Tax Declaration

Many property owners don't know what a Tax Declaration (Tax Dec) is. More often than not, whenever we ask for it, they send a copy of the Real Property Tax (RPT) Billing or RPT Official Receipt. So what is it?

A Tax Dec is a document issued by the City Assessor that states the following:

a. location of the property (based on a Cadastral Map),

b. size of the Property, and

c. classification of the Property (residential, commercial, agricultural, etc.).

There are other details stated in the Tax Dec, but we'll stick to these three for this post.

What is it used for?

1. Ownership

Together with the transfer/condominium certificate of title, these documents prove ownership of a property. As discussed in my previous post, "Tax Dec Properties," there exist properties that do not have titles but have Tax Decs (i.e., Tax Dec Properties).

2. Real Property Taxation Computation

City Assessors use this document as the basis for the computation of Real Property Tax depending on the location, size, and classification.

3. Basis for classifying an asset capital or ordinary

The BIR uses this document to determine whether the sale of such property would be subjected to VAT. If a property was used for residential purposes but classified as "Commercial" in the tax dec, the sale of such property will be subjected to VAT.

What most people don't know:

1. By law, Tax Decs are supposedly updated by the owners every three years.

Presidential Decree No. 1621 states, "...the sworn declaration of real property herein referred to shall be filed with the assessor concerned once every three years..."

2. Tax Decs are updated when the improvement is extended.

Owners are also supposed to update the tax dec with the City Assessor whenever they extend or build a new improvement/structure–even if it's just pouring a concrete slab on an open area.

If you don't, and when you sell the property, there's a chance the city assessor would visit the property and estimate the size of the improvement (and recently, they have).

For example, a client bought a property sometime during the early 2000s and sat on it (didn't touch the house). By 2020, they sold the property. When the Tax Dec was being transferred, a City Assessor visited and measured the size of the improvement. He found that the previous owner expanded a portion of the house. Since the old owner passed away, the new owner was forced to pay over a million pesos in back real property taxes (including interest charges).

3. The City Assessor may also re-assess the property and create a new tax dec for a property every three years. This is most common for Agricultural properties.

The City Assessor doesn't send owners a copy of the new tax dec; they simply send them a letter stating their property has been re-assessed. Each time the property is re-assessed, owners should request a certified true copy of the Tax Dec.

4. For the reason stated in number 3–that the City Assessor may update tax Decs without the owner's consent, a certified true copy of the tax dec from the City Assessor is seen as the most updated copy (vs. owner's copy). This is why the certified true copy is the one required for title transfers (not the owner's copy).