Proposed Reforms in Real Property Valuation
By: Atty. Rodel C. Unciano
"Notably, under the bill, the BLGF plays a vital role in its implementation. Once the bill is enacted into law, I am hopeful that the BLGF, in coordination with other concerned agencies, will be able to promote the development and maintenance of a just, equitable, impartial, and nationally consistent real property valuation system based on internationally accepted valuation standards, concepts, principles, and practices, consistent with the objectives set to be achieved."
 Atty. Rodel C. Unciano +632 8403-2001 loc.380 |
Another piece of tax legislation that is in the pipeline is the Real Property Valuation and Assessment Reform Act (RPVARA). This proposed legislation seeks to reform the real property valuation and assessment system in the Philippines.
Valuation of real property in the Philippines has always been an issue not only in the assessment and payment of real property taxes. It is also an issue in the assessment and payment of internal revenue taxes on transactions involving real property, the valuation of which, pursuant to the 1997 Tax Code, is based on the fair market value of the property as determined by the Commissioner of Internal Revenue, or the fair market value as shown in the schedule of values of the provincial and city assessors. This is apparently because of the lack of clear guidelines and methodologies in the determination of the fair market value of real property currently in place.
Under the 1997 Tax Code, as amended, the Commissioner of Internal Revenue is authorized to determine the fair market value of real properties in a particular zone or area, upon consultation with competent appraisers, both from the private and public sectors. On the other hand, under the Local Government Code of 1991, provincial and city assessors across the country are mandated to prepare a schedule of fair market values of real properties situated in their respective jurisdictions, for enactment by ordinance of the sanggunian concerned.
Senate Bill No. 2386, which was just recently approved by the Senate, aims to adopt a single real property valuation system for real properties for various transactions by all government agencies and for the assessment of real property-related taxes. The bill seeks to establish a uniform basis for the determination of real property-related taxes for both the national and local governments. The bill seeks to separate the function of valuation of real properties from the functions of tax policy formulation and administration of the taxes due.
The Bureau of Local Government Finance (BLGF) of the Department of Finance (DOF) shall be the primary agency to lead the implementation of the provisions of the proposed law. It shall develop, adopt, and maintain valuation standards, regulations, and specifications for real property appraisal used for taxation and other purposes. The BLGF shall develop, adopt, maintain, and implement uniform valuation standards which shall be used by all appraisers and assessors in the local government units and other concerned parties or agencies that conduct valuation in the appraisal or valuation of lands, buildings, machinery, and other real properties for taxation and other purposes.
For valuation purposes, all real properties, whether taxable or exempt, shall be valued or appraised based on prevailing market values in the locality where the property is situated, in conformity with the valuation standards. The provincial assessors, together with the municipal assessors, and the city assessors, shall prepare a Schedule of Market Values (SMVs) for the different classes of real property situated within their respective territorial jurisdictions, pursuant to the valuation standards, rules, regulations, and other specifications set by the DOF.
The Secretary of Finance shall approve the SMV in accordance with the latest Philippine Valuation Standards. All provincial assessors, together with the municipal assessors and the city assessors, shall update their respective SMVs and conduct general revision of property assessments and classifications not earlier than three (3) years.
Another important feature of the bill is the establishment of a comprehensive and up-to-date electronic database of all real property transactions. All provinces, cities, and municipalities, in coordination with the BLGF, are envisioned to automate their real property tax administration operations, such as in the setting-up of tax mapping technology, maintenance of software-enabled valuation systems, and computerize records management. The BLGF shall develop and maintain an up-to-date electronic database of the sale, exchange, lease, mortgage, donation, transfer, and all other real property transactions and declarations as well as on the cost of construction or renovation of buildings and other structures, and on prices of plant, machinery, and equipment.
Notably, under the bill, the BLGF plays a vital role in its implementation. Once the bill is enacted into law, I am hopeful that the BLGF, in coordination with other concerned agencies, will be able to promote the development and maintenance of a just, equitable, impartial, and nationally consistent real property valuation system based on internationally accepted valuation standards, concepts, principles, and practices, consistent with the objective set to be achieved.
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 be construed as a substitute for tax, legal or financial advice on any specific matter. Applicability of this article to any actual or particular tax or legal issue should be supported therefore by a professional study or advice. If you have any comments or questions concerning the article, you may e-mail the author at This email address is being protected from spambots. You need JavaScript enabled to view it. or call 8403-2001 local 380.