As we are once again into the real estate tax payment season, I hear several stories and concerns about proper valuation of real estate properties. Many are surprised by the sudden increase in real estate values ââas the basis for appraising the PPR with no clear legitimate reference to the market value of the appraised property.
The appraisal of real estate in the Philippines has become a constant concern for many taxpayers and tax administrators. This is a major concern that many of us encounter not only when paying property taxes, but also when paying internal income taxes on real estate transactions, including appraisal, in accordance with the Tax Code of 1997, is the fair market value of the property as determined by the Commissioner of the Internal Revenue, or the fair market value as indicated in the table of values ââof the provincial and municipal appraisers. This is apparently due to the cumbersome determination of the fair market value of real estate currently in place, which is a key determinant of the PPR and other taxes applicable to the disposition of real estate.
To date, no body is responsible for ensuring a correct valuation of real estate, but in almost all transactions involving the sale or disposition of real estate, the determination of the fair market value of real estate is almost always necessary. , in accordance with the laws in force.
Under the Tax Code of 1997, as amended by the TRAIN Act, the Tax Commissioner is authorized to divide the Philippines into different zones or zones, and determines the fair market value of real estate located in each zone or zone, after consultation compulsory with competent assessors, both from the private and public sectors. By law, this is supposed to be automatically adjusted once every three years. However, over the past three years, the Ministry of Finance record shows that only 60 percent of district revenue offices under the Bureau of Internal Revenue (BIR) have updated their zonal values.
On the other hand, under the Local Government Code of 1991, provincial and municipal appraisers across the country are mandated to prepare a table of fair market values ââfor different categories of real estate located in their respective jurisdictions for promulgation by ordinance. of the Sanggunian concerned. . Appraisers are mandated by law to prepare property valuation and classification reviews every three years. However, this did not turn into reality. A study shows that only 37 percent of local government units (LGUs) have updated the market value calendar.
Obsolete real estate appraisal benchmarks, both in the BIR and LGUs, have led to a situation where taxpayers often use their own property appraisal system while administrators, on the other hand, also use their own system and methodology, which is quite different from the system adopted by taxpayers. Hence the quarrel.
House Bill 4664, known as the Real Property Valuation and Assessment Reform Act, seeks to remedy the situation by developing and maintaining a fair, equitable, impartial and nationally consistent valuation based on valuation standards. , internationally accepted concepts and principles. and practices. It aims to improve the quality of the evaluation of local authorities and to make the revisions frequent, efficient, transparent, reliable and adapted to market developments.
A single valuation basis for taxation, which is a main feature of the bill, is therefore a welcome development that will hopefully end the dilemma that taxpayers have faced for decades every time they pay. property taxes and other taxes on the disposition of real estate. real estate, such as transfer tax, capital gains tax / withholding tax, documentary stamp duty, value added tax, among others. This will certainly speed up real estate transactions as the single valuation basis will also serve as a benchmark for other purposes, such as acquisition of right-of-way, leasing, leasing, etc.
Indeed, the reforms are expected to strengthen private investor confidence and public confidence in government assessments.
The author is a partner of Du-Baladad and Associates Law Offices (BDB Law), a member firm of WTS Global.
The article is for general information only and is not intended, nor should it be construed as a substitute for tax, legal or financial advice on any specific matter. The applicability of this article to any real or particular tax or legal question must therefore be supported by a study or professional advice. If you have any comments or questions regarding the article, you can email the author at email@example.com or dial 8403-2001 local 140.