Legal Updates

Understanding Republic Act No. 12001 or the Real Property Valuation and Assessment Reform Act of 2024 (RPVARA)

By Atty. Raegan L. Capuno and Atty. Maria Luisa J. Sebastian

On June 13, 2024, President Ferdinand Marcos, Jr. signed into law Republic Act No. 12001, otherwise known as the Real Property Valuation and Assessment Reform Act (RPVARA). This law aims to standardize the real property valuation in the Philippines and adopt the Schedule of Market Values (SMVs) as the single real property valuation base for the assessment of real property-related taxes in the country, and for the valuation of real property for various transactions by all government agencies.

RPVARA has three (3) important components, namely, (i) the reorganization of the Bureau of Local Government Finance (BLGF), (ii) valuation and assessment of real properties, and (iii) tax amnesty on real property taxes and special levies on real property.

The BLGF

The BLGF of the Department of Finance (DOF) is the primary agency to lead the implementation of RPVARA. Specifically, under this law, BLGF is tasked to develop, adopt, and maintain the Philippine Valuation Standards (PVS), which is the latest national standards designed and for use in the Philippines based upon the International Valuation Standards duly approved by the Secretary of Finance.

BLGF is also mandated to review and ensure that the SMVs prepared by the provincial, city, and municipal assessors are compliant with the PVS and real property valuation policies and standards.

With the enactment of the RPVARA that expanded its powers and functions, BLGF will now be headed by an Assistant Secretary. New offices and units in BLGF like Real Property Valuation Service, Real Property Valuation Unit, and their counterparts in BLGF regional offices are likewise established. Consultative committees are also created to serve as the forum on matters pertaining to the setting and adoption of international valuation standards and other related concerns on real property valuation.

Valuation and Assessment of Real Properties

Prior to RPVARA, and under the Local Government Code of 1991, every local government unit (LGU), through their respective provincial, city, and municipal assessors, is empowered to prepare a schedule of fair market values for different classes of real property situated in their respective territorial jurisdictions. This schedule of fair market values serves as the sanggunian’s basis in the enactment of an ordinance adopting said real property valuation. In essence, every LGU may adopt its own basis and standards of real property valuation. The values determined by the local assessors are the fair market values reflected in the schedule of market values or in the tax declaration of every real property.

In addition, Section 6(e) of the National Internal Revenue Code of 1997, as amended, authorized the Commissioner of Internal Revenue (CIR) to divide the Philippines into different zones or areas and determine the fair market value of real properties located in each zone or area. This is commonly referred to as the zonal value. The same provision states that the value of the property for purposes of computing any internal revenue tax is whichever is the higher between the zonal value determined by the CIR, or the fair market value as shown in the schedule of values of the local assessors.

Under the RPVARA, BLGF will develop and implement PVS to be used by all appraisers and assessors in the LGUs, and other persons, entities, or agencies that conduct valuation in the appraisal or valuation of real properties for taxation and other purposes. As stated above, PVS must conform with the Internal Valuation Standards approved by the Secretary of Finance. This means there will be a single and uniform standard to be adopted by all LGUs in real property valuation.

Using the PVS, all real properties, whether taxable or exempt, are valued or appraised based on prevailing market values in the locality where the property is situated. In addition, pursuant to the PVS, provincial, city, and municipal assessors will prepare the SMVs for the different classes of real property situated within their respective LGUs.

In general, RPVARA mandates the following procedures in the preparation of SMVs:

  1. SMVs must be completed within twelve (12) months from BLGF notice;
  2. Two (2) mandatory public consultations must be conducted within sixty (60) days before the submission by the local assessor of the SMV;
  3. The proposed SMVs must be published for at least two (2) weeks prior to the public consultation and hearing, in the official website of the LGU concerned, as well as post in two (2) conspicuous places in the provincial capitol, city hall, or municipal hall, as the case may be;
  4. The local assessor will submit the proposed SMV to the BLGF Regional Office for review and endorsement to the head of BLGF;
  5. The Secretary of Finance will certify that the proposed SMV is in accordance with the latest PVS. Such certification has the effect of an approval of the proposed SMV;
  6. The approved SMV will be published by the DOF in the Official Gazette or in its official website, and in the official website of the LGU concerned, as well as posting in two (2) other conspicuous public places in the provincial capitol, city hall, or municipal hall, as the case may be; and
  7. The approved SMV will be effective fifteen (15) days after its complete publication.

 

With the enactment of the RPVARA, CIR no longer has the power to determine zonal value of real properties for internal revenue tax purposes. Meanwhile, local assessors are now required to adopt the PVS to ensure uniform valuation of real properties. Moreover, the approval of the SMVs is now transferred from the LGU to the Secretary of Finance.

Use of Schedule of Market Values           

Under the RPVARA, the SMV serves as basis for the determination of real property-related taxes of national and local governments such as:

  1. Basis of the market value for local transfer tax, sand and gravel tax, community tax, and other fees and charges; and
  2. Basis of the CIR in computing any internal revenue tax, e., the SMV or the actual gross selling price, whichever is higher.

 

In addition, the SMV serves as the basis for the general revision of the assessment and property classification by the local assessor, in the adjustment of assessment level and tax rates of LGUs by the sanggunian, and for real property appraisals and other related purposes of all government agencies, instrumentalities, and government-owned or -controlled corporations.

Tax Amnesty

A welcome development in the enactment of RPVARA is the grant of tax amnesty on real property taxes and special levies on real property. The amnesty covers penalties, surcharges, and interests from all unpaid real property taxes, including special education fund, idle land tax, and other special levy taxes, prior to the effectivity of RPVARA.

The amnesty may be availed only within a period of two (2) years after the effectivity of the law. Property owner has the option to avail the amnesty of the delinquent real property taxes either on one-time payment or installment payment basis within two (2) years.

The amnesty, however, does not extend to the following real properties:

  1. Delinquent real properties which have been disposed of at public auction to satisfy the real property tax delinquencies;
  2. Real properties with tax delinquencies which are being paid pursuant to a compromise agreement; and
  3. Real properties subject of pending cases in court for real property tax delinquencies.

 

What’s Next?

The DOF will promulgate the necessary implementing rules and regulations for the effective implementation of RPVARA within three (3) months after its effectivity.

During the pendency of the preparation and approval of the PVS and SMVs, the zonal values and fair market values as determined by the CIR and local assessors, respectively, will continue to be in force and effect until repealed or replaced by the approved SMVs. The preparation and approval of the PVS and SMVs should take place within two (2) years from the effectivity of RPVARA.

This article is only for informational and educational purposes.  It is not intended as a legal advice or opinion. For assistance and legal queries, please contact Atty. Raegan L. Capuno (rlc@srmo-law.com) and Atty. Maria Luisa J. Sebastian (ljs@srmo-law.com).

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