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Transforming Real Estate: How the New Property Valuation Reform Act Impacts the Philippines

Here are the key points that you need to know about the Real Property Valuation and Assessment Reform Act (RPVARA), a recently introduced law reform poised to revolutionize the real estate valuation landscape.

 

What is the Impact of this law reform on real estate developers, homebuyers, and various other stakeholders in the property market?

The Real Property Valuation and Assessment Reform Act (RPVARA) aims to establish "a just, equitable, and efficient real property valuation system." The Department of Finance (DOF) asserts that this reform will enhance tax collections without raising tax rates while expanding the tax base used for property and related taxes. One of the main features of the bill is the creation of a comprehensive and current electronic database containing all real estate transactions, addressing the current lack of transparency in the real estate market.

• The Bureau of Local Government Finance (BLGF) within the Department of Finance (DOF) has highlighted several issues that the RPVARA aims to address:
• Eliminating multiple, overlapping valuations that lead to significant discrepancies in property values from different valuation agencies.
• Updating outdated valuations used for governmental purposes, particularly for national (such as the BIR's Zonal Value) and local taxation (like the Schedule of Market Value).
• Addressing the financial impact of outdated valuations, which can result in higher costs and foregone revenues, leading to discrepancies where the government pays relatively higher values compared to collected taxes.
• Establishing a single agency responsible for ensuring that property valuations adhere to international valuation standards.
• Implementing a comprehensive real property electronic database to facilitate regular and accurate property valuations.

 

How will the Real Property Valuation and Assessment Reform Act (RPVARA) affect the local government tax income and tax collection practice?

The significant disparity between the actual transaction price, the BIR's zonal value, and the assessed value by local government units (LGUs) has led to a common practice in the Philippines of declaring a lower transaction price closer to the zonal value.

Once enacted, this law will resolve the issue of outdated government valuations by harmonizing and standardizing the diverse valuation systems and methodologies used by various agencies such as the Bureau of Internal Revenue (BIR), LGUs through their Assessor’s Offices, the Department of Environment and Natural Resources (DENR), and government financial institutions.

 

Higher tax will impact the people's vote, any measures to reduce the impact on the popularity or vote?

The Department of Finance (DOF) emphasized that the Real Property Valuation and Assessment Reform Act (RPVARA) aims to improve tax collections without increasing tax rates. To mitigate potential negative impacts, the government can focus on fairness and equity by ensuring property valuations are accurate and transparent, conduct public awareness campaigns to highlight the benefits of the reform, implement the changes incrementally to ease the transition, and reassure the public that the reform is designed to enhance tax collection efficiency rather than raise tax rates.

The Real Property Valuation and Assessment Reform Act is a significant move towards modernizing the Philippines' property valuation system. By improving transparency, standardizing valuations, and promoting fair tax practices, the reform aims to benefit developers, homebuyers, and the government. This is expected to contribute to a more stable and attractive real estate market in the Philippines.

 

Get the latest information about the Philippine Real Estate Market! For an in-depth look into the country’s property market, contact the KMC Savills Research and Consultancy team here or send us an email at [email protected].