President signs law to change Philippine real estate landscape

President Ferdinand Marcos Jr. has signed a bill into law that will overhaul the Philippine real property valuation and assessment system. The president expressed optimism that Republic Act No. 12001, or the Real Property Valuation and Assessment Reform Act (RPVara), will improve bureaucratic efficiency through transparency, digitalization, and innovation.

The president cited the need to enhance the country’s tax collection system to generate revenues, create jobs, and attract investments nationwide. "No longer will we rely on the outdated valuation system,” the president said.

President Marcos said the law “streamlines and enhances the real property valuation and assessment system through a uniform real property appraisal that complies with international standards.”

“It also adopts the prevailing market value as the single real property valuation base for the assessment of real property tax. Furthermore, the law complements our efforts to modernize the services in our local government units (LGUs) through the creation of a Real Property Information System—a comprehensive, digitalized real property tax administration,” he said.

RA 12001 will also “instill and encourage long-term and consistent tax compliance by providing a two-year amnesty on interests and penalties for taxpayers with unpaid real property tax” as a strategy toward efficient tax collection.

Standardizing valuations, plugging tax leaks, and ensuring transparency are among the biggest expected benefits of the newly enacted RPVara, according to industry stakeholders.

The Chamber of Real Estate and Builders’ Associations Inc. (Creba) said the new law would hopefully “introduce the needed reforms in real property valuation and assessment.”

“It is a timely opportunity to overhaul the current system of Schedule of Market Values (SMV) formulation which has, for many years, been prone to compromise and corruption and wanting of direct participation by the private sector and professionals with the requisite technical know-how and training,” Creba said.

Colliers Philippines said the new law would provide “much-needed transparency” in a volatile industry on a post-pandemic rebound.

Paul Vincent Ramirez, senior director and head of valuation at Colliers, said its implementation would provide much-needed transparency to the current opacity of the Philippine real estate market.

“The game-changing details will be in the law’s yet-to-be-finalized and published implementing rules and regulations (IRR), which all property players need to prudently scrutinize,” he said.

Ovialand Inc. president Pammy Olivares-Vital welcomed the passage of the law, saying it would lead to a balanced property assessment across areas and regions.

“We have seen progressive local city assessors adjust their recent methods in assessing which was beneficial for the municipality or city. Standardizing this method, I believe, will benefit areas that are not yet practicing this,” Olivares-Vital said.

The Bureau of Local Government Finance said the RPVara would provide a single system of valuation to be used by all LGUs and other government agencies for taxation and other purposes.

It also transfers the approval of the SMVs from the local government council to the finance secretary, insulating the technical function of valuation by local assessors from the political function of setting assessment levels and tax rates by LGUs.

It also mandates the creation of an electronic and comprehensive Real Property Information System, which will serve as a database of all real property transactions with the Registry of Deeds, Bureau of Internal Revenue, notaries public, and other agencies.

The new law also provides for a real property tax amnesty lasting two years and will cover penalties, surcharges, and interests from all unpaid real property taxes.

Delinquent owners may settle their dues through a one-time payment or installment payment.

The amnesty does not cover delinquent real properties already disposed of through a public auction, real properties with tax delinquencies being paid under a compromise agreement, and those that have pending court cases on tax delinquencies.

For the first year of effectivity of the approved SMVs, increases in real property taxes will be capped at 6 percent of the real property taxes assessed on such properties prior to the effectivity of the law.

For the succeeding years, the LGU may enact an ordinance imposing a cap on the increase in real property taxes.