Computation to Determine the Tax Base of Sales, Transfer or any Disposition of Real Property Including Improvements Thereon for Purposes of Computing Internal Revenue Taxes and Further Amendments to RAMO 3-87

February 4, 1988 REVENUE AUDIT MEMORANDUM ORDER NO. 1-88 SUBJECT : Computation to Determine the Tax Base of Sales, Transfer or any Disposition of Real Property Including Improvements Thereon for Purposes of Computing Internal Revenue Taxes and Further Amendments to RA MO 3- 87 TO : All Internal Revenue Officers and Others Concerned Although zonal values of real properties for purposes of computing internal revenue tax have already been established in certain places like Makati (East and West), Paraaque, Las Pias, Muntinlupa; Pasig, Taguig, Pateros and Quezon City (North and South), said values had only reference to land. Improvements were not included therein, except in the case of condominiums/townhouses where both land and improvements have been taken into account. This Revenue Audit Memorandum Order presents the manner of computation of the tax base of sale, transfer or any disposition of real property including improvements thereon where the zonal value of land has not been established, and at the same time introduces amendments to RAMO 3-87, as follows: A. Determination of Tax Base of Sale, Transfer or Any Disposition of Real Property Including Improvements . 1. Computation to determine the tax base of sale, transfer or any disposition of real property including improvements when the zonal value of land has been established : a. Total Selling Price/Consideration per Deed of Sale (land and improvement) P. . . Less: Approved Zonal Value of Land . . . Fair Market Value of Improvement P. . . b. Market Value of Improvement per latest Tax Declaration P. . . Add: 10% to 50% Percent thereof . . . Fair Market Value of Improvements P. . . c. Determination of Tax Base: Approved Zonal Value of Land P. . . Add: Fair Market Value of Improvement in "1(a)" or "1(b)" whichever is higher . . . Tax Base P . . . 2. Computation to determine the tax base of sale, transfer or any disposition of real property including improvement when zonal value of land has not yet been established : a. Total Selling Price/Consideration per Deed of Sale (land and improvement) P . . . b. Market Value of Land per Latest Tax Declaration plus 10%/50% thereof (Refer to RA MO 3- 87) . . . Add: Market Value of Improvement per Latest Tax Declaration plus 10% to 50% thereof . . . Fair Market Value for Land and Improvement . . . c. Determination of Tax Base: Total Selling Price/Consideration per Deed of Sale in "2(a)" or Fair Market Value for land and improvement in "2(b)", whichever is higher shall be the tax base. Tax Base P . . . 3. a. The following percentages shall be added to the market value of improvement as per classification made by the Provincial/City Assessor appearing in the latest tax declaration: 1) Type I (purely concrete) 50% 2) Type II (semi-concrete) 40% 3) Type III (wooden-first class wood) 30% 4) Type IV (wooden) 20% 5) Type V (nipa and other light materials) 10% b. Improvement defined is a valuable addition made to property or an amelioration in its condition, amounting to more than mere repairs or replacement of waste, costing labor or capital, and intended to enhance its value, beauty or utility or to adopt it for new or further purposes. (Chapter I, Section 3 (k) of the Real Property Tax Code). B. Further Amendments to RAMO 3-87 Under RAMO 3-87, the percentage of increase in the market value of real property (land and improvement) per latest tax declaration filed with the provincial/city assessor is fixed at 10% or 50%, depending on the location of said real property. For commercial or industrial property and for fishpond, the increase in market value is pegged at a uniform rate of 50% regardless of regional location. Paragraph 2(d) of RAMO 3-87 is amended to read as follows: (d) If the property is classified as a fishpond, and agricultural land planted to coconut, tobacco, sugar, rice, corn, citrus, and vegetable, the market value of land including improvements shall be increased by fifty (50%) also regardless of regional location. C. Requirement in the Disposition of Real Property Without any Improvement . The disposition of real property without any improvement shall be accompanied by a certification from the Office of Provincial/City Assessor and affidavit by the taxpayer that there is no existing improvement of the real property being sold, transferred or disposed of. Effectivity . This Order shall take effect immediately. All orders, circulars and issuances inconsistent wherewith are modified accordingly. (SGD.) BIENVENIDO A. TAN, JR. Commissioner