THE LAST HOUSE STANDING

Let’s play a quick zoning-and-tax-base puzzle. In the photo is the iconic house from the animated movie “Up.”

For those unfamiliar with the movie, Carl’s (main character) house in Up is a small, colorful wooden home that looks like it came straight out of a storybook. Over time, towering gray buildings rise around it as developers buy out the entire neighborhood. But Carl refuses to sell. His little house becomes the last remaining holdout, a lone splash of color in a sea of concrete, symbolizing his memories, his grief, and his determination to protect the life he once shared with his wife, Ellie.

Using only the details in the caption, try to answer:

1. What is the total zonal value of the property?

2. Which tax applies to the seller—Capital Gains Tax or CWT + VAT?

PROPERTY DETAILS

TITLE

• Lot Area: 200 sqm

TAX DECLARATION – LOT

• Area: 200 sqm

• Market Value: Php4,000,000

TAX DECLARATION – IMPROVEMENT

• Area: 100 sqm

• Market Value: Php500,000

BIR ZONAL VALUES

• Residential Rate (RR): Php50,000/sqm

• Commercial Rate (CR): Php60,000/sqm

ANSWERS

1. Total Zonal Value

LOT:

200 sqm × Php60,000/sqm = Php12,000,000

IMPROVEMENT:

Market Value = Php500,000

TOTAL TAX BASE:

12,000,000 + 500,000 = Php12,500,000

Why use the Php60,000 Commercial Rate instead of the Php50,000 Residential Rate?

Because the BIR footnotes state:

“All real properties—regardless of actual use—located in a street, barangay, or zone that is predominantly commercial shall be classified as Commercial for purposes of Zonal Valuation.”

So while Carl lived a quiet residential life, the neighborhood around him was already predominantly commercial—hence the higher rate applies.

2. What tax applies?

Capital Gains Tax.

Carl used the property as his primary residence and was clearly not engaged in the real-estate or leasing business in the movie. Therefore, the sale is subject to CGT, not CWT + VAT–even if we used the "Commercial" zoning value.