4-Hectare Agricultural Land Tax Computation in the Philippines

A comprehensive legal-practical guide (2025 edition)

Scope & limits – This article synthesises national-level rules in force as of 28 May 2025 and the typical practices of local government units (LGUs). Ordinances vary from province to province; always verify the current schedule of market values (SMV) and assessment levels at the assessor’s office where the land is situated. Nothing herein constitutes formal legal advice.

1. What taxes can arise from owning or dealing with agricultural land?

Stage	Kind of tax	Principal governing law	Who imposes / collects
Annual ownership	Real Property Tax (RPT) + 1 % Special Education Fund (SEF) levy; optional additional tax on idle/agricultural lands	Local Government Code (LGC) 1991, Book II ch. II (RA 7160)	Province / City / Municipality (cities may levy up to 2 × provincial rate)
Transfer by sale or donation	– 6 % Capital Gains Tax (CGT) on the higher of zonal/fair market value (FMV) or selling price (if the seller is an individual or a domestic corporation not habitually engaged in real-estate development) – 1.5 % to 3 % Documentary Stamp Tax (DST) on the same tax base – Local Transfer Tax ≤ 0.5 % of tax base – 12 % VAT only if the seller is VAT-registered and the land is held for business (not common for purely agricultural land)	National Internal Revenue Code (NIRC) 1997, as amended; LGU ordinances	Bureau of Internal Revenue (BIR); LGU treasurer
Partition, succession	Estate tax (6 % on net estate), donor’s tax if gratuitous division, DST, RPT succession requirements	NIRC; Civil Code	BIR; LGU
Leasing	Creditable Withholding Tax (CWT) on rental; Income tax on lessor	NIRC	BIR

2. Real Property Tax (RPT) mechanics for agricultural land

Identify the land’s taxable value LGU assessor-prepared SMV assigns a peso value per square metre or per hectare based on location, productivity class, irrigation, and road access.
Apply the assessment level (AL) Under Sec. 218, LGC the AL for agricultural land is graduated:

FMV bracket (₱)	Assessment level
≤ 100,000	20 %
100,000 – 500,000	25 %
500,001 – 1 M	30 %
1 M – 2 M	35 %
> 2 M	40 %

Multiply by the basic tax rate Province & municipalities: 1 % of assessed value Cities & Manila: 2 % of assessed value
Add mandatory levies SEF: 1 % of assessed value (uniform nationwide) Optional idle-land surcharge: up to 5 % of assessed value if > 1 ha and unproductive for > 1 yr (Sec. 236, LGC)

Illustration – Four-hectare riceland in Nueva Ecija (provincial LGU rate)

Step	Computation	Amount (₱)
1. FMV per latest SMV (example): ₱300,000/ha × 4 ha	–	1,200,000
2. Assessed value: FMV × AL (AL = 30 %)	1,200,000 × 30 %	360,000
3a. Basic RPT (1 %)	360,000 × 1 %	3,600
3b. SEF (1 %)	360,000 × 1 %	3,600
Total annual due	–	₱7,200

If the same land sat idle, the LGU could impose an added idle-land tax of up to 5 % → ₱18,000 surcharge, total ₱25,200.

3. Special rules & exemptions

Provision	Effect	Key citations
Retention vs. CARP coverage – Constitutional 5-ha retention limit for landowners; thus a 4-ha parcel is often outside compulsory acquisition.	Does not by itself affect RPT, but influences valuation when acquired by DAR/BANR.	Art. XIII Sec. 4 Constitution; RA 6657
Lands awarded under CARP, CLOA title	Exempt from RPT for the first 5 yrs from issuance (Sec. 66, RA 6657).	DAR AO 03-1994; LGU practice
Cooperatives producing agricultural goods	Exempt from all local taxes except RPT for real properties used in production; other properties are exempt (Art. 61 RA 9520).	CDA Memo 2015-01
Barangay micro business enterprise (BMBE) farms	Exempt from local tax collections except RPT (Sec. 7, RA 9178).	–
Disaster relief condonation	LGUs may, by ordinance, condone/suspend collection of RPT on calamity-affected farms.	Sec. 191, LGC

4. Taxation upon transfer of a 4-ha agricultural land

Capital Gains Tax (CGT) – 6 % Base: higher of (a) BIR zonal value; (b) LGU FMV; or (c) gross selling price in the deed. Example: zonal ₱350/m²; FMV in deed ₱300/m²; selling price ₱320/m².

Base = ₱350 × 40,000 m² = ₱14 M CGT = 6 % → ₱840,000
Documentary Stamp Tax – 1.5 % Same base as CGT: ₱14 M × 1.5 % = ₱210,000
Local transfer tax – up to 0.5 % (province) ₱14 M × 0.5 % = ₱70,000
Registration fees – minimal, plus notarisation.

Tip: Where the zonal value far exceeds actual productive worth, consider zonal value re-classification petitions or updated BIR zonal hearings.

5. Estate planning for farmers with ≤ 5 ha

Strategy	Tax result
Keep title under the parents’ names; children inherit upon death	6 % estate tax on net FMV minus ₱5 M standard deduction & funeral/medical deductions.
Lifetime donation to qualified heirs (executed via Deed of Donation)	6 % donor’s tax on FMV; but donor retains usufruct if desired.
Formation of family corporation or cooperative	Subsequent transfers become share deals; land remains titled in entity name and may enjoy incentives (e.g., CREATE Act, agribusiness VAT zero-rating).

6. Compliance calendar & penalties

Deadline	Obligation	Penalty for late filing/payment
31 January	File sworn statement of true property value (optional but may lower SMV disputes)	None specified if omitted, but deprives owner of contesting FMV
31 March or quarterly	Pay RPT (may pay quarterly without interest)	2 % interest per month, capped at 72 % of basic tax
Within 30 days of sale	CGT, DST, Transfer tax filing	25 % surcharge + 12 % interest p.a.
Estate returns: 1 yr from decedent’s death	Estate tax return & payment	25 % or 50 % surcharge + 12 % interest

7. Practical checklist before buying / selling a 4-ha farm

Secure updated tax declaration & RPT clearance – proves no arrears.
Check DAR land use clearance – ensure parcel is not CARP-covered or, if CLOA-covered, observe 10-yr alienation prohibition.
Verify zonal value at BIR RR – used for CGT.
Inspect LGU idle-land ordinances – surcharge exposure.
Obtain barangay certification – absence of tenancy conflict.
Prepare funds – CGT & DST usually borne by seller; registration & transfer tax by buyer (negotiable).
Notarise deed – ensure complete TCT, tax-map boundaries, technical description.

8. Key statutes & administrative issuances (quick reference)

Republic Act 7160 – Local Government Code (Secs. 197-283 on real property taxation)
Revenue Regulations 13-99, 07-03, 12-2018 – CGT & DST guidelines
RA 6657, DAR AOs 02-2004 & 03-1994 – agrarian-reform-covered properties, tax exemptions
RA 8424 (NIRC) – CGT, donor’s, estate, VAT
BIR Zonal Value Schedules – latest per Revenue District
CREATE Act (RA 11534) – income-tax incentives if land held by registered agribusiness enterprise

9. Frequently asked questions

Question	Short answer
Is my 4-ha land automatically exempt from CARP?	Yes, it is below the 5-ha retention limit, unless contiguous lands held by the same owner in the same municipality exceed 5 ha.
Can I pay RPT in advance?	Yes; most LGUs give 10 % discount for full-year payment in January.
Does agricultural re-classification to residential/commercial change the tax?	Absolutely. Assessment level will jump to 40 %-50 % and local approval + DAR conversion clearance are required.
Are solar farms on agri land taxed as idle?	No. Once a DENR-DOE endorsed lease or conversion permit is registered, the LGU typically re-classifies the parcel to “industrial” and imposes normal RPT, not idle-land surcharge.

10. Summary

Owning a 4-hectare farm in the Philippines entails three recurring tax themes:

Annual RPT – modest if actively cultivated; larger if idle or in a city.
Transfer-related taxes – CGT (or estate/donor), DST, local transfer tax.
Sector-specific incentives & pitfalls – agrarian reform retention, CARP exemptions, cooperative privileges.

Proactive documentation, timely payment, and familiarity with both national law and LGU ordinances keep tax cost predictable and avoid surcharges that can quadruple the bill.

When in doubt, request a written ruling from the BIR or consult a local assessor—fees for clarity are far cheaper than penalties.