Paying “Building Tax” on Public-Bid Land in the Philippines

(A practical legal guide to Real Property Tax on buildings and improvements when land is acquired through public bidding)

1) First principles: there is no separate “building tax,” but buildings are taxed

In Philippine law, real property tax (RPT) under the Local Government Code of 1991 (LGC, R.A. 7160) is imposed ad valorem on land, buildings, machinery, and other improvements. What many people call “building tax” is simply the RPT attributable to a building or structure, which is assessed and billed either together with the land or, where ownership differs, separately in the name of the building’s owner or possessor.

Key ideas

Tax base: fair market value (FMV) × assessment level = assessed value; tax rate is applied to assessed value.
Separate assessment allowed: If the building is owned by someone other than the landowner (e.g., “building on leased land”), the assessor may issue a distinct Tax Declaration (TD) for the building, apart from the land’s TD.
Accrual and lien: RPT accrues every January 1 and constitutes a superior lien on the property until paid.

2) “Public-bid land” scenarios that change who pays the building’s RPT

“Public bidding” can refer to different processes. How RPT on a building is handled depends on which scenario applies.

A. Tax-delinquency public auction (LGC collection remedy)

What it is: The local treasurer auctions land (and usually its improvements) because of unpaid RPT.
Ownership & redemption: The highest bidder gets a Certificate of Sale; the delinquent owner has one (1) year to redeem by paying the purchase price plus statutory interest and costs. If not redeemed, title consolidates in the purchaser by Final Deed of Sale.
Who pays RPT on the building during redemption? The property remains in the delinquent owner’s name for that redemption year. As a rule of thumb:
- Past-due taxes that triggered the sale are covered by the proceeds of the auction.
- Current and subsequent RPT (including the building’s portion) keep accruing. LGUs often still bill the registered owner/declared owner of record until consolidation. Purchasers commonly choose to pay current taxes to protect their bid; amounts paid can be factored into redemption or post-consolidation settling.
After consolidation: The bidder (now owner) should transfer the TDs for both land and building (if the building was part of the sale) and will be liable for all RPT going forward.

B. Government disposition/award via public bidding (e.g., alienable public land, asset disposition)

What it is: A government agency (e.g., NHA, GOCC, or a privatization body) sells or awards land through a competitive bid.
Who pays the building RPT?
- If the winning bidder acquires both land and an existing building, the bidder must update the TDs (land and building) and pay RPT from the year after acquisition (practically, RPT for the year of transfer still “accrues” to the owner as of January 1; parties usually prorate by contract, but LGU collection follows the accrual rule).
- If the building remains owned by a third party (e.g., a bona fide builder on someone else’s land with separate TD), that building owner is separately assessed and liable for the building’s RPT; the land buyer pays RPT on the land TD.

C. Lease of government land won by bid; private party builds

What it is: You win a lease (not ownership) over government land and then construct a building.
RPT liability: Government property is generally exempt, but beneficial use granted to a taxable person becomes taxable in that person’s name. Your building will be declared separately and taxed to you, and in many LGUs the possessory/beneficial use of the land is also assessed (via special rules or contractual allocation).

3) How the building’s RPT is computed

Classification (residential, commercial, industrial, etc.) determines the assessment level.
FMV comes from the LGU’s Schedule of Market Values.
Assessed value = FMV × assessment level.
Basic RPT rate: up to 1% of assessed value in provinces; up to 2% in cities and Metro Manila.
Plus:
- SEF tax: an additional 1% (for local school boards).
- Idle land levy: up to 5% of assessed value for idle properties where applicable (rare for buildings, but may apply to land).
- Special levy for properties specially benefited by public works (allocated share of actual cost, capped by law).
Discounts & interest: Many LGUs grant up-to-20% discounts for advance/full-year payment. Late payment interest can be up to 2% per month, capped at 36 months.
When payable: RPT may be paid quarterly (on/before Mar 31, Jun 30, Sep 30, Dec 31) or in full.

4) Special ownership patterns that affect “who pays”

Building on another’s land (separate TDs): The building owner pays tax on the building TD; the landowner pays tax on the land TD.
Condominiums: The corporation/developer initially holds the master TD; after condo titles are issued, unit owners pay RPT on their pro-indiviso land share and improvements via unit-specific TDs.
Usufruct/beneficial use: The beneficiary/possessor is often the taxable party for the period of beneficial use.
Government property with private operator: Though the land is government-owned and exempt, improvements used by a private entity are usually taxable to that entity.

5) If you bought land at a tax-delinquency auction and there is an existing private building

Check the auction scope: Did the Certificate of Sale cover land only or land and improvements? Many LGUs phrase sales as “land and improvements thereon.”
Ask the Assessor whether the building has a separate TD (in someone else’s name).
During the 1-year redemption:
- Expect the original owner to remain the taxpayer of record.
- To protect your interest, you may pay current RPT (land/building) as they fall due; keep receipts.
If redeemed: You receive your purchase price plus statutory interest; you may claim reimbursement of taxes you advanced (check LGU practice).
If not redeemed: Obtain the Final Deed of Sale; consolidate title; then transfer TDs for land (and building, if included in the sale). From the next tax year, you’ll clearly be the taxpayer of record.

6) If you won government land by bid and plan to construct a new building

Declare the improvement: Within 60 days from completion or occupancy, file a Sworn Statement/Improvement Declaration so the Assessor can issue a building TD and assess RPT going forward.
Permits vs. taxes: Building permits, occupancy permits, zoning fees are not RPT; you must secure them, but they’re separate from “building tax.”
Start of liability: RPT accrues January 1 annually; for a building completed mid-year, the assessor will prorate for the year of first use or assess beginning the following cycle, depending on LGU practice. Always file on time to avoid back assessments and surcharges.

7) Payment workflow (typical LGU practice)

Title/possession documents: Deed of Sale/Final Deed (for auction), Notice of Award/Deed (for government disposition), TCT/CCT/Lease, and IDs.
Assessor’s Office:
- Transfer TD to your name (land and, if applicable, building), or open a new building TD for new construction.
- Submit plans/permits for new buildings and photographs/affidavits for existing structures.
Treasurer’s Office:
- Secure Order of Payment for basic RPT + SEF + any special levies (and prior delinquencies, if assumed).
- Pay in full or quarterly; keep official receipts.
If you’re the bidder in a tax sale: Keep auction documents together with RPT receipts for future title consolidation and TD transfer.

8) Common pitfalls & how to avoid them

Assuming the auction wiped out future RPT: It only addresses delinquencies up to sale; current/future RPT still accrues.
Ignoring separate building ownership: Always check for a separate building TD; you may be paying land taxes while a third party is billed for the building—or vice versa.
Missing the January 1 accrual rule: LGUs look at ownership/possession as of January 1; proration is contractual, not binding on the LGU.
Late declaration of improvements: Triggers back assessment and interest. File the improvement declaration promptly.
Relying on private receipts only: For tax purposes, official receipts from the LGU treasurer are what count.

9) Quick checklist (buildings on public-bid land)

Do I have the Certificate of Sale / Final Deed (tax sale) or Deed/Notice of Award (government disposition)?
Is there a separate building TD (different owner from the land)?
Have I transferred or opened the building TD in the assessor’s records?
Did I declare new improvements within 60 days of completion/occupancy?
Am I paying basic RPT + 1% SEF (and special/idle levies if applicable) on time (quarterly or in full)?
If in a redemption period, have I secured and kept receipts for any current RPT I advanced?

10) Frequently asked questions

Q: I won a tax sale in July. Who pays the building’s RPT for that year? A: RPT accrued January 1. The owner/declared owner of record as of that date remains liable to the LGU for that tax year, though auction and redemption rules complicate collection. Purchasers commonly advance current RPT to safeguard their interest; final allocation is handled by redemption or post-consolidation settlement.

Q: The land is government-owned; I lease it and built a warehouse. Am I taxed? A: Yes. Beneficial use granted to a private entity is taxable. Your building will be assessed to you; some LGUs also assess the possessory interest on the land.

Q: Is there any way to reduce my “building tax”? A: You cannot bargain the rate, but you can:

Ensure the classification (residential vs. commercial) and floor area are accurate;
Avail of advance-payment discounts;
Check if disaster damage or partial demolition warrants a reassessment;
Confirm you are not misclassified as idle or subject to a special levy without basis.

11) Core legal anchors to know (by topic)

Local Government Code (R.A. 7160) — Real property taxation: imposition, assessment, collection, lien, public auction, redemption, SEF, idle/special levies, discounts/interest, installments.
Civil Code — Ownership, accession, buildings separate from land ownership by agreement or by law.
Local tax ordinances and Schedules of Market Values — Your LGU’s rates, assessment levels, discounts, and procedures.
Disposal/privatization statutes or agency rules — For sales or leases of government assets/lands via public bidding.

12) Practical next steps

Identify your scenario (tax sale with/without redemption; government disposition; lease).
Visit the Assessor to verify TDs for land and building; request printouts.
Cure paperwork (transfer TDs or open a new building TD; file improvement declarations).
Pay or schedule RPT; keep official receipts.
For complex situations (e.g., separate building owner, contested redemption, beneficial-use assessments), consult a local property-tax practitioner to align documents with LGU practice.

This article summarizes settled principles and typical LGU practice on real property taxation of buildings where land is acquired through public bidding. Specific LGU ordinances and factual nuances can change outcomes, so verify locally before you act.