Amending RAMO 1-88 Regarding the Determination of the Tax Base for Sales, Transfers, or Other Disposition of Real Property including Improvements thereon for Internal Revenue Tax Purposes

February 18, 1991 REVENUE AUDIT MEMORANDUM ORDER NO. 2-91 SUBJECT : Amending RAMO 1-88 Regarding the Determination of the Tax Base for Sales, Transfers, or Other Disposition of Real Property including Improvements thereon for Internal Revenue Tax Purposes TO : All Internal Revenue Officers and Others Concerned A. OBJECTIVES : This Order amends RAMO 1-88, dated February 4, 1988 regarding the determination of the tax base for sales, transfers or any disposition of real property including improvements thereon with the specific objective of updating the tax base . acd B. DEFINITION OF TERMS : 1. Agricultural land devoted principally to the raising of crops, such as rice, corn, sugarcane, tobacco, coconut, etc., or to pasturing, dairying, inland fishing, salt-making and other agricultural uses, including timber lands and forest lands. (Chapter 1, Sec. 3(c), Real Property Tax Code, P.D. No. 464as amended) 2. Commercial land devoted principally to commercial purposes, and generally for the object of profit. (Chapter 1, Sec. 3(h), Real Property Tax Code, P.D. No. 464as amended). Improvements thereon shall be classified as commercial. 3. Condominium is an interest in real property consisting of a separate interest in a unit in a residential, industrial or commercial building and an undivided interest in common directly or indirectly, in the land on which it is located and in other common areas of the building. (Sec. 2, The Condominium Act, R.A. No. 4726). 4. Condominium " Unit " means a part of the condominium project intended for any type of independent use or ownership including one or more rooms or spaces located in one or more floors (or part or parts of floors) in a building or buildings and such accessories as may be appended thereto. (Sec. 3(b), The Condominium Act, R.A. No. 4726 ). 5. Improvement 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 1, Sec. 3(k), Real Property Tax Code, P.D. No. 464as amended) 6. Industrial land devoted principally to industry as capital investment. (Chapter 1, Sec. 3(1), Real Property Tax Code PD No. 1 & 4 as amended) Improvements thereon shall be classified as industrial. 7. Townhouse is an independent dwelling on an independent lot which is attached on both sides to a similar dwelling on both adjacent lots. The attachment is made along two common or party walls that are jointly owned. (Manual of Housing/ Planning and Design Criteria by Joseph De Chiara and Lee Koppelman) C. DETERMINATION OF THE TAX BASE FOR LAND AND IMPROVEMENT : The computation to determine the tax base shall be as follows: 1. When the zonal value of land HAS BEEN established a. Value of Improvement: 1) Total Selling Price/ Consideration Per Deed of Sale (Land and Improvement) x x x Less: Zonal Value of Land x x x ____ Value of Improvement x x x ==== 2) Construction Cost Per Building Permit and/or Occupancy Permit Plus 10% Thereof Per Year After Year of Construction; or Market Value Per Latest Tax Declaration Plus 100%/150% Thereof (See C(4)). Market Value of Improvement x x x ==== b. Determination of Tax Base: Zonal Value of Land x x x Add: Market Value of Improvement in 1.a.(1) or 1.a.(2), Whichever is Higher x x x ____ TAX BASE OF LAND AND IMPROVEMENT x x x ==== 2. When the zonal value of land has NOT been established a. Total Selling Price/ Consideration Per Deed of Sale (Land and Improvement) x x x ==== b. Land: Market Value Per Latest Tax Declaration Plus 100%/150% Thereof. (See C(3)) x x x Add: Improvement Construction Cost Per Building Permit and/or Occupancy Permit Plus 10% Thereof Per Year After Year of Construction; or Market Value Per Latest Tax Declaration Plus 100%/150% Thereof. (See C(4)) x x x ____ Total Market Value of Land and Improvement x x x ==== c. TAX BASE OF LAND AND IMPROVEMENT (2(a) or 2(b), Whichever is Higher) x x x ____ 3. Market Value of Land There shall be added to the market value per latest tax declaration ONE HUNDRED PERCENT (100%) thereof. PROVIDED , that if the property is classified as commercial, industrial and agricultural devoted to fishpond/prawn farm, ONE HUNDRED FIFTY PERCENT (150%) shall be added thereto. 4. Market Value of Improvement The market value of improvement, except townhouse, condominium unit, commercial and industrial improvements where the zonal values have already been established, shall be determined as follows: Improvements introduced in: a. 1986 1990 The construction cost appearing in the building permit and/or occupancy permit duly certified by the Provincial/City/ Municipal Engineer shall invariably be used; PROVIDED , that TEN PERCENT (10%) of the construction cost shall be added thereto for every year, after the year of construction; Provided , however, that this additional 10% shall not apply to improvements constructed in 1991. Provided, further that in places, other than in National Capital Region and Chartered Cities (Annex "A"), if there is no building/occupancy permit, the market value appearing in the latest tax declaration plus ONE HUNDRED PERCENT (100%) thereto shall apply. Provided finally , that ONE HUNDRED FIFTY PERCENT (150%) shall be added thereto if the improvement is classified as commercial, industrial and/or agricultural devoted to fishpond/prawn farm. b. 1985 and Prior Years The market value appearing in the latest tax declaration plus ONE HUNDRED PERCENT (100%) thereof, shall be used; PROVIDED , that ONE HUNDRED FIFTY (150%) shall be added thereto, if the improvement is classified as commercial, industrial and/or agricultural devoted to fishpond/prawn farm. D. OTHER REQUIREMENT FOR TRANSFER/DISPOSITION OF REAL PROPERTY : In case of sale, transfer or other disposition of real property without any improvement, an affidavit of taxpayer and/or certification from the Provincial/City/Municipal Assessor that there is no existing improvement thereon, shall be required. E. AMENDATORY PROVISION : This Order amends RMO 3-87 and RAMO 1-88 and all other issuances inconsistent therewith. F. EFFECTIVITY : This Order takes effect immediately. (SGD.) JOSE U. ONG Commissioner ANNEX A NATIONAL CAPITAL REGION AND THE CHARTERED CITIES UNDER EXECUTIVE ORDER NO. 249, EFFECTIVE JULY 1, 1987 NATIONAL CAPITAL REGION : CITIES : 1. Kalookan 2. Pasay 3. Manila 4. Quezon MUNICIPALITIES : 1. Malabon 2. Navotas 3. Valenzuela 4. Mandaluyong 5. San Juan 6. Muntinlupa 7. Pasig 8. Marikina 9. Las Pias 10. Makati 11. Pateros 12. Taguig 13. Paraaque CHARTERED CITIES : REGION I : 1. Baguio 2. Dagupan 3. Laoag 4. San Carlos REGION III : 1. Angeles 2. Cabanatuan 3. Palayan 4. San Jose 5. Olongapo REGION IV : 1. Batangas 2. Cavite 3. Lipa 4. Lucena 5. Puerto Princesa 6. San Pablo 7. Tagaytay 8. Trece Martirez REGION V : 1. Iriga 2. Naga 3. Legaspi REGION VI : 1. Bacolod 2. Bago 3. Cadiz 4. Iloilo 5. La Carlota 6. Roxas 7. San Carlos (Negros Occidental) 8. Silay REGION VII : 1. Bais 2. Canlaon 3. Cebu 4. Davao 5. Dumaguete 6. Lapu-Lapu 7. Mandaue 8. Tagbilaran 9. Toledo REGION VIII : 1. Calbayog 2. Ormoc 3. Tacloban REGION IX : 1. Dapitan 2. Dipolog 3. Pagadian 4. Zamboanga REGION X : 1. Butuan 2. Cagayan de Oro 3. Gingoog 4. Oroquieta 5. Ozamis 6. Surigao 7. Tangub REGION XI : 1. Davao 2. Gen. Santos REGION XII : 1. Iligan 2. Marawi 3. Cotabato ANNEX B 18 February 1991 MEMORANDUM FOR: Commissioner Jose U. Ong Respectfully submitted herewith is the Proposed Revenue Audit Memorandum Order (RAMO) amending RAMO 1-88, for your approval. Hereunder are the proposed amendments: SALIENT FEATURES OF AMENDMENTS OF RAMO 1-88 A. Basis of computation for improvement: RAMO 1-88 Proposed RAMO CHANGES INTRODUCED: (1) If there is a zonal value of land: Market value of improvement per latest tax declaration plus 10% or 50% thereof, (pursuant to RAMO 3-87) is now changed to construction cost per building permit and/or occupancy permit plus 10% thereof after year of construction or market value per latest tax declaration plus 100% thereof. (See C(4) of proposed RAMO) (2) If there is no zonal value of land: Market value of land per latest tax declaration plus 10% or 50% thereof, is now changed to market value per latest tax declaration plus 100% or 150% thereof. (See C(3) of proposed RAMO) ADD: Improvement Market value of improvement per latest tax declaration plus 10% or 50% thereof. (Pursuant to RAMO 3-87) is now changed to construction cost per building permit and/or occupancy permit plus 10% thereof after year of construction or market value per latest tax declaration plus 100% or 150% thereof. (See C(4) of proposed RAMO) B. Dropped paragraph 3a of RAMO 1-88 re types of improvements; substituted it with new paragraph 4 regarding determination of market value of improvement. C. Changed paragraph B on percentage to be added to market value of commercial, industrial, fishpond and agricultural lands planted to coconut, tobacco etc. to new paragraph 3 regarding market value of land. D. Added paragraph D regarding additional other requirement for transfer/disposition of real property. (SGD.) IMELDA L. REYES Assistant Commissioner Assessment Service