Updates on Real Property Valuation and Assessment Reform Act (RPVARA)

Summary

The Congress ratified the RPVARA in March 2024. The act aims to promote an objective and standardized property valuation based on internationally accepted principles.

Outlook

RPVARA aims to address common issues encountered in valuation practice, while maximizing the fiscal autonomy of the LGUs, which is in line with the national government’s commitment to promoting fiscal decentralization.

SB 2386: Real Property Valuation & Assessment Reform Act

RPVARA Benefits:

Single valuation base for taxation and other government transactions
Improve fiscal autonomy of local government units with potential increase of real property tax revenues
Updated valuations that meet international standards
Accessible centralized real property transactions database
Improved ease of doing business
Higher investor confidence

Bureau of Local Government Finance (BLGF) under Department of Finance (DOF) to lead implementation

Status: Waiting for the President’s signature

Schedule of Market Values

WHAT	SMVs will be the basis for: Determination of real property-related taxes of national and local governments. Computing any internal revenue tax and local transfer tax (SMV or gross selling price, whichever is higher) Other purposes, such as local transfer tax, tax on sand and gravel, community tax, fees and charges, or baseline for real property appraisal of all government agencies
WHO	Prepared by Assessors within their LGUs and submitted to BLGF Secretary of Finance to approve SMVs Subject to mandatory public consultations
WHEN	Updated not earlier than every 3 years* (with possible “off-schedule” revisions when there is a material change in market values)
HOW	Will be published in Official Gazette or DOF official website, and in LGU official website, as well as in two other conspicuous public places within territorial jurisdiction

Real Property Information System

WHAT	Up-to-date electronic database of sale, exchange, lease, mortgage, donation, transfer and other real property transactions and declaration and on the cost of construction or renovation of buildings and other structures, and on prices of plant and machinery, and equipment.
WHO	BLGF in charge of development and maintenance of the Real Property Information System (RPIS) The following shall electronically transmit relevant transactions data every quarter to BLGF: Register of Deeds BIR Notaries public Officials issuing building permits Geodetic engineers conducting surveys within a locality

Assessment Levels and Tax Rates

WHAT	Assessment Level or Taxable Value Percentage applied to market value to determine taxable value of property (Assessed Value) Maximum assessment level per property classification is indicated in the Local Government Code of 1991, Book II (RA 7160) Properties are classified, valued, and assessed based on their actual use Tax Rate Real property tax rate applied to Assessed Value Maximum 2% for Metro Manila and 1% outside Metro Manila, as indicated in the Local Government Code of 1991, Book 2 (RA 7160)
WHO	Assessor determines assessment levels and tax rates, with a Sanggunian-enacted tax ordinance, approved by the provincial governor or city mayor Subject to mandatory public consultations
WHEN	*Updated not earlier than every 3 years (with SMVs)

Real Property Tax Computation
Commentary

1. Revenue Generation
Regularly updated valuations that meet international standards will optimize potential revenues from real property-related taxes

2. Digital technology and RPIS
Will help improve accuracy and efficiency of administration, transactions, assessments, etc. Database will provide benchmarks for stakeholders

3. Qualifications of representative of private appraisal sector
Representative of private appraisal sector in Central Consultative Committee should have significant experience in preparing reports that meet international standards for them to add more valuable contribution to the committee

4. Include IAOO as resource
Possibly add the International Association of Assessing Officers (IAOO) which was formed for administration of property taxes — potentially a valuable resource

5. Impact to property owners
Assessors should consider the impact of updated values on property owners when determining assessment levels and tax rates

The Real Property Valuation and Assessment Reform Act (RPVARA) signifies a substantial advancement in modernizing property valuation practices in the Philippines. Through the establishment of standardized procedures and the adoption of digital technology, RPVARA seeks to not only enhance revenue generation but also improve the efficiency and transparency of real property transactions.

For inquiries, comments, or further information regarding the Real Property Valuation and Assessment Reform Act (RPVARA), please reach out to us at inquire@leechiu.com.

Disclaimer:
This presentation is intended for general guidance and information purposes only. It is under no circumstances intended to be used or considered as financial or investment advice. The Company makes no representation and extends no warranty, express or implied, and assumes no responsibilities whatsoever with respect to the completeness, or utility of any information contained herein, merchantability or fitness for a particular purpose, or the freedom from infringement of any third intellectual property rights by the use of any information contained herein. Neither the issue nor delivery of this presentation shall under any circumstance create any implication that the information contained herein is correct as of any time subsequent to the date hereof. The information may be subject to changes without prior notice. The Company does not accept any form of liability, neither legally nor financially, for loss (direct or indirect) caused by the understanding and/or use of this presentation or its content. Parties are encouraged to consult with their legal, financial, and tax advisers, as this document does not purport to be an exhaustive and/or definitive summary of all commercial, legal, and financial matters which may be material to your decision to proceed (or not to proceed) with any transaction that might be covered by this presentation.