What to expect from the RPVAR Act

Change is the only constant in life – and this applies to laws as well. Some of our laws undergo reforms, either in the form of amendments or repeals. For instance, reforms in real property taxation in the Philippines are also underway through the Real Property Valuation and Assessment Reform (RPVAR) Act which recently hurdled Congress and, as of yesterday, awaits the signature of President Marcos.

The RPVAR Act was first introduced by the House of Representatives under House Bill 6558. Later, the Senate introduced its own version under Senate Bill 2386. The conflicting provisions of these bills were reconciled by the bicameral conference committee and the reconciled version was ratified by the Congress on March 20, 2024.

Once enacted, the RPVAR Act will repeal several provisions of the Local Government Code of the Philippines or Republic Act 7160 on Real Property Taxation.

The law aims to promote fiscal autonomy of local government units (LGUs), ensure transparency in real property transactions to protect the public interest and develop confidence in the valuation system of real properties and to promote the use of innovative digital technology in local and real property tax administration, real property transactions and other business processes to improve the local government’s revenue generation capacity.

Some notable features of the law include the granting of amnesty to delinquent taxpayers, development of a real property market database and the formulation of uniform valuation standards for real assets.

Section 30 of the proposed RPVAR Act provides that taxpayers may enjoy real property tax amnesty on all unpaid real property taxes, including Special Education Fund, idle land tax and other special levy taxes. The amnesty also covers penalties, surcharges and interests which may be availed of within two years from the effectivity of the RPVAR Act.

Moreover, the proposed law also gives taxpayers the option to pay delinquent real property taxes either through one-time payment or through installment payments.

However, the amnesty program under the RPVAR Act does not extend to the following properties: delinquent real properties which have been disposed of at public auction to satisfy real property tax delinquencies, real properties with tax delinquencies which are being paid pursuant to a compromise agreement and real properties subject of pending cases in court for real property tax delinquencies.

Notably, the amnesty provision discussed above was only introduced in the consolidated version of the bill after reconciliation by the bicameral conference committee.

The same was not part of either House Bill 6558 or Senate Bill 2386. Further, there is still a possibility that the amnesty provision and other provisions of the bill, will be vetoed by the Office of the President.

As part of the government’s initiative to gradually transition toward digitization of its systems, the RPVAR Act provides for the development and establishment of a Real Property Information System.

This system will serve as an up-to-date electronic database of the sale, exchange, lease, mortgage, donation, transfer and all other real property transactions and declarations and on the costs of construction or renovation of buildings and other structures and the prices of plants, machinery and equipment.

Further, LGUs are mandated to automate their real property administration such as, but not limited to, establishment of tax mapping technology and software-enabled valuations systems and the computerization of records management.

Finally, the RPVAR Act also provides for the establishment of a uniform valuation standards which shall be used by all assessors and appraisers across all LGUs in the country.

In this view, the said law adopts market value as the single property valuation base for the assessment of real-property-related taxes. For this purpose, the provincial, municipal and city assessors are mandated to adopt a schedule of market values which shall be subject to the approval of the Secretary of Finance. Thereafter, LGUs are required to enact an ordinance setting the assessment levels and real property tax rates to be implemented in their respective localities, taking into consideration the estimated revenue and tax impact of the new schedule of market values.

Hopefully, after the implementation of the RPVAR Act, taxpayers will have an improved experience in transacting with LGUs for their real property taxes and, consequently, be encouraged to religiously pay their real property taxes and benefit from the reprieve that will be granted under the said law.

Donna Jean Pena is a Supervisor from the Tax Group of KPMG in the Philippines (R.G. Manabat & Co.), a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. The firm has been recognized as a Tier 1 in Transfer Pricing Practice and in General Corporate Tax Practice by the International Tax Review. For more information, you may reach out to Tax Supervisor Donna Jean I. Pena or Tax Principal Kathleen L. Saga through [email protected], social media or visit www.home.kpmg/ph.