Market Value vs Assessed Value, and How These Drive Taxes and Registry Fees

1) Why this topic matters

In Philippine estate settlement, disputes and delays often trace back to one practical issue: valuation. Heirs commonly ask:

“Do we pay based on the assessed value on the tax declaration?”
“Or the market value?”
“Why is the Registry of Deeds (RD) using a higher value than what’s in our documents?”

The short answer is: assessed value is mainly for real property tax (RPT), while estate-related taxes and most transfer/registration fees generally use fair market value rules—often pegged to the higher of government-set benchmarks.

This article explains the valuation concepts and then ties them to the major costs in estate registration: estate tax, local transfer tax, and RD registration fees, plus common supporting payments.

2) Core valuation concepts (Philippine setting)

A. “Market Value” on a Tax Declaration (Local Assessor concept)

A Philippine Tax Declaration (Tax Dec) for land/buildings typically shows at least two values:

Market Value (sometimes called “fair market value” in local assessment documents)
- Determined by the City/Municipal Assessor using the local Schedule of Market Values (SMV) approved by ordinance.
- This is not necessarily “what buyers would pay,” but the LGU’s standardized valuation.
Assessed Value
- Used as the tax base for Real Property Tax (RPT).
- Computed as: Assessed Value = Market Value × Assessment Level
- Assessment levels vary depending on property classification (residential, commercial, agricultural, etc.) and applicable local rules.

Key point: The assessed value is usually lower than market value because it is a fraction of market value.

B. BIR “Fair Market Value” (National internal revenue concept)

For national tax purposes (including estate tax), Philippine rules generally look at fair market value (FMV) determined using government benchmarks—commonly for real property:

BIR Zonal Value (BIR-issued valuation per zone/area), and
FMV per Tax Declaration (which, in practice, refers to the Market Value reflected on the Tax Dec, not the assessed value)

A widely applied rule in transfers (including estate contexts) is:

Use the higher between the BIR zonal value and the FMV per Tax Declaration.

Key point: When people say “tax declaration value,” the relevant figure is typically the Market Value, not the Assessed Value.

C. True “market price” vs government valuation

Even if a property could sell for ₱20M in the open market, BIR and LGU systems may compute using a standardized FMV (zonal or assessor’s market value). Estate settlement costs are often driven by those official values, not negotiated selling price—unless a later sale occurs.

3) Estate settlement pathways (because the documents affect fees)

A. Extrajudicial Settlement (EJS)

Used when:

The decedent left no will, and
There are no disputes, and
Heirs are known and agree.

Common instruments:

Deed of Extra-Judicial Settlement, sometimes with Sale (if an heir sells his/her share), or with Waiver/Renunciation (which may trigger donor’s tax issues depending on how it’s structured).

B. Judicial Settlement

Used when:

There is a will, or
Heirs/distribution is contested, or
Court intervention is necessary.

Court cases add litigation costs, timelines, and often require additional clearances and orders for RD registration.

Practical effect on fees: Whether extrajudicial or judicial, you generally still need to address:

Estate tax compliance and the BIR transfer clearance (eCAR/CAR)
Local transfer tax
RD registration fees
RPT clearance and updated tax declaration

4) The major charges tied to valuation

A. Estate Tax (BIR)

Estate tax is a national tax on the privilege of transferring property upon death. Under the TRAIN-era regime, the estate tax system is largely 6% of net estate after allowable deductions (with important statutory deductions like a standard deduction and family home deduction, subject to conditions).

Valuation base (real property): For estate tax purposes, the FMV of Philippine real property is generally determined at the date of death, commonly using the higher of:

BIR Zonal Value, or
FMV per Tax Declaration (typically the assessor’s Market Value)

Important: This is a frequent point of confusion—BIR does not compute estate tax using assessed value.

Other assets—typical valuation approaches (overview):

Bank deposits: outstanding balance (and often includes accrued interest up to date of death depending on documentation)
Shares of stock:
- Listed shares: commonly valued using stock market values around the date of death (method depends on applicable rules and documentation)
- Unlisted shares: commonly book value-based approach (depending on financial statements and regulatory rules)
Vehicles/Personal property: supported by documents/valuations acceptable to BIR
Business interests: financial statements and appraisal/valuation support may be required

Compliance output that matters to RD: To transfer title, heirs typically need BIR’s clearance for transfer—commonly called eCAR/CAR—covering the real property being transferred/registered.

B. Local Transfer Tax (City/Municipality/Province)

LGUs impose a transfer tax on transfers of real property ownership (including transfers by reason of death). Rates vary by LGU (subject to legal caps and local ordinances), so the exact percentage depends on the location.

Valuation base: LGUs often compute the transfer tax on the higher of:

consideration (if any) stated in the instrument, or
a government benchmark value (often the tax declaration market value and/or other official values used locally)

In estates, there may be no “price,” so the benchmark values usually control.

Common requirement: proof of payment of transfer tax is usually required before or during RD processing.

C. Registry of Deeds (RD) Registration Fees (LRA schedule)

The Registry of Deeds charges registration fees when:

registering the estate settlement instrument (EJS or court order),
issuing a new Transfer Certificate of Title (TCT) in the name of heirs,
annotating liens/encumbrances,
registering related affidavits, waivers, or deeds.

How valuation comes in: RD registration fees for conveyances are commonly computed using a schedule based on the value of the property or consideration, and in practice registries often look to:

BIR zonal value / values shown in the eCAR, and/or
Tax Declaration market value, and/or
declared consideration (if a sale is involved)

Because assessed value is not a good proxy for property “value” in registry practice, RDs generally do not compute the main registration fee from assessed value.

Other RD charges that may appear (often fixed or per page/entry):

entry fees
issuance fees for new title
annotation fees
legal research fees / IT fees (varies in how offices itemize)
certified true copies

Reality check: Different RD offices can be strict about what “value” they accept as the base; many are aligned to BIR clearance values because the RD will not transfer without BIR’s clearance anyway.

D. Real Property Tax (RPT) arrears and clearances (LGU)

While RPT itself is not an estate “transfer” fee, it commonly becomes a gating item because LGUs often require:

Tax clearance, and/or
updated payments before releasing updated tax declarations or transfer tax documents.

Valuation base for RPT: Assessed value (not market value). This is where assessed value is central—but that’s a different bill.

5) Market value vs assessed value—what each is used for (quick guide)

Market Value (Tax Dec “Market Value” / Assessor value)

Commonly used for:

comparisons against zonal value for BIR-based FMV determination
LGU transfer tax bases in many local practices
RD registration fee bases (often alongside zonal value / BIR value)

Assessed Value

Primarily used for:

Real Property Tax (RPT) computation
some penalties/charges that are tied to RPT system computations

Rule of thumb: If you’re paying an estate-related transfer charge (BIR, LGU transfer tax, RD fees), expect market/zonal-based valuation, not assessed value.

6) Common estate registration scenarios where valuation drives the bill

Scenario 1: Simple EJS, transfer to heirs (no sale)

What drives costs:

Estate tax base: higher of zonal vs tax dec market value (date-of-death benchmark)
Transfer tax: benchmark-based
RD fees: value-based schedule (often keyed to BIR/Tax Dec market values)

Scenario 2: EJS with “Waiver” in favor of one heir

This can become tricky:

If an heir renounces in favor of a specific person, it may be treated as a donation (donor’s tax implications) depending on structure and circumstances.
If the renunciation is “general” (in favor of the estate/heirs proportionately), it may be treated differently.

Valuation matters: donor’s tax (if triggered) uses its own valuation base rules, often aligned with FMV concepts.

Scenario 3: EJS plus immediate sale to a buyer

Now you may have:

estate settlement transfer, and
a sale transfer (with its own taxes, documentary requirements, and value bases)

This can increase costs and documentation significantly.

7) Practical process map (typical extrajudicial flow) and where value is checked

Gather documents
- Death certificate
- Titles (TCT/CCT), tax declarations
- Certificate of No Improvement (if applicable) / building tax dec
- Heirship documents (birth/marriage certificates)
- SPA if heirs are abroad
- Latest RPT receipts and tax clearances
Prepare settlement instrument
- Deed of EJS (and partition, if applicable)
- Publication requirement (commonly required for EJS)
File and pay estate tax with BIR
- BIR reviews assets and valuations (zonal vs tax dec market values)
- Pay estate tax (and penalties if late)
- Obtain eCAR/CAR (critical for RD)
Pay LGU transfer tax
- City/Municipal Treasurer issues official receipts
Register with RD
- Present eCAR/CAR, deed/court order, tax clearances, receipts
- RD computes fees based on value schedules and processes title transfer
- New title issued in heirs’ names
Update Tax Declaration
- Submit new title to Assessor’s Office
- New Tax Dec issued under heirs

8) Frequent misconceptions (and how to avoid delays)

Misconception: “Assessed value is the basis for estate tax and RD fees.”

Usually false. Assessed value is mainly for RPT. Estate and registry systems tend to use FMV benchmarks.

Misconception: “The deed says the property is worth ₱X, so that’s what we pay on.”

Often false, especially if ₱X is below zonal value or assessor market value. Government offices frequently compute using the higher benchmark value.

Misconception: “We can transfer title first, then deal with BIR.”

In most cases, RD will not transfer inherited real property without BIR clearance (eCAR/CAR).

Misconception: “Tax declaration is optional.”

Practically false. You typically need updated tax declarations, RPT status, and clearances to move through BIR/LGU/RD steps.

9) Planning tips (legal and practical)

Check zonal value early. If the BIR zonal value is much higher than the tax dec market value, your estate tax and RD fees may jump.
Update tax declarations if needed. An outdated tax dec can delay processing; improvements not declared can also trigger issues.
Watch for “waivers” and renunciations. Poorly drafted waivers can inadvertently trigger donor’s tax or create BIR objections.
Account for penalties. Late filings and late payments can add surcharges/interest/compromise penalties.
If there are many properties, build a valuation schedule. List each property with: title no., location, zonal value, tax dec market value, and whichever is higher.

10) Bottom line rules to remember

Assessed Value = for RPT (local property tax), not typically for estate tax or RD fee base.
Market Value on the Tax Declaration (Assessor’s market value) is commonly used as a benchmark for BIR/LGU/RD computations.
For real property estate transfers, official practice frequently follows “higher of zonal value or tax dec market value” principles.
Estate registration costs are not one fee—they are a chain: BIR (estate tax) → LGU (transfer tax) → RD (registration fees), each typically influenced by FMV, not assessed value.

If you want, I can also provide:

a checklist of documents per office (BIR, LGU Treasurer, RD, Assessor), and
a sample valuation worksheet (template) that heirs use to anticipate the likely fee bases.