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Mr. Juan dela Cruz constructed two identical buildings, a two storey house located along the same street at C M.Recto Avenue, Davao City.  It cost him Php 4,000,000 to build each building.  Building A was utilized as a grocery store and the other one, Building B  was used as their residential house.  The tax rate of Davao City presently is 2 1/5 percent.

Computation of Annual Tax

Actual Use of  Building A = Commercial Building

Market Value (MV) x Assessment Level (AL) =Assessed Value
Php 4,000,000 x 70 %= Php 2,800,000
Assessed Value (AV)  x  Tax Rate (TR)=Annual Tax
Php 2,800,00 x 2 1/2% or Php 70,000 per year.
 
 
Actual Use of Building B =Residential

MV x AL=Assessed Value
Php 4,000,000 x 40% = php 1,600,000

AV x TR-Annual Tax Due

Php 1,600,000 x 2 1/2% Php 40,000 per year.
 

PHP 70,000 less Php 40,000 = Php 30,000 difference

Reason=Actual use is the basis in the assessment of Real Properties.  Commercial buildings take a higher assessment assessment level than the residential ones.

NB: Tax rates differ in one City to the Other. because this is being decided by their local Councils.

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