Real Property Valuation and Assessment and Reform Act: What You Need to Know

SUMMARY: This article provides an in-depth discussion on Republic Act No. 12001, also known as the Real Property Valuation and Assessment Reform Act and highlights its key objectives and anticipated impact on the real estate industry and the Philippine economy as a whole.

Republic Act No. 12001, also known as the Real Property Valuation and Assessment Reform Act, stands as a landmark legislation in the Philippines, aiming to modernize and revitalize the country’s real property valuation and taxation system. Enacted on June 13, 2024, this Act signifies a significant shift towards greater transparency, efficiency, and fairness in real property transactions.

This in-depth article delves into the key provisions of the Act, analyzing its impact on various stakeholders and exploring its potential benefits and challenges.

I. Overview of Republic Act No. 12001

The Act’s preamble emphasizes the State’s commitment to fostering sustainable development and maintaining a just, equitable, and nationally consistent real property valuation system. This vision aligns with international best practices, reflecting a conscious effort to harmonize the Philippine system with global standards.

II. Declaration of Policy and Objectives

The Act lays out several critical objectives, each contributing to a more efficient and equitable real property valuation system:

A. Establishing Valuation Standards (Section 3(a) & 13): The Act prioritizes the adoption and implementation of the Philippine Valuation Standards (PVS). The PVS, based on international standards, aims to ensure uniformity in valuing real properties for taxation and other purposes. This standardization provides a consistent framework for appraisers and assessors, fostering greater accuracy and transparency in valuations.

B. Market Value as the Valuation Base (Section 3(b) & 14): The Act mandates market value as the single valuation base for assessment, eliminating inconsistencies arising from different valuation methods. This shift towards a market-oriented approach aligns valuations with prevailing market conditions, reflecting a more realistic and dynamic system.

C. Promoting Fiscal Autonomy of LGUs (Section 3(c)): By enhancing the capacity of LGUs to generate local revenues from real property, the Act aims to empower local governments to provide essential services to their constituents. This approach aims to address the disparity in revenue generation between LGUs, allowing them to become more self-reliant and responsive to local needs.

D. Separating Valuation Functions (Section 3(d)): The Act emphasizes the separation of real property valuation from tax policy formulation and administration. This aims to prevent potential conflicts of interest and ensure that valuation decisions are based purely on professional expertise and market realities, not influenced by tax policy considerations.

E. Creating a Comprehensive Electronic Database (Section 3(e) & 22): The Act mandates the creation of a comprehensive electronic database of all real property transactions. This database will serve as a valuable resource for understanding market trends, facilitating research, and improving the accuracy of valuations.

F. Supporting Research and Development (Section 3(f)): The Act underscores the importance of continuous research and monitoring of new developments in valuation. This commitment ensures that the Philippine valuation system remains updated and aligned with global standards.

G. Ensuring Transparency (Section 3(g)): Transparency is a cornerstone of the Act, aiming to build public trust and confidence in the valuation system. By promoting transparency in real property transactions, the Act seeks to address concerns about manipulation and ensure fairness and accountability in the valuation process.

H. Promoting Digital Technology (Section 3(h)): The Act encourages the use of innovative digital technology in local and real property tax administration. This will modernize processes, improve data management, and enhance the efficiency and effectiveness of real property taxation.

III. Bureau of Local Government Finance (BLGF)

The BLGF is central to the Act’s implementation, assuming a leading role in promoting a more effective real property valuation system.

A. Powers and Functions of the BLGF (Section 5)

The Act empowers the BLGF to:

1. Develop, adopt, and maintain the PVS (Section 5(a)): The BLGF assumes responsibility for the PVS, ensuring its alignment with international standards and regulating its implementation by LGUs and other stakeholders.
2. Review and ensure compliance of SMVs (Section 5(b)): The BLGF is tasked with reviewing the SMVs prepared by provincial, city, and municipal assessors, ensuring their compliance with the PVS and recommending their certification to the Secretary of Finance for taxation purposes.
3. Interpret and decide on valuation matters (Section 5(c)): The BLGF acts as the authoritative body in resolving issues related to real property valuation policies and standards, providing clarity and consistency across LGUs.
4. Provide technical assistance (Section 5(d)): The BLGF offers technical support on real property appraisal matters to government agencies and instrumentalities, further strengthening the capacity of these entities to conduct accurate and reliable valuations.
5. Provide leadership and policy direction (Section 5(e)): The BLGF assumes a leadership role in guiding LGUs on real property valuation for taxation and other purposes, promoting best practices and fostering a culture of continuous improvement in valuation processes.
6. Maintain a roster of appraisers and assessors (Section 5(f)): The BLGF maintains a roster of licensed local government appraisers and assessors in consultation with the Professional Regulation Commission (PRC), ensuring the quality and competence of professionals working in the field.
7. Develop and maintain a comprehensive electronic database (Section 5(g)): The BLGF is tasked with developing and maintaining an up-to-date electronic database of real property transactions and materials prices, providing essential information for accurate valuations and market analysis.
8. Conduct continuing research and studies (Section 5(h)): The BLGF undertakes ongoing research and studies on valuation, remaining abreast of global and national trends and developments to ensure that the Philippine valuation system is dynamic and responsive.
9. Formulate uniform procedures for assessor’s offices (Section 5(i)): The BLGF establishes standardized procedures for transactions in assessor’s offices, including the transfer, annotation, and issuance of tax declarations, promoting efficiency and consistency in administration.
10. Exercise technical supervision over all assessors (Section 5(j)): The BLGF exercises technical supervision over all assessors, ensuring compliance with valuation standards and promoting continuous professional development through capacity building programs and training initiatives.
11. Determine and collect administration fees, fines, and penalties (Section 5(k)): The BLGF is empowered to determine and collect administration fees, fines, and penalties associated with the implementation of the Real Property Information System (RPIS), ensuring the system’s financial sustainability.

B. Reorganization of the BLGF (Section 6)

The Act reorganizes the BLGF, establishing the Real Property Valuation Service (RPVS) within its structure. This reorganization aims to strengthen the BLGF’s capacity to effectively execute its expanded mandate. The RPVS will have counterpart personnel in the BLGF Regional Offices, ensuring a consistent approach to valuation across the country.

C. Supervisory Role of the Head of the BLGF (Section 7)

The head of the BLGF is entrusted with ensuring the efficient and effective day-to-day performance of the RPVS, holding overall responsibility for its internal management and governance. This ensures that the RPVS operates effectively and consistently with the Act’s provisions.

D. Real Property Valuation Units (RPVUs) (Section 8)

To implement the Act at the local level, the Act mandates the establishment of Real Property Valuation Units (RPVUs) under the Office of the Local Assessor in every province and city. Municipalities can also establish RPVUs. The organizational structure and staffing pattern of these units are included in the annual budget of the Office of the Assessor, ensuring their operational capacity.

IV. Central and Regional Consultative Committees

The Act establishes Central and Regional Consultative Committees to foster dialogue and collaboration among key stakeholders in the real property valuation process.

A. Central Consultative Committee (Section 9)

The Central Consultative Committee serves as a forum for discussing matters related to the adoption of international valuation standards and addressing other concerns regarding real property valuation. Its key functions include:

1. Providing a Platform for Dialogue (Section 9(a)): The Committee serves as a platform for discussion and collaboration among representatives from various government agencies, professional organizations, and private sector stakeholders.
2. Setting and Adopting Valuation Standards (Section 9(b) & (c)): The Committee plays a vital role in the process of setting and adopting international valuation standards, ensuring that the Philippine system aligns with globally accepted best practices.
3. Ensuring Equal Participation (Section 9(c)): The Committee emphasizes equal participation of public and private sector representatives, fostering a collaborative and inclusive approach to developing valuation standards.
4. Providing Secretarial Support (Section 9(d)): The BLGF serves as the Secretariat of the Central Consultative Committee, providing administrative support and ensuring the smooth functioning of the Committee.

B. Regional Consultative Committees (Section 10 & 11)

The Regional Consultative Committees are established at the regional level to facilitate discussions on developments in the local real property market, concerns of taxpayers, and other matters related to real property valuation.

1. Facilitating Regional Dialogue (Section 10 & 11(a)): The Regional Committees serve as platforms for regional stakeholders to discuss issues specific to their respective regions, fostering a more localized approach to real property valuation.
2. Reviewing Proposed SMVs (Section 10(b)): The Regional Committees review the SMVs prepared by assessors in their respective regions, ensuring that these values align with local market conditions and comply with national standards.
3. Providing Valuation Services (Section 10(c)): The Regional Committees work to ensure the provision of economical, efficient, and effective valuation services within their regions.
4. Coordinating with Other Agencies (Section 10(d)): The Regional Committees facilitate coordination and collaboration with other government departments, bureaus, and agencies involved in real property valuation within their regions.
5. Maintaining Regional Databases (Section 10(e)): The Regional Committees maintain comprehensive and up-to-date electronic databases of real property-related transactions in their regions, providing valuable insights for local market analysis and valuation decisions.
6. Performing Other Assigned Functions (Section 10(f)): The Regional Committees undertake other functions assigned by the head of the BLGF, contributing to the effective implementation of the Act at the regional level.
7. Ensuring Equal Participation (Section 11(b)): The Regional Committees ensure equal opportunity for the participation of public and private sector representatives in discussions, promoting a collaborative approach to addressing real property valuation issues.
8. Providing Secretarial Support (Section 11(c)): The BLGF Regional Offices serve as the Secretariats of the Regional Consultative Committees, providing administrative support and ensuring the smooth operation of these Committees.

C. Functions of the Regional Consultative Committees (Section 12)

The Regional Committees play a vital role in:

1. Discussing Local Market Developments (Section 12): The Committees serve as forums for discussions on developments in the local real property market, enabling stakeholders to stay informed about market trends and their implications for valuation.
2. Addressing Taxpayer Concerns (Section 12): The Committees provide a platform for addressing concerns of taxpayers, civil society, and other stakeholders regarding real property valuation, promoting transparency and responsiveness to public input.
3. Analyzing Compliance Reporting (Section 12): The Committees review compliance reporting data from assessors in the region, identifying areas for improvement and ensuring that the Act’s provisions are implemented effectively.
4. Training Local Government Assessors (Section 12): The Committees are actively involved in the training and development of local government assessors, ensuring that assessors are equipped with the skills and knowledge necessary to conduct accurate and reliable valuations.

V. Valuation of Real Properties

The Act establishes a clear framework for the valuation of real properties, emphasizing market value as the primary basis for assessment.

A. Valuation Standards and Market Values (Section 13 & 14)

The Act establishes the following key principles:

1. Uniform Valuation Standards (Section 13): The BLGF is responsible for developing, adopting, maintaining, and implementing uniform valuation standards for all appraisers and assessors, including those conducting valuations for taxation and other purposes.
2. Compliance with International Standards (Section 13): The valuation standards developed by the BLGF must conform to international valuation standards and principles, ensuring that the Philippine system is aligned with global best practices.
3. Market Value as the Valuation Base (Section 14): All real properties, whether taxable or exempt, are to be valued based on prevailing market values in the locality where the property is situated, in conformity with the PVS.
4. Consideration of Depreciation (Section 14): Depreciation must be taken into consideration in the valuation of depreciable assets, ensuring that valuations are adjusted to reflect the age, condition, and remaining useful life of the property.

B. Preparation of the Schedule of Market Values (SMVs) (Section 15)

The Act outlines a comprehensive process for the preparation of the SMVs for different classes of real property within each LGU:

1. Responsibility of Local Assessors (Section 15): The provincial assessors, together with municipal and city assessors, are responsible for preparing the SMVs for their respective LGUs, adhering to the PVS and other guidelines set by the DOF.
2. Timeline for Completion (Section 15): The preparation of SMVs must be completed within twelve (12) months following the notification from the BLGF to local assessors to submit their proposed SMVs.
3. Public Consultation and Hearing (Section 15): Two mandatory public consultations must be conducted within sixty (60) days before the submission of the SMV by the local assessor, ensuring transparency and stakeholder engagement.
4. Submission and Review (Section 15): The local assessor submits the proposed SMV to the BLGF Regional Office, which then reviews and endorses it to the head of the BLGF. Cities and the lone municipality in the Metropolitan Manila Area submit their proposed SMVs directly to the BLGF Central Office for review.
5. Certification by the Secretary of Finance (Section 16): The head of the BLGF submits the proposed SMV to the Secretary of Finance for certification. The Secretary must certify that the SMV is in accordance with the latest PVS within thirty (30) days from receipt.
6. Revision of SMVs (Section 16): If the Secretary of Finance determines that the SMV does not comply with the latest PVS, they may order the assessor to revise the SMV, providing specific reasons for disapproval.
7. Public Consultation for Revised SMVs (Section 16): The assessor may conduct public consultations prior to resubmitting the revised SMV to the BLGF.
8. Final Approval and Publication (Section 16): The approved SMV takes effect fifteen (15) days after its publication by the DOF in the Official Gazette or its official website, and on the LGU’s official website.

C. Revenue and Tax Impact Report (Section 17)

The Act requires the preparation of a revenue and tax impact report to assess the potential effects of the new SMVs on taxpayers:

1. Report Preparation (Section 17): The concerned assessor, in coordination with the local treasurer, prepares a report on the revenue and tax impact of the new SMV on taxpayers.
2. Submission to Local Chief Executive and Sanggunian (Section 17): The assessor submits the report, including three proposed options for adjusting assessment levels and tax rates, to the local chief executive and Sanggunian for consideration within thirty (30) days from receipt of the approved SMV.

D. Use of Schedule of Market Values (Section 18)

The approved SMVs serve as the basis for determining real property-related taxes:

1. Taxation Purposes (Section 18(a)):
   • General Revision of Assessments (Section 18(a)(1)): The SMVs are used as the basis for the general revision of property assessments and classifications by local assessors.
   • Adjustment of Assessment Levels and Tax Rates (Section 18(a)(1)): The Sanggunian uses the SMVs to adjust assessment levels and tax rates for LGUs.
   • Determining Market Value for Other Property-Related Taxes (Section 18(a)(2)): The SMVs are used to determine market value for other property-related taxes, such as local transfer tax, sand and gravel tax, community tax, and other fees and charges.
   • Computing Internal Revenue Tax (Section 18(a)(3)): The Commissioner of Internal Revenue uses the SMV or the actual gross selling price in consideration (as stated in real property transaction documents), whichever is higher, in computing any internal revenue tax.
2. Real Property Appraisals and Other Purposes (Section 18(b)): The approved SMVs are used as the basis for real property appraisals and other related purposes by all government agencies, instrumentalities, and government-owned or controlled corporations.

E. Updating of the Schedule of Market Values (Section 19)

The Act mandates regular updates to the SMVs:

1. Initial Update (Section 19): All provincial assessors, together with municipal and city assessors, must update their respective SMVs within two (2) years from the effectivity of this Act.
2. Regular Updating (Section 19): LGUs are required to update the SMVs and conduct general revisions of property assessments and classifications every three (3) years thereafter.
3. Revisions for Significant Market Changes (Section 19): In cases of significant market changes, such as infrastructure development, calamities, disasters, pandemics, or declared public health emergencies, the provincial and city assessors may recommend revisions to their existing SMVs to the BLGF Regional Office.
4. Suspension of General Revisions (Section 19): The assessor may suspend the conduct of general revisions during a national state of emergency declared by the President or a local state of calamity declared by the local chief executive.

F. Additional Indicator for the Seal of Good Local Governance (Section 20)

The Act highlights the importance of compliance with its provisions:

1. Compliance with the Act (Section 20): Compliance with the Act is considered an additional indicator for the Seal of Good Local Governance under RA No. 11292, recognizing the significance of implementing a sound real property valuation system.

VI. Development and Maintenance of Real Property Market Database

The Act recognizes the importance of a comprehensive and up-to-date real property database.

A. Development of the Real Property Information System (RPIS) (Section 22)

1. Database Development and Maintenance (Section 22): The BLGF is responsible for developing and maintaining an up-to-date electronic database of real property transactions, construction costs, and prices of materials, including plant, machinery, and equipment.
2. Mandatory Submission of Documents (Section 22): The BLGF requires the mandatory submission of relevant documents from national government offices and LGUs.
3. Data Privacy (Section 22): The submission of documents and information is subject to data privacy provisions of RA No. 10173, ensuring the protection of sensitive information.
4. Access to Database (Section 22): The updated database is made available at no cost to all LGUs, national government agencies, and the Commissioner of Internal Revenue, subject to relevant data privacy provisions.
5. Private Sector Access (Section 22): The private sector may access the database subject to BLGF guidelines.
6. Penalties for Non-Submission (Section 22): Non-submission of required documents to the BLGF will subject the concerned official or employee to administrative penalties.
7. Automation of Real Property Tax Administration (Section 22): The Act requires all provinces, cities, and municipalities to automate their real property tax administration operations with the guidance of the BLGF and the Department of Information and Communications Technology (DICT).

B. Duty of Register of Deeds to Supply Assessors with Real Property Transactions Data (Section 23)

1. Data Submission from Register of Deeds (Section 23): The Register of Deeds must prepare and submit an abstract of the entire registry and copies of relevant real property transactions to the provincial, municipal, and city assessors every three (3) months.

C. Transmission of Real Property Transactions Data to the BLGF (Section 24)

1. Electronic Transmission of Data (Section 24): The Register of Deeds, BIR, notaries public, officials issuing building permits, and geodetic engineers conducting surveys must electronically transmit relevant real property transactions data to the BLGF every quarter.

VII. Appointment of Assessors

The Act revises the appointment process for assessors, emphasizing transparency and competency:

1. Appointment by Local Chief Executive (Section 25): The local chief executive is responsible for appointing provincial, city, and municipal assessors and assistant assessors, following civil service laws, RA No. 9646 (Real Estate Service Act), and guidelines outlined in the Act.
2. Selection from a List of Eligible Candidates (Section 25): For provincial and city assessors, and for municipal assessors in the Metropolitan Manila Area, the appointee must be chosen from a list of at least three ranking eligible candidates within the region.
3. Selection from a List of Eligible Candidates within the Province (Section 25): For municipal assessors, the appointee must be chosen from a list of at least three ranking eligible candidates within the province.

VIII. Penal Provisions

The Act establishes penalties for violations of its provisions, ensuring compliance and accountability.

1. Violations by Government Officials and Employees (Section 26): Penalties include a fine, suspension from government service, or both, for violations such as failure to provide information, non-compliance with valuation standards, and failure to prepare or implement SMVs.
2. Unlawful or Unauthorized Processing or Disclosure of Information (Section 27): Unauthorized processing, access, disclosure, or use of real property information system data is punishable under RA No. 10173 (Data Privacy Act), RA No. 10175 (Cybercrime Prevention Act), and other relevant laws.
3. Other Violations (Section 28): Any person, whether natural or juridical, violating provisions of the Act other than those punishable under Sections 26 and 27, may be dealt with under applicable existing laws.

IX. Transitory Provisions

The Act includes provisions to facilitate the transition to the new valuation system:

1. Transitory Guidelines (Section 29): LGUs already in the process of updating their SMVs upon the effectivity of the Act are to continue their revisions, ensuring coordination with the BLGF.
2. Use of Existing SMVs (Section 29): In cases where SMVs are not yet available or updated, the Commissioner of Internal Revenue shall adopt the existing SMVs, zonal values, or actual prices in consideration, whichever is higher, for computing internal revenue tax, subject to maximum assessment levels.
3. Cap on Real Property Tax Increases (Section 29): For the first year of the approved SMV’s effectivity, any increase in real property taxes is limited to a maximum of six percent (6%) of the taxes assessed prior to the effectivity of the Act.
4. LGU Ordinance for Subsequent Years (Section 29): LGUs may enact an ordinance to impose a cap on real property tax increases for subsequent years.

X. Tax Amnesty

The Act provides tax amnesty on unpaid real property taxes:

1. Grant of Tax Amnesty (Section 30): A real property tax amnesty is granted, covering penalties, surcharges, and interests on unpaid real property taxes, including Special Education Fund, idle land tax, and other special levies, prior to the effectivity of the Act.
2. Period for Availing Amnesty (Section 30): The amnesty can be availed within two (2) years after the effectivity of the Act.
3. Payment Options (Section 30): Delinquent property owners may choose either one-time payment or installment payment of delinquent taxes within two (2) years from the Act’s effectivity.
4. Exclusions from Amnesty (Section 30): The amnesty does not apply to delinquent real properties disposed of at public auction, properties with tax delinquencies being paid under a compromise agreement, or properties subject to pending court cases.

XI. Funding Requirements

The Act establishes a dedicated fund for implementing the Act’s provisions:

1. Real Property Tax Administration Fund (RPTAF) (Section 32): Each local Sanggunian must appropriate necessary funds from locally generated revenues, national tax allotment, or other sources to establish the RPTAF for updating SMVs, revising real property assessments, and administering real property taxes.
2. Subsidy for Third and Lower Income Class LGUs (Section 32): The Secretary of Finance, through the BLGF, will provide a subsidy to third and lower income class LGUs to augment their resources for the RPTAF.

XIII. Conclusion

Republic Act No. 12001 represents a comprehensive reform effort aimed at modernizing the real property valuation and assessment system in the Philippines. This Act’s focus on aligning with international standards, promoting transparency, and enhancing fiscal autonomy of LGUs is expected to bring significant benefits to various stakeholders. Hopefully, this Act can effectuate its main purpose to finally maintain a just, equitable and impartial property valuation system based on international standards and practices.

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