Property Value Assessment and What It Means

Owning any type of property in the Philippines is subject to taxation. It is mandated by national law that property taxes are paid based on their assessed value. Industrial property owners stand to gain or lose a significant amount in their finances and investment in this regard.

For this reason, it’s necessary to properly assess the value of owned industrial properties such as a warehouse for lease, not only for taxation purposes but also to inform owners how much they can benefit if they decide to list it on the market.

Real Property Taxation in the Philippines

According to the Local Government Code of 1991, local government units (LGUs) are vested with taxing powers with imposed limitations on the tax base and rates by the national policy. This has been done to eliminate multiple taxations. Property taxes are revenue sources for LGUs.

Before delving deeper into property value assessment and property taxes, let’s first tackle what’s considered real property in the Philippines. There’s no exact definition provided in the Local Government Code. In place of this, Article 415 of the Civil Code provides an enumeration of what is identified as real properties.

A few examples of real properties subject to taxes are buildings, land, and machinery. The law provides assessment levels (tax base) from a percentage of the land’s market value integrated into the overall taxation rate. These are the differential assessment level based on land use: Residential - 20%; Agricultural - 40%; Commercial, Industrial and Mineral - 50%; Timberland - 20%; Special classes: cultural, scientific - 15%; and Hospital and water districts - 10%.

Based on these assessed values, property tax rates for properties located in Metro Manila are 2%, and within provincial areas are 1% (as mentioned in Section 233 of the Local Government Code). This is only the basic real property tax. Other additional charges that may be imposed from the assessed value are the following: Ad Valorem Tax on unused lands (5%), Special Education Fund (1%), and special assessments such as public improvements surrounding the property that contributed to its value increase.

Assessed Value vs. Market Value

Let’s move on to knowing the difference between the assessed value and the market value of a real estate property and should not be interchanged. The assessed value is mainly used for deciding the applicable property tax on any type of real estate. On the other hand, fair market value is the price the property is expected to sell. Another thing to understand, the assessed value is a fraction of the market value of a property.

Employing Professional Assessment

Knowing how property taxes are computed as prescribed by law, more prominent property owners are required to pay a sizable amount in property tax yearly. If a huge chunk of an owner’s finances and investments are going to taxes, it’s necessary to know that what they’re paying for is correct.

Real estate professionals can present an accurate assessed value of industrial properties with in-depth marketing analysis and precise assessment tools. Knowing the exact tax amount to be paid can help with managing expenses and setting realistic financial expectations.

Owners can also use this expertise to know the approximate amount of a property’s fair market value, such as an industrial lot for lease if they’re eyeing to sell in the future. Knowing what they stand to profit will be advantageous to any business decisions.

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