How to Compute Zonal Value of Property in the Philippines

A practitioner’s guide for sales, donations, and estates

1) What is “zonal value”?

“Zonal value” is the Bureau of Internal Revenue’s (BIR) reference fair market value (FMV) for real property in a specific location (street, subdivision, or barangay) and classification (residential, commercial, industrial, agricultural). It is issued by the Commissioner of Internal Revenue through Revenue Memorandum Orders (RMOs) under the Commissioner’s valuation power in the National Internal Revenue Code (NIRC).

Zonal values are primarily used to determine the tax base for national taxes on one-time transactions involving real property (sale, exchange, donation, succession), and sometimes for VAT and creditable withholding on ordinary asset sales.

2) When do zonal values matter?

They are relevant in computing the tax base for:

Capital Gains Tax (CGT) on sales of real property classified as capital assets by individuals (generally 6% of the higher of gross selling price or FMV).
Documentary Stamp Tax (DST) on deeds of sale or conveyance of real property (generally 1.5% of the higher of consideration or FMV).
Estate Tax (6% of the net estate, with land valued at FMV at time of death: BIR zonal value if available, or the assessor’s schedule).
Donor’s Tax (6% of net gifts; land valued at FMV at time of donation on the same rule).
Value-Added Tax (VAT) for sales of ordinary assets by VAT-registered real estate dealers/lessors (output VAT base cannot be lower than the higher of consideration or FMV).
Withholding Taxes on sales of ordinary assets (creditable withholding computed on the higher of selling price or FMV).

Key principle: For national taxes, the FMV used is the higher of (a) BIR zonal value, if any, or (b) FMV per the assessor’s schedule (“market value” on the property’s tax declaration) for the relevant date. Do not use the assessor’s assessed value (that is for local real property tax).

3) Core concepts you must identify

RDO and Property Location – Which Revenue District Office covers the property? Zonal values are listed by city/municipality and often by named streets/subdivisions or barangays.
Property Classification – Residential, commercial, industrial, or agricultural; condominiums and parking slots have their own entries.
Applicable RMO and Effectivity Date – Use the schedule in force on the taxable date:
- Sale/Exchange: date of notarized deed (or transfer of ownership, if earlier under special rules).
- Donation: date of donation.
- Estate: date of death.
Measured Area – Land area (sq.m.) for lots; floor area (sq.m.) for condominium units and parking slots.
Improvements – Buildings or structures are not given BIR zonal values; their FMV typically follows the assessor’s schedule of values (or appraisal), separate from land.

4) The computation workflow (land; with or without building)

Step A — Determine the correct zonal entry (land)

Match city/municipality → barangay or named street/subdivision → classification.
Some schedules distinguish “along [street]” vs. “interior” or list different blocks/phase names. Use the entry that fits the exact location.

Land FMV (zonal) = Zonal rate per sq.m. × Land area (sq.m.)

Step B — Determine the assessor’s FMV

Obtain the property’s tax declaration (TD).
Use the “market value” (per square meter schedule) × area.
If there are improvements, the TD usually states the building market value following the assessor’s schedule (by building type, grade, and depreciation).

Step C — Select the FMV to use for national taxes

For the land component, compare:

(1) Zonal value of land, and
(2) Assessor’s market value of land. Use whichever is higher.

For the building/improvement component, use the assessor’s market value (or a competent appraisal if required by the RDO). Add this to the land FMV (from the higher-of rule above) when the tax requires FMV of the whole property (e.g., DST, VAT on ordinary assets).

For CGT on capital assets, the BIR historically treats the FMV for comparison as the higher of: • Selling price vs. (Land zonal or assessor’s market value of land) plus (Assessor’s market value of improvements). In practice, ONETT evaluates the total FMV (land + improvements) based on these components.

Step D — Compare with the contract price

For CGT, DST, VAT, and creditable withholding, taxes use the higher of contract price (gross selling price) or FMV.
For Estate/Donor’s Tax, use FMV as of the relevant date (no selling price to compare).

5) Detailed examples

Example 1 — Vacant residential lot (capital asset; CGT & DST)

Land area: 200 sq.m.
Zonal rate (residential): ₱30,000/sq.m.
Assessor’s market value (land): ₱25,000/sq.m.
Deed selling price: ₱5,200,000

Land FMV (higher of zonal vs assessor): ₱30,000 × 200 = ₱6,000,000 (vs assessor ₱5,000,000 → choose ₱6,000,000)

CGT base: Higher of selling price ₱5,200,000 vs FMV ₱6,000,000 → ₱6,000,000 CGT (6%): ₱360,000

DST base: Higher of consideration ₱5,200,000 vs FMV ₱6,000,000 → ₱6,000,000 DST (1.5%): ₱90,000

(No building to consider.)

Example 2 — House-and-lot (capital asset; CGT & DST)

Lot area: 180 sq.m.
Zonal rate (residential): ₱40,000/sq.m. → Land zonal ₱7,200,000
Assessor’s market value (land): ₱35,000/sq.m. → ₱6,300,000
Assessor’s market value (building): ₱2,000,000
Deed selling price: ₱8,500,000

Land FMV: higher of ₱7,200,000 (zonal) vs ₱6,300,000 (assessor) → ₱7,200,000 Total FMV (land + improvements): ₱7,200,000 + ₱2,000,000 = ₱9,200,000

CGT base: higher of selling price ₱8,500,000 vs total FMV ₱9,200,000 → ₱9,200,000 CGT (6%): ₱552,000

DST base: higher of consideration ₱8,500,000 vs total FMV ₱9,200,000 → ₱9,200,000 DST (1.5%): ₱138,000

Example 3 — Condominium unit with parking (capital asset)

Unit floor area: 50 sq.m.; zonal rate for condo units in the building: ₱180,000/sq.m. → ₱9,000,000
Parking slot TCT area: 12.5 sq.m.; zonal rate for condo parking in the same building: ₱120,000/sq.m. → ₱1,500,000
Assessor’s market value (unit + parking): ₱9,800,000
Deed selling price (bundled): ₱10,200,000

Zonal total: ₱9,000,000 + ₱1,500,000 = ₱10,500,000 Assessor total: ₱9,800,000

FMV (higher): ₱10,500,000 CGT base: higher of selling price ₱10,200,000 vs FMV ₱10,500,000 → ₱10,500,000 CGT (6%): ₱630,000 DST (1.5%): ₱157,500 on the same base.

Example 4 — Estate tax (land with old house)

Death on 1 June 2025.
Land zonal value (as of 1 June 2025): ₱15,000,000
Assessor’s market value (land): ₱13,000,000
Assessor’s market value (building): ₱1,000,000 (old house)

Estate FMV component: Land = higher of zonal vs assessor → ₱15,000,000 Improvements = assessor ₱1,000,000 Gross value included in the estate: ₱16,000,000 (before deductions and standard ₱5M deduction, if applicable under prevailing rules). Estate Tax (6%) is computed on net estate after allowable deductions.

6) Special situations and practical rules

No zonal value published for the area Use the assessor’s market value (per schedule of values) as FMV. ONETT may still validate via ocular inspection or appraisal if there are doubts.
Property straddling multiple entries If a lot fronts a high-value street but is partly interior, some RMOs provide specific rates “along” versus “inside.” Apply the entry that matches the lot’s actual situation; when ambiguous, ONETT typically uses the highest applicable rate for the frontage portion.
Corner or irregular lots Unless the RMO expressly provides a premium or adjustment, apply the listed rate. (Some schedules differentiate by exact street; others do not.)
Right-of-way, easements, and encumbrances Zonal schedules do not automatically discount for encumbrances. If material, prepare supporting documents (annotated TCT, engineering plans, appraisals) and request ONETT valuation consideration.
Buildings and other improvements BIR schedules generally do not assign zonal values to improvements. Use the assessor’s market value or a BIR-accepted appraisal. If the building is undeclared, ONETT may require a sworn statement, photos, and an appraisal; assessor’s update may also be required.
Condominiums Zonal values are typically per sq.m. of floor area and building-specific (or street-specific). Parking slots often have a separate zonal line and are valued independently unless the RMO states otherwise.
Agricultural land Ensure classification aligns with the RMO. Conversion or reclassification for zoning purposes does not automatically change the BIR classification unless the RMO provides new rates. Use the classification in the applicable RMO.
Ordinary vs. capital asset
- Capital asset (e.g., your family home) sold by an individual: 6% CGT on the higher of price vs FMV.
- Ordinary asset (inventory/held for sale by real estate dealers; property used in trade or business): no 6% CGT; gain is subject to normal income tax; sale may be VAT-able; creditable withholding and DST still apply using higher-of rules. Correct classification is crucial and determined by facts (use in business, taxpayer type, holding purpose), not by the TCT label alone.
Change of schedules Use the schedule effective on the taxable date. If a new RMO takes effect after the deed or death/donation, it generally does not retroact.
Foreign currency or non-cash consideration Convert to PHP at the relevant BIR-accepted rate on the taxable date; for non-cash consideration, obtain a defensible cash equivalent. The higher-of comparison with FMV still applies.

7) What documents do you actually submit or review?

Title (TCT/CCT) and Lot/Unit Plan (to verify area and location).
Latest Tax Declaration(s) for land and improvements (to get the assessor’s market values).
Applicable RMO/Zonal printout (the exact line item for the address/subdivision/building).
Deed (sale, exchange, donation) or Death Certificate (estate).
Official Appraisal, photos, or engineering documents if there are unusual features.
BIR Forms (illustrative):
- CGT: BIR Form 1706 (real property capital gains).
- DST: BIR Form 2000-OT (one-time).
- Donor’s: BIR Form 1800.
- Estate: BIR Form 1801.
- Creditable Withholding on ordinary asset sales: applicable 16xx series.
Clearances: Tax clearance, eCAR (Electronic Certificate Authorizing Registration) from ONETT before BIR clearance for title transfer.

Practical tip: ONETT examiners will compute the FMV themselves. Having the exact zonal line and assessor’s market values ready significantly speeds up issuance of the eCAR.

8) Mini-checklist you can follow

Identify taxable event and date.
Confirm RDO and current RMO in force on that date.
Match exact location to the correct zonal line and classification.
Compute land zonal value = rate × land area.
Obtain assessor’s market value for land and for improvements.
Choose higher of land zonal vs assessor for land; add improvements (assessor).
Compare total FMV with contract price (if applicable); select higher as tax base.
Apply correct tax (CGT/DST/VAT/withholding/estate/donor’s).
Prepare forms and proofs; submit to ONETT for eCAR.

9) Frequently asked questions

Q: What if the zonal value seems unrealistically high (or low)? A: Zonal values are binding for tax base purposes while effective. You may present appraisals and facts for improvements and special encumbrances, but for land, ONETT will typically apply the published zonal (or higher assessor market value, if that is higher).

Q: Which is used for estates and donations: zonal or assessor? A: Use the higher of zonal vs assessor for land, plus assessor (or appraised) value for improvements, all as of the date of death or donation.

Q: Do I ever use the assessor’s assessed value? A: No, not for national taxes. The assessed value is a local tax base for real property tax only. For BIR purposes, use the assessor’s market value (from the schedule of values).

Q: Are parking slots and storage rooms in condos valued separately? A: Usually yes. Many RMOs list separate zonal rates for parking and sometimes for storage; compute each on its own area.

Q: How are interior lots priced when the RMO only lists a street rate? A: Follow the specific wording of the RMO line. If it says “along [Street]” and your lot is not along that street, find the applicable barangay/subdivision entry; ONETT won’t infer discounts unless the schedule says so.

Q: What if my land area on the title differs from the actual surveyed area? A: The title/official survey controls unless ONETT accepts a newer approved survey. Discrepancies should be resolved (e.g., with a DENR/LRA-approved survey) before final tax computation.

10) Quick reference formulas

Land Zonal Value = Zonal Rate (₱/sq.m.) × Land Area (sq.m.)
Land FMV for BIR = max( Land Zonal Value, Land Assessor Market Value )
Total FMV (for most taxes) = Land FMV (above) + Assessor Market Value of Improvements
CGT (individual; capital asset) = 6% × max( Gross Selling Price, Total FMV )
DST (deed of sale) = 1.5% × max( Consideration, Total FMV )
Estate/Donor’s: Use Total FMV as of date of death/donation (then apply rates on net).
VAT/Withholding (ordinary assets): Base cannot be lower than max( Price, Total FMV ); apply the applicable VAT/WHT rate.

Final notes

Always use the effective schedule on the taxable date.
Keep documentary proof (zonal schedule printout, TDs, appraisals, photos).
Expect ONETT to verify and, where needed, conduct an ocular inspection or require clarifications on classification and improvements.

With these steps and checks, you can compute zonal values and the resulting tax base confidently and in line with Philippine practice.