5 Real Property Tax Exemptions in the Philippines

By: Tax and Accounting Center Philippines

Under the Local Government Code of the Philippines of 1991 or Republic Act No. 7160, a real property tax (RPT) in the Philippines ranging from 1% to 2% of the assessed value of the real property. Assessment of the property is based on a certain percentage of the fair market value of the property depending on the actual use of the property.

Under Section 234 of the Local Government Code of the Philippines, the following five real property tax exemptions are provided:

1. RPT exemption on government real properties 

“Real property owned by the Republic of the Philippines or any of its political subdivisions except when the beneficial use thereof has been granted, for consideration, or otherwise, to a taxable person”

Under this, a government owned property used in furtherance of its governmental functions. However, if the use of such government owned property is granted to a taxable person, the exemption does not apply and the property shall be subject to real property tax in the Philippines.

2. RPT exemptions on religious, charitable and educational institution’s

“Charitatable institutions, churches, parsonages or convents appurtenant thereto, mosques, non-profit or religious cemeteries and all lands, buildings and improvements actually, directly, and exclusively used for religious, charitable, or educational purposes.”

In here, the exemption is strictly applicable to properties actually, directly, and exclusively used for religious operations, or charitable operations, or educational purposes. Ownership in itself does not count, but rather, the fact of actual, direct, and exclusive use of such owned property.

3. RPT exemptions on Local water utilities machinery and equipments

“All machineries and equipment that are actually, directly, and exclusively used by local water districts, and government owned or controlled corporations engaged in the supply and distribution of water and/or generation and transmission of electric power.”

4. RPT Exemptions of cooperatives

“All real property owned by duly registered cooperatives as provided under Republic Act No. 6938”. Under the concept of cooperatives, involvement of the ground level members of society is being encouraged for forge an alliance towards mutual benefits. The Cooperative Code of the Philippines provides a number of tax exemptions on such cooperatives and included among which is that of real property taxes in the philippines.

5. RPT exemptions for pollution and environmental protection

“Machinery and equipment used for for pollution control and environmental protection.”

Under Section 206 of the Local Government Code of the Philippines, a taxpayer who claims exemption from real property taxation in the Philippines shall file with the local government sufficient documentary evidence in support and as proof of such exemption within thirty (30) days from date of declaration of such property.

Disclaimer: This article is for general conceptual guidance only and is not a substitute for an expert opinion. Please consult your preferred tax and/or legal consultant for the specific details applicable to your circumstances. For comments, you may please send mail at info@taxacctgcenter.org.