Real Property Taxation Introduction Flashcards
What is real property tax?
Real property tax is a direct tax on ownership of lands and buildings or other improvements thereon not specially exempted, and is payable regardless of whether the property is used or not, although the value may vary in accordance with such factor.
What is the basis of real property tax?
Real property tax is a fixed proportion of the assessed value of the property being taxed and requires, therefore, the intervention of assessors.
The present law on real property taxation (R.A. 7160, LGC) adopts actual use of real property as basis of assessment (Sec. 199[b], LGC), even if the user is not the owner (Province of Nueva Ecija v. Imperial Mining Co., Inc. G.R. No. 59463, November 19, 1982).
Real Property shall be classified, valued and assessed on the basis of its actual use regardless of where located, whoever owns it and whoever uses it (Sec. 217, LGC).
What are the fundamental principles governing real property taxation?[CAULE]
- Real property shall be appraised at its Current and fair market value. 2. Real property shall be classified for assessment purposes on the basis of its Actual use. (Doctrine of Usage)
NOTE: Actual use refers to the purpose for which the property is principally or predominantly utilized by the person in possession of the property.
- Real property shall be assessed on the basis of a Uniform classification within each LGU 4. The appraisal, assessment, levy and collection of real property tax shall not be Let to any private person. 5. The appraisal and assessment of real property shall be Equitable (Sec. 197, LGC).
What is the NATURE OF REAL PROPERTY TAXATION? (DALIPI)
- Direct tax whose burden could not be shifted by the one who pays to other persons
- Ad valorem tax based on the assessed value of the property
- Local tax
- Imposed on use and not ownership
- Progressive in character pending to a certain extent on the use and value of the property
- Indivisible single obligation
What is real property?
RA7160 has not defined the meaning of real property for tax purposes, thus, it is defined as those immovables enumerated under the Civil Code.
Under Article 415 of the New Civil Code, the following are Immovable Property: 1. Land, buildings, roads and constructions of all kinds adhered to the soil; 2. Trees, plants, and growing fruits, while they are attached to the land or form an integral part of an immovable; 3. Everything attached to an immovable in a fixed manner, in such a way that it cannot be separated therefrom without breaking the material or deterioration of the object; 4. Statues, reliefs, paintings or other objects for use or ornamentation, placed in buildings or on lands by the owner of the immovable in such a manner that it reveals the intention to attach them permanently to the tenements; 5. Machinery, receptacles, instruments or implements intended by the owner of the tenement for an industry or works which may be carried on in a building or on a piece of land, and which tend directly to meet the needs of the said industry or works; 6. Animal houses, pigeon-houses, beehives, fish ponds or breeding places of similar nature, in case their owner has placed them or preserves them with the intention to have them permanently attached to the land, and forming a permanent part of it; the animals in these places are included; 7. Fertilizer actually used on a piece of land; 8. Mines, quarries, and slag dumps, while the matter thereof forms part of the bed, and waters either running or stagnant; 9. Docks and structures which, though floating, are intended by their nature and object to remain at a fixed place on a river, lake, or coast; 10. Contracts for public works, and servitudes and other real rights over immovable property.
May a personal property e considered real property for tax purposes?
The SC has generally held that Art 415 of the Civil Code provides an exclusive enumeration of what constitutes real property, for tax purposes, however, it is common for otherwise personal properties under the Civil Code to be classified as real property (Mindanao Bus Co. v. City Assessor, G.R. No. L-17870, September 29, 1962).
NOTE: the NIRC and the LGC prevail in classifying property for tax purposes. Under the LGC, machinery, which may or may not be permanently attached to land, is subject to real property tax.
Define IMPROVEMENT
Improvement is a valuable addition made to a property or an amelioration in its condition, amounting to more than a mere repair or replacement of parts involving capital expenditures and labor, which is intended to enhance its value, beauty or utility or to adapt it for new or further purposes (Sec. 199 [m], LGC).
May improvements be subject to real property tax? If yes cite examples.
Yes. Improvements are subject to RPT, such as:
- Oil storage tanks which are not imbedded in the land but merely placed on top of a foundation with an asphalt layer and not attached thereto, are improvements on the land which enhance its utility rendering it useful for the industry conducted thereon. Thus, subject to real property taxes.
- Sugar mills with appropriate machinery.
- Meralco Pipeline
What are the requisites for the taxability of an improvement? (ESI)
- Must enhance the value of the property
- Must be separately assessable
- Can be treated independently from the main property
When can personal property be regarded as RPT for taxation purposes?
- It must be “essential and principal elements” of the business being conducted on the land or building without which the business cannot be carried out.
- Must have been placed by one who is NOT the owner of the building or land.
What are considered as real properties for purpose of taxation?
- Those enumerated under Article 415 of the New Civil Code
- Those personal properties that are attached to an immovable (bldg./land) by one who is NOT the owner of the immovable, and which are ESSENTIAL and PRINCIPAL elements of the business conducted on the said immovable.
- Machinery, mobile equipment essential to the industry.
What Is the Doctrine of Essentiality?
Properties considered as personal under the Civil Code may nonetheless be considered as real property for tax purposes where said property is essential to the conduct of business. The property to be considered as immobilized for RPT must be “essential and a principal element” of an industry without which such industry would be unable to carry on the principal industrial purpose for which it was established.
Examples: 1. Gasoline station equipment and machineries like above ground and underground tanks, elevated water tanks, water tanks, gasoline pumps, computing pumps water pumps, car washers, car lifts, air compressors, tire inflators and the like attached to the pavement and to the shed (Caltex Phils. v. CBAA, GR No. 50466, May 31, 1982). 2. A mining Company’s siltation dam and decant system are not machineries but improvements subject to real property tax (The Provincial Assessor of Marinduque v. CA, G.R. No. 170532, April 30, 2009). 3. Pipelines embedded and attached to the land which cannot be removed therefrom without dismantling the steel pipes welded to it to form the pipeline (MERALCO v. CBAA, G.R. No. L-46245, May 31, 1982).
Kinds of real property tax and special levies [REIS]
- Basic Real property tax
- Additional levy on real property for the Special Education Fund (Sec. 235, LGC)
- Additional ad valorem tax on Idle lands (Sec 236, LGC)
- Special levy by LGUs (Sec 240, LGC)
- Socialized Housing Tax(RA 7279, March 24, 1992) LGUs are authorized to impose an additional onehalf percent (0.5%) on the assessed value of all lands in urban areas in excess of P50,000, except those from lands which are exempted from the coverage of RA 7279.
