Expect RPT to Increase...SOON

The DOF presented its Real Property Valuation Reform (RPVAR) plan in an event in Cebu last February 25, 2023.

This is the third leg of the government's Tax Reform program that would increase property taxes by aligning property valuations.

Currently, there is a disparity between the Fair Market Value (prices at which properties are sold), the zonal value (prices determined by the BIR), and the assessed value (prices determined by the city assessor). The DOF estimates show that the government could increase revenue from Real Property Taxes (RPT) by Php30.5 Bn by aligning valuations.

Good news:

- By aligning the three valuation methods, infrastructure projects may be completed more quickly since right-of-way acquisitions become more straightforward.

- A database of current property values will finally be created.

Bad news:

- The proposed RPVAR will penalize owners of idle properties as annual RPT payments increase.

FAQ: Will the increase in Real Property Taxes really happen?

Yes. This plan has long been on the drawing board since the government created the TRAIN law. The increase in RPT was one way the government (through the LGUs) could recover the lost revenue from lowering the corporate income tax (from 35% to 20%).

In fact, the bill for "Real Property Valuation and Assessment Reform" was passed on the third and final reading at the House of Representatives session dated 12 December 2022.

FAQ: What to expect?

When the government finally implements this, I expect owners to sell idle assets. Thus, I expect more downward pressure on prices.

For example, imagine you're a condo unit owner and pay an annual RPT of Php20,000. The unit has been vacant for over a year. (Assuming my assumptions are correct), your annual real property tax MAY jump to Php140,000 per year. What would you do with this unit?

Please note that these are just estimates. It's best to wait for the actual values the BLGF comes up with and computation revisions from the LGUs.

I also expect rental rates to increase to help cover the added expense.