As we all know, taxes are inevitable, and owning a property is not an exception. As Uncle Ben in Spiderman said, “with great power comes great responsibility." The same is true for owning real estate properties. With all the perks of being a property owner come financial responsibilities. But do not worry about missing any of them and incurring liabilities. Awareness and information are key.
In this blog, we discuss how houses are taxed in the Philippines. Also below are other common taxes that property owners are required to pay. What is real property tax? A property owner is required to pay an annual tax on his property called Real Property Tax or commonly known as amilyar. According to Section 232 of the Local Government Code, “a province or city, or municipality within the Metropolitan Manila Area may levy an annual ad valorem tax on real property such as land, building, machinery, and other improvement not hereinafter specifically exempted.” Under this law, the local government unit has the authority to create and collect their sources of funds for essential public services such as education, public welfare, healthcare, road maintenance, housing, etc., and one of their main sources is the Real Property Tax. Aside from the Real Property Tax, property owners must also be aware of additional taxes levied on them by the government. The local government is given the power to charge additional tax added on the basic real property tax for the Special Education Fund, which is (1%) (Section 235, Additional Levy on Real Property for the Special Education Fund) levied on the assessed value of the real property and additional ad valorem tax on idle lands not exceeding (5%) (Section 236, Additional Ad Valorem Tax on Idle Lands). How to compute the real property taxes? The formula to compute the Real Property Tax (RPT) is Real Property Tax = RPT rate x assessed value. The Real Property Tax rate is determined by the location of the property. On the other hand, the assessed value is the property’s taxable value which can be defined as the fair market value multiplied by the assessment level of a property based on Section 218 of the Local Government Code. First, identify the assessed value of the property. Assessed value of land: residential land (Php3,500,000) x assessment level (20%) = Php700,000 Assessed value of structure: residential land (Php2,500,000) x assessment level (40%) = 1,000,000 Total Assessed Value of the Property: A + B = Php1,700,000 Next, multiply the total assessed value with the tax rate levied on provinces (1%). Real Property Tax: C x Provincial RPT rate (1%) = Php17,000 The total basic real property tax is Php 17,000, but Gabriel Perez must also compute for the Special Education Fund, which is (1%) of the total assessed value of the property. Special Education Fund: C x (1%) = Php17,000 Hence, the total tax to be paid by Gabriel Perez is Php34,000, and if he pays on or before the deadline, he could score a discount from the Municipal Treasurer. How to pay for real property taxes? Real Property Tax or amilyar can be paid in full before January 31 of the year or quarterly instalments. Here are the deadlines to take note of: 1st Quarter: On or before March 31 2nd Quarter: On or before June 30 3rd Quarter: On or before September 30 4th Quarter: On or before December 31 Local governments offer discounts if the basic real property tax and special education fund are paid on or before the deadlines. What happens when you do not pay your property taxes in the Philippines? Failure of the property owner or duly authorized representative to pay for the basic Real Property Tax and Special Education Fund upon expiration of the deadlines will subject the taxpayer to a penalty rate of 2% on the amount to be paid. The local government treasurer may declare a property as delinquent for the failure of payment. What is Estate Tax? When a person dies, his properties are transferred to his heirs. In the Philippines, the process of transferring properties to the heirs of the decedent is subject to what we call the Estate Tax. The Bureau of Internal Revenue is responsible for managing the Estate Tax. Estate Tax must be filed or processed within (1) year from the death. The heirs or duly authorized representative therein must file for the estate tax return and pay the amount on BIR or its agencies. How to process the Estate Tax? The estate tax return must be filed within (1) year from the decedent’s death. There are cases that the Commissioner may grant an extension of filing no more than 30 days. The return is filed in any of the Authorized Agent Bank of the Revenue District Office with jurisdiction over the decedent’s place of residence when they died. For a nonresident in the Philippines, the representative or executor must file the estate tax return with the Office of the Commissioner at the Revenue District Office No.39, South Quezon City. What happens when an estate tax is not paid in the Philippines? Failure to pay the estate tax before the deadline will result in interests and penalties. In February 2019, President Rodrigo Duterte approved the Tax Amnesty Act of 2019, which grants taxpayers the opportunity to settle unpaid estate taxes without penalties to lessen the number of delinquencies and cases which cover estates of decedents who died on or before December 31, 2017. The period of availing of the Tax Amnesty Act was recently extended until June 14, 2023. Make sure to be updated on the tax laws to avoid penalties. Also, if you're looking for house and lot, you may check the developers site and its high-tech home technologies offerings.
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When we talk about these aspirations, there's no doubt that two main things come to mind: our dream house and what car is parked in that dream house's garage (or driveway, if you're a driveway kind of person). There are definitely a thousand more questions that we could muse over for the entire day. Plus, there are plenty of details to consider about our ideal house and lot and what our dream car would be.
Wherever your dream house and lot in the Philippines might be and whatever kind your dream vehicle is, you'll quickly come to the realization that both are significant investments. These are properties that you're going to have to make in your life. Add to that the fact that houses and cars don't exactly come cheap. So knowing what your priorities are is a must before making that jump to purchase either of these. You Can't Park Your House in a Car Now, this might be a little self-explanatory and, admittedly, a bit of a silly thought but hear this out—you can't park your house into a car. While the premise of the idea is a little outlandish, the underlying fact behind it is pretty sound. When things really come down to it, there's no getting around the reality that a house is a more sound investment than a car. It will keep you safe from everything, including the elements, no matter how hot the day is or how strong the storm's winds are. It also becomes a place that you can always come back to, or in other words, it becomes a place where you can park your car every time you go out to explore the big, wide world. While you can't park your house in a car, you can park your car in your home. Public Transport is a Great Alternative Speaking of exploring that big, wide world, there is always more than one way to get around. Public transportation is an excellent alternative because while a car would definitely be more convenient, commuting is much cheaper. Using a private vehicle means that you're going to have to worry about paying for the fuel you use every time you make a trip. You also have to worry about paying for the maintenance of your vehicle. These are things like taking it to a car wash and getting the oil changed. Not to mention getting the insides cleaned if you just so happen to spill your morning coffee in a rush (it happens sometimes). If you already have a home, you can always opt to use public transportation. Choosing a public vehicle also means that there would be one less vehicle on the road. This, by extension, also means that there would be less pollution coming from cars and fossil fuels. Going green and being kind to the earth that we call our home is never a bad thing. Great Locations Can Always Be Nearby While public transportation is cheap. But sometimes, squeezing into a jeepney or train filled to its total capacity just isn't very appealing even if we really need to go somewhere. The good news is that our own two feet can quickly take us where we need to go if we invest in a house and lot placed in a convenient location. This also means that even if we are in a rush, getting to places that we need to be will always be a piece of cake. Are you in the middle of cooking, and you forgot an ingredient just before starting? No problem, a shopping center is sure to be close by so you can buy that missing ingredient you need for your signature dish. Feeling a little bored? You won't be in the next couple of moments because you'll find yourself in a place of leisure in no time. You Can Earn Money From Owning Property More than just saving money from using public transportation or not having to use vehicles from being close to locations that you need, you can actually also earn money from owning property. The good thing about owning houses, especially in great areas, is that the house and lot will just keep gaining value over time. Investing in properties early or purchasing a property currently in pre-selling can also make you more money. In comparison, the values of cars usually depreciate over time. In addition, using and reselling them means that you won't gain as much money back compared to if you resell properties. This would make upgrading to other cars hard and impractical since the vehicle's value decreases at every sale you make. Investments in house and lot properties, on the other hand, are a gift that keeps on giving. Purchasing Your First Home is Easier Than You Think Some may find the idea of looking for their first home to be a daunting experience, especially since times are hard. With the effects of the pandemic on the economy, prices of our day-to-day necessities continue to rise. With a little bit of help and research, purchasing your first home is actually easier than you think. There are flexible payment schemes and plans so that you will be able to quickly and smartly invest your money so that you can own your very own place to call home. Investing in an automobile would require just about as much research and planning. But it would be best to invest in a house and lot first since it does provide more benefits in the long run. Dreams Do Not Need to Stay as Just Dreams You no longer have to keep your eyelids shut tightly to get glimpses of your dreams for the future. You can keep your eyes wide open and keep looking straight ahead because your goal of getting a house and lot along with your dream car is attainable. Making smart investments in your property and prioritizing it over purchasing an automobile is a great way to get things started. One key point to keep in mind is that you'll be able to save more money by investing in a property. Especially those in prime locations since you'll also be able to gain income from it either from reselling or renting it out. Not to mention the convenience of being close to all of the necessary amenities that can help you save on transportation costs. Being safe and secure with a home will finally provide you with enough confidence to make other significant investments. |