Property Tax is payable by the owners by the year of assessment on “net assessable value”(NAV) at the standard rate. The year of assessment is from 1 April to 31 March of the next year.
The annual rent is the “assessable value” (AV) if the owner receives only rent and no other benefit. Rent receivable, which is due but not received yet, should be included in the AV.
Irrecoverable rent can be excluded from tax charge in the year it became irrecoverable. If any amount is recovered subsequently, it is tax assessable as income in the year of recovery.
In the case where the tenant pays rates, NAV is equal to the AV less a standard allowance of 20% for repairs and outgoings.
In the case where the owner pays rates, the rates paid are deductible before the 20% standard allowance.
Therefore, it allows for more deduction if the owner is responsible for paying the rates.
File the Right Tax Return for Different Kinds of Ownership
Tax Return for Individuals (BIR60) is for reporting rental income from solely owned properties. Property Tax Return (BIR57) is for jointly owned properties.
Since the owner is granted a 20% deduction every year, all other actual expenses cannot be deducted such as government rent, decoration fees, insurance, mortgage interests, building management fees, rent-collection fees.
Mortgage interest deduction on the purchase of property can only be claimed by owners who are eligible and have elected for Personal Assessment (PA).
Apart from rent, all cash and non-cash benefits given to the owner should be included in the AV, including lease premium payable. However, rent deposit should not be included in the owner’s tax return as it is not an income and is returnable to the tenant.
Lease premium spreading up to 36 months at maximum is permitted by the law.
Example
My property was rented out on 1 July 2021 for $30,000 monthly. I paid rates for 3 quarters to 31 March 2022 amounted to $12,000.
What is the amount of Property Tax for 2021/22?
*Computation for Provisional Property Tax 2022/23
It is based on the net assessable value for 2021/22 ($206,400) and grossed up to 12 months:
Can I get tax relief and pay less tax?
If you are eligible and have elected for PA, you can get tax relief. If you have elected for PA and have no other income, your payable tax will be reduced from $30,960 to $0.
If you have elected Personal Assessment for 2021/22, you are most likely not required to pay Provisional Property Tax for 2022/23.
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