House Bill No. 4664: Real property valuation

Valuation of real property in the Philippines has become a perennial concern to many taxpayers and to tax administrators alike. This is a major concern many of us encounter not only during payments of real-property taxes, but also in time of payment of internal revenue taxes on transactions involving real property, the valuation of which, pursuant to the 1997 Tax Code, is the fair market value of the property as determined by the commissioner of Internal Revenue, or the fair market value as shown in the schedule of values of the provincial and city assessors. This is apparently because of the cumbersome determination of the fair market value of real property currently in place, which is a key determinant in RPT and other applicable taxes in the disposition of real property.

To date, no single agency is responsible in ensuring correct valuation of real property, yet in almost all transactions involving sale or disposition of real property, determination of fair market value of real property is almost always necessary, pursuant to existing laws.

Under the 1997 Tax Code, as amended by TRAIN law, the commissioner of Internal Revenue is authorized to divide the Philippines into different zones or areas, and shall determine the fair market value of real properties located in each zone or area, upon mandatory consultation with competent appraisers, both from the private and public sectors. Under the law, this is supposed to be subject to automatic adjustment once every three years. However, over the last three years, record of the Department of Finance shows that only 60 percent of Revenue District Offices under the Bureau of Internal Revenue (BIR) have updated their zonal values.

On the other hand, under the Local Government Code of 1991, provincial and city assessors across the country are mandated to prepare a schedule of fair market values for the different classes of real property situated in their respective jurisdictions for enactment by ordinance of the concerned Sanggunian. The assessors are mandated, by law, to prepare revisions of real-property assessment and classification every three years. However, this has not been transformed into reality. Study shows that only 37 percent of local government units (LGUs) have updated the schedule of market values.

The outdated real-property valuation references, both in the BIR and the LGUs, have led to a situation where taxpayers oftentimes employ their own system of property valuation while administrators, on the other hand, likewise, employ their own system and methodology, which is entirely different from the system adopted by the taxpayers. Hence, the squabble.

House Bill 4664, to be known as Real Property Valuation and Assessment Reform Act, aims to remedy the situation through the development and maintenance of a just, equitable, impartial and nationally consistent real-property valuation based on internationally accepted valuation standards, concepts, principles and practices. It aims to improve the quality of valuation of local governments and making the revisions frequent, efficient, transparent, reliable and attuned to market developments.

A single valuation base for taxation, which is a principal feature of the bill, is, therefore, a welcome development that will hopefully end the dilemma that taxpayers have been facing for decades every time they pay real-property taxes and other taxes on disposition of real properties, such as transfer taxes, capital gains tax/withholding tax, documentary stamp tax, value- added tax, among others. This will certainly speed up transactions involving real property as the single valuation base will also be used as benchmark for other purposes, such as right-of-way acquisition, lease, rental, etc.

Indeed, the reforms are expected to foster private investors’ confidence and build the public’s trust in the valuations of government.

The department of Finance (DoF) is pressing Congress to pass, under its comprehensive tax reform program (CTRP), the package for improving real property valuation and assessment in the country, before President Rodrigo R. Duterte’s term ends.

The House of Representatives passed its version of the bill on third reading in November 2019, while the Senate version is still pending at the committee level.

18th-Congress-HB-4664-Package-3-Real-pro.

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Converting agricultural land for development use

Dreaming to develop a project but the property is classified as agricultural land?

Your dream might only be a few documents away from becoming a reality given the recent amendments on the 2002 Comprehensive Rules on Land Use Conversion by the Department of Agrarian Reform (DAR).

Defining land use conversion

Land use conversion is defined as the act or method of modifying the current physical use of a parcel of agricultural land for either a non-agricultural purpose or the same agricultural use but other than soil cultivation as well as growing of crops and trees as approved by DAR.

However, it is important to note that land use conversion is different from reclassification. Compared to land use conversion, reclassification is the act of specifying the potential of agricultural land to be utilized for non-agricultural purposes. However, this doesn’t automatically allow a landowner to utilize the same agricultural land for different use. A converted land meanwhile gives the landowner an actual right to use a previously classified agricultural land into its converted, now intended use. This is according to DAR’s Section 65 of Republic Act No. 6657, as amended by Executive Order (EO) 129-A, and paragraph (13), Section 3, Title XI of the Revised Administrative Code of 1987, otherwise known as EO No. 292.

Is any agricultural land eligible for land use conversion?

The short answer is no. The long answer, however, is divided into three categories: convertible lands, non-negotiable areas for conversion and highly restricted areas for conversion.

Agricultural lands eligible for conversion should be reclassified into non-agricultural uses such as commercial, industrial and residential through the local government unit or via a Presidential Proclamation, according to RA No. 6657 effective on June 15, 1988. For agricultural lands reclassified before June 15, 1988, however, DAR’s guidelines on securing an exemption clearance should apply.

Areas non-negotiable for conversion can be further subdivided into two categories. First are agricultural lands classified under the National Integrated Protected Areas System (NIPAS) as determined by the Department of Environment and Natural Resources (DENR).

The second category includes irrigated, irrigable land and agricultural lands with existing irrigation facilities as delineated by the National Irrigation Administration (NIA).

Lastly, areas highly restrictive for conversion include the following: irrigable lands with firm funding commitment, but are not covered by irrigation projects; agro-industrial croplands; highlands or areas with elevations of 500 meters and above exhibiting potential for growing high-value or semi-temperate crops; lands with notice of land valuation and acquisition, and; lands located within Environmentally Critical Areas (ECA) or involved with Environmentally Critical Projects (ECP).

Except for authorized housing projects, agricultural lands highly restrictive for conversion and with areas over five hectares should undergo deliberations by the Presidential Agrarian Reform Council (PARC) Land Use Technical Committee (PLUTC).

Streamlined processes

Through its Administrative Order (AO) No. 1, Series of 2019, the department has now revised its guidelines and methods aimed at streamlining the long process of land use conversion in the Philippines. This was done by amending specific provisions on AO No. 1, Series of 2002 in hopes of hastening the process of land conversion cases.

To start, only the landowner or his/her duly authorized representative can apply for land use conversion and submit all supporting documents. However, agricultural lands for conversion which were acquired under RA 6657 would only be allowed if the applicant is also the agrarian reform beneficiary. The beneficiary should likewise pay for the full price of the land.

To achieve faster processing, the latest guidelines also eliminated some requirements for land use conversion, such as the Department of Agriculture (DA) Certificate; the DENR’s Environmental Compliance Certificate (ECC), on certain conditions, and; a Conversion Grant for areas to be used as resettlement or relocation sites for displaced communities after a nationally declared calamity, provided that these are not part of the Strategic Agriculture and Fisheries Development Zones (SAFDZ).

With the latest amendments, electronic copies of land titles are now being accepted to confirm landholding and its registered owner(s) in place of certified true copies. However, the following localities are not covered by this specific amendment: Basilan (Isabela); Batanes (Basco); Cadiz City; Cagayan (Tuao); Dapitan City; Negros Occidental; Province of Tawi-Tawi (Bongao); Silay City and; Sulu (Jolo).

Towards smoother public transactions

Simplifying major laws such as the 2002 Comprehensive Rules on Land Use Conversion is an excellent executive method, thanks to the department’s initiative. However, this isn’t merely for avoiding additional yet unnecessary fees in securing individual clearances. Instead, amendments of similar goals will allow the country to develop a comprehensive land policy framework that utilizes agricultural development towards sustainable economic growth.

The author is the principal architect of Fulgar Architects. Source: Inquirer.net

How to check the Zonal Value of a Property in the Philippines?

First, let’s define the term Zonal Value or Zonal Valuation:

Zonal Valuation – is an approved zonal schedule of fair market values on real property used by the Bureau of Internal Revenue as basis for the computation of internal revenue taxes.

The National Internal Revenue Code (NIRC) of 1997, as amended, is the law that governs the taxation in the Philippines. It gives the Bureau of Internal Revenue (BIR), under the supervision of the Department of Finance (DOF), the authority to assess and collect national internal revenue taxes, fees and charges and to enforce all forfeitures, penalties and fines connected therewith.

Pursuant to Section 6 of the aforesaid code as amended by Section 4 of R.A. No. 10963 or otherwise known as Tax Reform for Acceleration and Inclusion Act (TRAIN LAW), the Commissioner of the Internal Revenue is authorize to divide the Philippines into different zones or areas and determine the fair market value (FMV) of real properties located therein upon consultation with competent appraisers both from private and public sectors. These values are necessary for purposes of computing any internal revenue tax related to the aforementioned transfer.

The basis to determine the tax liabilities is the value of the property, whichever is higher of: (a) the gross selling price/consideration as shown in the duly notarized document of sale or transfer of real property; or (b) the FMV as determined by the Commissioner; or (c) the FMV as shown in the schedule of values of the Provincial and City Assessors.

So the zonal valuation is used primarily:

• Basis for computing the fair market value of the property

• computation of internal revenue taxes

Now, how do you go to get the Zonal Value of a Real estate property?

You can use our Zonal value page to search the zonal values for selected locations.

(best viewed with desktop or tablet)

On the mobile version we provide for the time being only the zonal values for San Carlos City, Negros Occidental.

Or you either go to https://www.bir.gov.ph/zonal-values?type=PAGE&to=zonal-values&label=Zonal%20Values (which will then give you a list of zonal values based on location, and prompt you to download the file for it) or call/visit your nearest BIR office to get the information.

Example:

RDO No. 76 - Victorias City, Negros Occidental is composed of the following Cities and Municipalities: Cadiz City , San Carlos City, Calatrava, E.B. Magalona, Escalante City, Manapla, Sagay City, Toboso and Victorias City

RDO No. 76 - Victorias City, Negros Occi

Download 76 - VICTORIAS CITY, NEGROS OCCI • 484KB