and type of property. Always refer to the BIR’s official listings for the most current rates or consult with local real estate professionals.
How do I get the BIR zonal value classification code of my property?
To get the BIR zonal value classification code of your property, visit the Bureau of Internal Revenue’s official website or contact your local BIR office. Or contact us directly at [email protected] to get assistance with finding your property’s zonal value in the Philippines.
2 Responses
We just need to clarify a point:
A former Filipino, now American bought a lot fully paid in July 2022 before the zonal value changed. When calculating taxes, where do we base the zonal value from? Is it from the previous version or the latest version which was released right after full payment of the property? Your comment please, thank you.
Hi Dennis,
The zonal value for tax purposes is typically determined based on the value at the time of the transaction or relevant event, such as the sale of the property. If the property was fully paid for in July 2022, before the zonal value changed, the tax calculations would generally be based on the zonal value as of that date.
However, it’s important to note that tax regulations can vary, and there might be specific rules or exceptions in certain jurisdictions. Therefore, it’s advisable to consult with a tax professional or a local authority in the Philippines for accurate and personalised advice. You can contact us at [email protected] to get assistance.
^ Matt