In the Philippine property valuation system, there are different valuation and assessment methods. When paying capital gains tax to the Bureau of Internal Revenue (BIR), your property is assigned a “Zonal Value.” On the other hand, when paying the annual real estate property tax to your Local Government Unit (LGU), you pay based on their “Assessed Value.” When selling the property, the “Market Price” is used, which significantly differs from both government estimates.
Toward a single valuation base
Republic Act No. 12001, or the Real Property Valuation and Assessment Reform Act (RPVARA), aims to phase out the current methods of property valuation.
A key aspect of the law is the adoption of a unified valuation base. The Department of Finance (DOF) is responsible for overseeing the consolidated Schedule of Market Values (SMV). This schedule will serve as the basis for both local property real estate tax and national taxes, including Capital Gains Tax and Documentary Stamp Tax.
By aligning the BIR’s requirements with the LGUs’ assessments, the historical friction that hindered the issuance of Certificates Authorizing Registration (CAR) will be eliminated. Furthermore, the law mandates that these SMVs be updated every three years, ensuring that government revenue remains in sync with the actual economic growth.
Transparency through the digital lens
One of the technical reforms is the establishment of the Real Property Information System (RPIS). The DOF, through its Bureau of Local Government Finance, has developed a centralized electronic database that encompasses all property transactions, including sales, leases, and mortgages.
Once operational, LGUs will have an automated real property tax system directly integrated with the BIR eCAR system. This automation aims to streamline the process of title transfers by providing assessors with access to the digital analysis of the actual sales of nearby properties when determining the value of a property. This transition from subjective estimates to objective, data-driven valuations empowers assessors to make more informed decisions.
A final note
While the valuation of the property will soon undergo more stringent regulation and standardization, your local city or municipal Sanggunian retains the authority to determine the Assessment Level and the Tax Rate in the meantime. This allows you to mitigate the immediate repercussions of increased property values if they choose to do so.
Double-edged sword
While the expected reforms will modernize the current system, it presents a unique set of opportunities and challenges:
Advantage
1. Predictability is crucial for any investor. Knowing that valuations adhere to the Philippine Valuation Standards eliminates a significant risk that has often deterred investors.
2. Linking the BIR and LGU systems removes the manual bottlenecks that used to delay property registration. When you sell a property, the system automatically pulls the unified market value to calculate Capital Gains Tax and Documentary Stamp Tax.
3. The reform expedites government infrastructure development. With updated, realistic market values, the government can offer fair compensation from the outset, paving the way for swift and efficient decision-making.
Disadvantages
1. For many property owners, updated values will likely lead to higher taxes. This is because many LGUs have not updated their SMVs. Consequently, the jump to current market levels could be substantial.
2. Our local assessors are now being asked to become sophisticated data analysts and international-standard appraisers. In the short term, we may encounter some administrative bottlenecks as LGUs rush to modernize their systems.
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