ZONAL VALUATION PROCESS

The determination of zonal valuation is a three tiered approach. Basically, these three states of zonal evaluation starts with the Sub-technical Committee (STCRPV), to the Technical Committee (TCRPV) and then to the Executive Committee (ECRPV) before its final approval by the Secretary of Finance through the issuance of a Department Order.

These committees were created by the Ministry of Order Nos. 20-86 and 21-86 and were recently amended by Department Orders No. 10-92 AND 11-92. The Executive Committee is composed of the Commissioner of Internal Revenue as Chairman, Assistant Commissioner, (National Assessment Office) and representatives from the Bureau of Local Government Finance, National Tax Research Center, and two competent appraisers from the private sector as members.

Tapped as Consultants are representatives of the Housing and Land use Regulatory Board (HLURB), National Mapping and Research Information Authority (NAMRIA), Land Registration Authority (LRA), and National Housing Authority (NHA). It is in charge with the function of studying, analyzing and approving zonal valuations passed upon by the Technical Committee and to decide on difficult questions or protest raised in the lower level committees.

The Technical Committee (TCRPV), on the other hand, is composed of the Assistant Commissioner of the Internal Revenue as chairman, and for its members include the representatives from the Bureau of Local Government Finance, National Tax Research Center, Bureau of Internal Revenue and two representatives from the Association of Private Real Estate Appraisers, Brokers or Developers. It has for its function the study and preparation of zonal schedules of fair market values on real properties to be used as basis in the computation of any internal revenue tax.

Department Order No. 10-92 further gave this committee an additional authority to create a Sub-technical Committee on Real Property Valuation (STCRPV).

This Sub-technical Committee is composed of the Revenue District Chief in every branch or zones as chairman, and the Provincial/City/Municipal Assessors and two competent appraisers/brokers representing the private sector, as members. This committee will basically provide the initial work related to the establishment of zonal values on real properties situated within the respective jurisdiction of the Revenue District Chief.

(a) STEP-BY-STEP PROCEDURE

Revenue Memorandum Order No. 56-89 provides for the procedural steps in establishing the zonal values from the Revenue District Branches until its final approval by the Secretary of Finance. The following therefore are the steps adopted in arriving at the zonal values of real properties.

1. Preparation of a preliminary schedule of recommended values on real properties.

After determining the boundaries or zones and classification of the lands, the Sub-technical Committee shall prepare the schedule of recommended values by the zones/barangays or barrios (the smallest political unit in the Philippines) under the following classifications:

(a) Residential Regular ………. RR (b) Commercial Regular ……… CR (c) Residential Condominium ………….. RC (d) Commercial Condominium ………… CC (e) Agricultural ………. A (f) Industrial ………. I (g) General Purpose ………. GP (h) Government Purpose ………. GL (i) Area for Priority Development ……. APD

The recommended values shall be based on acceptable methods of appraisal, records of the most recent and actual sales/transfers/exchanges of properties appearing on documents filed in public offices, private records of banks, realtors or appraisers in the locality and records of the Provincial/City/Municipal Assessors.

The recommended zonal values shall be made only after a deliberation has been conducted with the appraisers and assessor of the locality on the three recommended values of the land. The final recommended value shall be the average of the two highest values.

2. Submission/Review of the Schedule of Recommended Zonal Values.

The schedule of recommended values of real properties duly signed by the chairman of the Sub-technical Committee and members including the maps and listings shall be submitted to the Technical Committee (TCRPV).

The Technical Committee shall then evaluate the submitted schedule of recommended zonal values. In the absence of any objections of comments, the same shall be finalized and submitted to the Executive Committee for consideration, otherwise, said schedules shall be returned to the Sub-technical Committee for necessary corrections or adjustments.

3. Public Hearing/Notice to the Public

A public hearing shall be held in (1) Metro Manila Areas; (2) chartered cities and (3) provincial capitals with the following in attendance:

(a) Chairman or a representative of the Executive Committee; (b) Chairman or representative of the Technical Committee; and (c) chairman and members of the Sub-technical Committee. In places other than the above-mentioned areas, a public hearing shall be held with the following in attendance – (a) Revenue Regional Director; (b) a representative of the Technical Committee; and (c) chairman and members of the Sub-technical Committee.

Notice of public hearing shall be given wide publicity in newspapers of general circulation, radio and television. The Revenue District Office concerned shall likewise disseminate the information by preparing notices to be posted in the places where the public hearing will beheld together with the letters of invitation to local officials association of realtors, civic organization, etc.

In places where public hearing is not feasible, notice to the public regarding the recommended zonal values shall instead be made through the Municipal and Barangay (Village) Officials, by posting the said zonal values in public places for thirty (30) days and/or weekly publications in local newspapers of general circulation for three consecutive weeks. If no comments or objections are received within the said period, the schedule of values shall be finalized for final approval.

4. Implementation of Approved Zonal Values

As soon as the Executive Committee accepts the zonal values, a Department Order on the implementation of the said zonal values shall be prepared for approval and signature of the Secretary of Finance.

Upon issuance of the Department Order implementing the approved schedule of zonal values on real properties, the latter shall be published in the Official Gazette or any newspaper of general circulation. Said values shall be take effect fifteen days from the date of circulation.

(b) ZONAL VALUE COMPARED TO MARKET VALUE

The general standard for valuation of property for tax purposes is market value. Market Value is defined as the price a willing buyer would pay to a willing seller, assuming that neither is under any compulsion to buy or sell. It can also be described as the most probable price, as of specified date, in cash, or in terms equivalent to cash, or in other precisely revealed terms, for which the specified property rights should sell after reasonable exposure in a competitive market under all conditions requisite to fair sale, with the buyer and seller each acting prudently, knowledgeable, and for self interest, and assuming that neither is under undue duress.

As differentiated from market value, zonal value is a value set by the government for internal tax purposes and is derived at by taking into consideration factors such as location or zone of the property, its most recent selling price, appraisal valuation or realtors and the assessed values as prepared by the Provincial/City/Municipal Assessors. It can be said therefore that zonal values are some sort of a “compromise value” derived at from a diversified valuation procedure adopted or used by the different members of the recommending body. When these values are approved by the Secretary of Finance, then they become the statutory values of the properties until their subsequent revision or amendment.

In the various zonal values approved by the Department of Finance, it can be observed that the zonal values are relatively lower than the current market value but is a more realistic valuation of properties for internal revenue tax purpose than those values on the same properties adopted by the local governments which is based on the assessed value.

E. TAXES AFFECTED BY ZONAL VALUATION IN THE NATIONAL TAX