Everything You Need to Know About Real Property Tax | Condo Tips

Nov 26, 2021

Along with the continuous increase in property values, many are investing in properties such as condominiums. Condos are considered the most stable investment because they are easily acquired and can be sold at a greater value, not to mention, they can be leased out, especially if your condominium property is strategically located near business and lifestyle establishments as well as transportation hubs. 

The recurring income is one of the key benefits that property investors and landlords enjoy when it comes to investing in real estate. 

Despite the pandemic, the demand for rental properties remained stable, proving it to be a tried-and-tested business venture. However, just like any business, there are taxes associated with buying and renting out a property. 

To avoid missing or miscalculating payments and settling fines in the process, you need to have a basic understanding of the real property tax (RPT) that will be imposed on your property.

RPT is a tax paid by real property owners to local government units. The real property tax code of the Philippines was enacted as a means to provide additional funds to LGUs in the provision of basic public services. 

RPT is imposed on all types of real properties such as lands and buildings, which include condos and office spaces. It is the responsibility of the property owner to pay for the RPT every year. Failure to do so will be grounds for the LGU to auction the property. 

In case you decide to rent out your property, for example, your condo unit, you are in charge of paying the RPT and the renter is free of this obligation.

In case you’re wondering what the formula is for computing the RPT, it is pretty simple: RPT = RPT rate x assessed value. 

It is usually 2% for cities and municipalities in Metro Manila and 1% for the properties located in the provinces. Meanwhile, the assessed value pertains to the fair market value of the property multiplied by the assessment percentage applied to the fair market value to arrive at the taxable value of the property. 

In addition to the real property tax, the LGU may collect an annual tax rate of 1% on the assessed value of the property, which may be used as part of the Special Education Fund. 

The RPT can be settled at the city or municipal treasurer’s office and may be paid on a full or installment basis. If you decide to pay it in full, you should settle it on or before January 31. But if you decide to pay on an installment basis, you have to pay on or before the last day of each quarter. 

When you pay your RPT early, chances are you will be given a discount that will not exceed 20% of the annual tax due. But you should also check this with your LGU because discounts usually vary per city or municipality. 

You have to settle on time because failure to pay the real property tax on time will subject owners to a late payment interest rate of 2% to 72% on the unpaid amount depending on the months of delay, with 36 months as the maximum.

Meanwhile, those who bought a property under the rent-to-own condo scheme are usually exempted from paying the RPT since technically and legally speaking, the condo developer still owns the property. 

Rental Income Tax

Rental income tax is the tax that is being charged when properties are leased. It is usually collected by the lessor or landlord as part of the rental payments over the lease term.

There are provisions that make an owner of a rental property subject to rental income tax, which include the: a) gross rental income earned is at least $1,500 or less than Php 64,000 per month, b) the rental property is directly owned by the lessor or jointly with his or her spouse, c) the lessors are not earning from other types of local income and d) there is no loan taken for the purchase of the property. 

Value Added Tax

Leasing a property is categorized as a service, which also makes it subject to Value Added Tax (VAT). However, like anything imposed with VAT, rental income can be subject to a number of exemptions. According to the Bureau of Internal Revenue (BIR), these exemptions include the following:

  • A 12 percent VAT is imposed on residential property leases that satisfy certain conditions. The VAT burden is generally shouldered by the tenants but for calculation purposes, it is added to the landlord’s tax liability.
  • Properties with rental payments exceeding Php12,800 ($272) per month received by landlords whose gross rental income per year exceeds Php1,919,500 ($40,840) are subject to 12 percent VAT.
  • Properties with rental payments exceeding Php12,800 ($272) per month received by landlords whose gross rental income per year is less than Php1,919,500 ($40,840) are not subject to VAT but are instead liable for percentage tax at a flat rate of 3 percent levied on the gross rent.
  • Properties with rental payments below Php12,800 ($272) per month are exempt from VAT.

Filing Rental Income Tax

According to the Bureau of Internal Revenue (BIR), rental income tax falls under annual income tax for self-employed individuals, estates, and trusts, and will be filed under BIR Form 1701.

You need to fill out this form in case you are earning money from a rental property.

The final Adjustment Return or Annual Income Tax Return must be filed on or before the 15th day of April of each year covering income for the preceding year. 

For more information on the documentary requirements for the filing of rental income tax, the associated filing procedure, and penalties in the event of late filing, you may visit BIR’s official government website.

Remember that it is our responsibility to pay for our taxes. We should be able to pay regularly and on time to avoid the hassle of paying fines. 

Vista Residences is the condominium arm of the country’s largest homebuilder, Vista Land & Lifescapes, Inc., which offers ready for occupancy and pre-selling condominium projects in Manila, Quezon City, Cebu, and Baguio that are strategically located within inner-city areas, in close proximity to premium universities and developed business districts. 

Living in Vista Residences enables you to enjoy convenience, where everything is pretty much within walking distance or a few minutes away from the property; comfort because the project features and amenities are designed to deliver comfort at all times, which makes condo living a worthy investment; security that is 24/7 and CCTV monitoring, which makes the residents safe and secure within the property. 

In line with Vista Residences’ thrust to offer convenience among its residents, it also features an AllDay Convenience Store and Coffee Project in all its projects. 

Vista Residences is part of Vista Land’s roster of vertical housing brands that cater to millennials and young professionals. The other vertical brands include Camella Manors, COHO, and Crown Asia. 

For more information on Vista Residences, email [email protected], follow @VistaResidencesOfficial on Facebook, Twitter, Instagram, and YouTube, or call the Marketing Office at 0999 886 4262 / 0917 582 5167.  

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