What You Need to Know About Real Estate Tax Reform Bill?

After his victory in the 2020 national elections, President Ferdinand "Bongbong" Marcos Jr. ruled the proposed Real Property Valuation and Assessment Reform Act as one of his priority legislative measures during his first State of the Nation Address (SONA). It has been approved on the third and final reading by the House of Representatives.

According to a report from ABS-CBN, the Committees on Local Government and Finance, together with the Senate Committee on Ways and Means, commenced their deliberations on March 2 this year for the proposed law aiming to reform the country’s real property valuation and assessment system.

What is the real property valuation reform bill?

Going back to December last year, House Bill (HB) No. 6558 garnered 254 affirmative votes during nominal voting in the plenary session. There were only four votes who voted on the negative.

The proposed legislative measure aims to improve the Philippine real property industry by means of ensuring a just, impartial, and equitable real property valuation that is based on internationally-accepted valuation standards.

The authors of the proposed law cited the poor efficiency performance of Local Government Units (LGUs) as instrumental to the lack of adequate revenue generation from real properties which, by extension, also result in poor services to their constituents. Hence, the bill also takes aim at helping local government units to achieve their goal in the Local Government Code and become actively involved in the country's pursuit of genuine national development.

The Bureau of Local Government Finance (BLGF) under the Department of Finance (DOF) was assigned and tasked to lead the implementation of the proposed measure. Under HB 6558, the BLGF is expected to adopt, develop, and implement consistent valuation standards, which all appraisers and assessors in various LGUs and other concerned parties shall use in the appraisal or value assessment of lands and real estate properties for taxation and other related purposes.

Schedule of Market Values (SMVs)

Together with the Bureau of Internal Revenue (BIR), the BGLF is in charge of reviewing and ensuring that the schedule of market values by provincial, city, and municipal assessors are in full compliance with real property valuation policies, and must endorse its approval to the Finance Secretary.

The proposed legislative measure states that all real properties, regardless if they are taxable or tax-exempt, shall be valued or appraised on the basis of fair and prevailing market values in the area where the property is located, and it shall be in correspondence with the valuation standards and policies stipulated in the proposed law. The implementing rules and regulations for real property valuations, meanwhile, shall be promulgated by the Finance Secretary as well.

Still, the obligation of planning and organizing the SMVs for the various real property classes were passed on to local government assessors and appraisers. However, it is still subject to the valuation requirements and regulations established by the Finance Department.

The suggested SMVs will be thoroughly reviewed by the regional office of BLGF alongside its Executive Director and the BIR Commissioner. The Secretary of Finance, currently Benjamin Diokno, will have the final say in the proposed schedule of market values.

After the approval of the SMVs, they shall be conveyed to the LGU for the appropriate implementation of the modified valuation levels and real property taxes rates. The endorsed ordinance, on the other hand, will be published in a national newspaper for two consecutive weeks.

What is more, the bill obliges the BGLF to assume the responsibility of developing and maintaining an all-encompassing and up-to-date electronic database of all real property transactions and dealings, as well as the corresponding prices of materials for buildings and machinery in the Philippines.

With that said, according to the bill, the BLGF shall also enforce the requisite submission of all essential documents from the concerned officials and/or parties from the national and local governments, as well as the private sector.

To ensure the success of the proposed law, BLGF is also tasked to come up with and provide consistent procedures on the different dealings in the assessor’s office, such as the annotation, transfer, and tax declaration issuances. House Bill 6558 institutes the Real Property Valuation Service (RPVS) in the BLGF to make sure that its goals and objectives will be met and fulfilled.

The creation of a Central Consultative Committee (CCC} is eyed under the bill to serve as the consultative council on concerns regarding the adoption of internationally accepted valuation standards and other matters about real property valuation and tax rates.

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