Quick answer

No single figure automatically determines both the selling price and the taxes on Philippine property.

Zonal value is an official government value historically set by the Bureau of Internal Revenue (BIR) for particular locations and property classifications. It is mainly relevant to tax computation, not a mandatory selling price.
Appraised value is a professional opinion of value as of a specified date and for a stated purpose—such as sale, bank financing, estate settlement, litigation, or insurance.
Market value is the estimated amount a willing buyer and willing seller would agree on in an arm’s-length transaction after proper marketing, with both acting knowledgeably and without compulsion.

The actual contract price may be higher or lower than any of these figures. However, declaring a lower price does not necessarily lower the taxes. Under the current valuation reform and its transition rules, the BIR generally applies the applicable official market-value schedule or the actual consideration stated in the transaction documents, whichever produces the legally required higher tax base.

The three values are not interchangeable

Value	Who determines it?	Main purpose	Does it dictate the selling price?	Can it affect taxes?
Zonal value	Historically, the BIR, with approval through Department of Finance issuances	National internal revenue tax valuation during the transition to the new system	No	Yes, while the applicable zonal schedule remains in force
Appraised value	A licensed appraiser, bank appraiser, government assessor, or other authorized valuer	A specific valuation assignment, date, and purpose	No; it informs negotiation or lending	Not by itself, unless the law or relevant government process adopts it
Market value	Estimated through market evidence and recognized valuation methods	Probable arm’s-length exchange value	It is often the best guide to a defensible asking price	Yes, when reflected in an approved government Schedule of Market Values
Actual selling price	Buyer and seller	Contract consideration	Yes—the parties agree on it	Yes; it is generally compared with the applicable official value

This comparison also shows why “appraised value” and “market value” are not true opposites. An appraisal is a process that produces an opinion of value. The type of value being estimated may be market value, investment value, liquidation value, or another basis stated in the report.

What market value means under Philippine law

Republic Act No. 12001, or the Real Property Valuation and Assessment Reform Act, defines market value as the estimated amount for which real property should exchange on the valuation date between a willing buyer and willing seller in an arm’s-length transaction, after proper marketing, with both parties acting knowledgeably, prudently, and without compulsion.

Market value therefore assumes a normal, adequately exposed sale. It may differ from the actual price when, for example:

the seller urgently needs cash;
the buyer is a relative or business affiliate;
the property is occupied or subject to a long lease;
access, title, zoning, easements, flooding, structural condition, or unpaid obligations reduce its appeal;
a buyer pays a premium to assemble adjoining properties; or
the transaction is a foreclosure, auction, expropriation, or other compelled transfer.

Market value is also date-specific. A sound valuation from two years ago may no longer describe the present market.

What appraised value means

Under Republic Act No. 12001, valuation or appraisal is a systematic analysis of property facts and relevant data resulting in a supportable estimate or professional opinion of value as of a specific date and for a specific purpose.

The appraisal should identify at least:

the property and ownership interest being valued;
the valuation date;
the purpose and intended users;
the basis of value;
the property’s physical, legal, and economic characteristics;
the evidence and assumptions used;
the valuation methods applied; and
limiting conditions or uncertainties.

Recognized approaches include the market approach, income approach, and cost approach. The appropriate approach depends on the property. Comparable sales may be most useful for ordinary residential land, while income evidence may matter more for a leased commercial building.

A bank’s appraised value is primarily for the bank’s credit and collateral decision. It does not guarantee that the property will sell for that amount, and the bank may lend only a portion of its accepted collateral value. A broker’s suggested listing price is also not necessarily a formal appraisal.

For a formal independent appraisal, use a properly licensed real estate appraiser. The profession is regulated under the Real Estate Service Act, Republic Act No. 9646, and licenses may be checked through the Professional Regulation Commission.

What zonal value means—and what it does not mean

A zonal value assigns a government value to property according to its location and classification. BIR schedules commonly distinguish residential, commercial, industrial, agricultural, condominium, parking, and other classifications, with special rules where the precise street, subdivision, or property type is not listed.

Zonal value is not:

a government-fixed minimum price at which an owner must sell;
proof that a buyer will pay that amount;
a bank’s required collateral value;
the same as the assessed value on a tax declaration; or
conclusive evidence of the property’s actual open-market value.

The Supreme Court has explained in the just-compensation context that zonal valuation is only one indicator of fair market value and cannot, by itself, conclusively establish actual value. See Republic v. Asia Pacific Integrated Steel Corporation, G.R. No. 192100, 12 March 2014.

Current BIR schedules may be checked through the official BIR Zonal Values page. Use the schedule and revision applicable to the property’s exact location, classification, and transaction date.

The new Schedule of Market Values system

Republic Act No. 12001 adopts market value as the single government valuation base and requires local assessors to prepare Schedules of Market Values, or SMVs, in accordance with the Philippine Valuation Standards. An approved SMV takes effect 15 days after the required publication by the Department of Finance and the concerned local government.

Once an approved SMV applies, the BIR must use the higher of:

the applicable SMV; or
the actual gross selling price or consideration stated in the real-property transaction documents.

Implementation must be checked property by property. Republic Act No. 12001 preserves existing zonal values and local schedules until they are repealed, superseded, revised, or replaced. Where an updated SMV is not yet applicable, its transition rule directs the BIR to use the highest of:

the existing local SMV or assessor’s market value;
the applicable BIR zonal value; or
the actual consideration stated in the transaction documents.

Accordingly, do not assume that the same valuation regime applies throughout the country. Confirm with the local assessor and the BIR Revenue District Office whether a newly approved and published SMV has already replaced the older schedules for the property.

The controlling framework appears in Republic Act No. 12001 and its implementing rules.

Do not confuse market value with assessed value

A tax declaration may show both a market value and an assessed value.

Under Republic Act No. 12001:

Assessed value = market value × applicable assessment level

Assessed value is the taxable value used in computing local real property tax. Because an assessment level is applied, it may be substantially lower than the property’s stated market value. It should not be substituted for the market-value figure when preparing a BIR tax computation unless a controlling rule expressly requires it.

The tax declaration is also not proof of ownership. Ownership and registrable interests must be checked against the Original, Transfer, or Condominium Certificate of Title and relevant Registry of Deeds records.

How these values affect capital gains tax and documentary stamp tax

For a typical individual selling Philippine real property classified as a capital asset, the final capital gains tax is generally 6% of the legally applicable gross tax base. It is a tax on gain presumed to have been realized, not a 6% tax on the seller’s actual net profit.

For an ordinary taxable conveyance, documentary stamp tax is generally ₱15 for every ₱1,000, or fractional part of ₱1,000, of the applicable tax base—effectively 1.5%.

During the transition, an illustrative computation could look like this:

Figure	Amount
Actual selling price in the deed	₱4,000,000
Applicable zonal value	₱3,500,000
Assessor’s applicable market value	₱3,200,000
Private appraisal	₱4,800,000

Assuming no new SMV has replaced the legacy schedules, the tax base would generally be ₱4,000,000—the highest applicable statutory figure. The private appraisal does not automatically increase the BIR tax base.

On that assumption:

Capital gains tax: ₱4,000,000 × 6% = ₱240,000
Documentary stamp tax: ₱4,000,000 × 1.5% = ₱60,000

If an effective new SMV instead valued the property at ₱4,500,000, the applicable tax base would generally be ₱4,500,000 because it exceeds the actual price.

This example does not include local transfer tax, registration fees, unpaid real property taxes, VAT, withholding tax, brokerage, notarial expenses, or other transaction costs.

First determine whether the property is a capital or ordinary asset

The 6% capital gains tax does not apply to every property sale.

Real property may be an ordinary asset when it is:

inventory or stock in trade;
held primarily for sale to customers in the ordinary course of business;
used in the seller’s trade or business;
a depreciable business building or improvement; or
otherwise covered by the classification rules for real estate dealers, developers, lessors, banks, or business property.

An ordinary-asset sale may involve expanded withholding tax, ordinary income tax, VAT or an exemption from VAT, invoicing obligations, and different returns. The classification depends on the seller and the property’s history and use—not merely on how the deed describes it. The detailed BIR rules are in Revenue Regulations No. 7-2003.

Classification should be resolved before the parties finalize the net price or assign responsibility for taxes.

Selling below zonal value or the applicable SMV

A property may be sold below its zonal value or government SMV if the parties genuinely agree on that price. The official value is not, by itself, a statutory minimum contract price.

The practical consequence is that taxes may still be computed using the higher official value. A low contract price can therefore leave the seller with tax based on money the seller did not actually receive.

The deed must state the true consideration. Do not use a second, undisclosed price or understate the consideration simply to reduce taxes. Aside from deficiency taxes, interest, surcharges, and possible enforcement consequences, a false price can create serious problems when proving payment, enforcing warranties, rescinding the sale, settling marital or estate shares, or defending the transaction in court.

A genuine below-market sale between related parties, an ordinary-asset transfer, or a transaction containing a gratuitous element should be reviewed for possible donor’s-tax and related consequences rather than treated as a routine discounted sale.

Principal-residence exemption: important but not automatic

An individual’s sale of a principal residence may qualify for capital-gains-tax exemption if the statutory conditions are satisfied. These generally include:

full use of the gross proceeds to acquire or construct a new principal residence;
completion of that use within 18 calendar months from the sale;
notification to the BIR within 30 days from the sale;
use of the exemption only once every 10 years; and
compliance with the escrow, return, documentation, and basis-carryover requirements.

If only part of the proceeds is properly used, the exemption may be proportionate rather than complete. Co-ownership, actual occupancy, spouses’ interests, and the address shown in tax records can affect eligibility.

The BIR’s current documentary requirements include a sworn letter of intent, proof of residence, an escrow agreement where required, and proof of purchase or construction of the replacement residence. Obtain advice before signing the deed because the 30-day notification period is short.

Filing deadlines after signing

For a taxable sale of a capital asset:

Capital gains tax return and payment: generally within 30 days following the sale, exchange, or disposition.
Documentary stamp tax return and payment: generally within five days after the close of the month in which the taxable document was made, signed, issued, accepted, or transferred.

The capital gains tax filing uses BIR Form No. 1706. The BIR’s Form 1706 guidelines explain the general 30-day deadline. The current BIR Form No. 2000-OT page states the documentary stamp tax deadline.

Waiting for the buyer’s bank, a new appraisal, or completion of the title transfer does not ordinarily suspend these tax deadlines. The date and legal effect of a contract to sell, conditional sale, deed of absolute sale, installment arrangement, foreclosure, or rescission may require separate analysis.

The BIR currently accepts covered applications through its eONETT portal, subject to the applicable procedure and documentary requirements. An electronic Certificate Authorizing Registration, or eCAR, is ordinarily needed before the Registry of Deeds can register the transfer.

Practical steps before agreeing on a price

Confirm ownership and authority to sell. Obtain a recent certified title, check annotations, identify spouses and co-owners, and resolve estate or corporate authority issues.
Classify the asset for tax purposes. Determine whether the property is a capital or ordinary asset in the seller’s hands.
Obtain current assessor records. Request certified tax declarations for the land and every improvement, together with a certificate of no improvement where appropriate.
Identify the applicable official schedule. Check the exact barangay, street, subdivision, condominium, property classification, and effective revision. Confirm whether a new RA 12001 SMV has already taken effect.
Commission an appraisal when the price is uncertain or the property is unusual. This is especially useful for income-producing, special-purpose, partly occupied, landlocked, damaged, or high-value property.
Compare genuine market evidence. Give more weight to recent closed transactions involving similar properties than to unsupported asking prices.
Prepare a complete cost estimate. Include the correct national taxes, local transfer tax, registration fees, real property tax clearance, association dues, professional fees, and any VAT or withholding-tax consequences.
State the true consideration and payment terms. Identify deposits, escrow arrangements, loan proceeds, installment dates, tax allocations, turnover conditions, and remedies for default.
Calendar every deadline immediately after signing. Do not assume an agent, broker, buyer, bank, or notary has filed the required returns.

Evidence worth preserving

Keep organized copies of:

the signed and notarized deed and all prior drafts;
proof of every payment, including bank records and official receipts;
the applicable zonal-value schedule or published SMV;
certified titles, tax declarations, surveys, and vicinity plans;
building permits, plans, occupancy records, and improvement details;
the complete appraisal report and its supporting photographs;
leases, association statements, and evidence of occupants;
comparable-sale data and written offers;
correspondence about price negotiations and disclosed defects;
BIR returns, payment confirmations, ONETT computation sheets, and eCAR;
local tax receipts, tax clearance, and Registry of Deeds documents; and
corporate approvals, powers of attorney, marriage records, or estate-settlement papers where applicable.

Common mistakes

Treating zonal value as the required asking price.
Using the assessed value instead of the applicable market value.
Assuming a bank appraisal guarantees the achievable sale price.
Applying 6% capital gains tax without first classifying the property.
Ignoring buildings or other taxable improvements.
Using the wrong street, property classification, or schedule revision.
Relying on an old appraisal in a changed market.
Declaring an artificial price to reduce taxes.
Assuming the principal-residence exemption applies automatically.
Signing before checking marital, co-ownership, estate, corporate, or title restrictions.
Missing tax deadlines while waiting for loan approval or BIR processing.

When professional help is urgent

Consult a Philippine lawyer, tax professional, or licensed appraiser promptly when:

the deed has already been signed and a filing deadline is approaching or has passed;
the property is used in business or held for lease or resale;
the seller is a developer, corporation, bank, foreign person, estate, or trust;
the transaction involves heirs, minors, absent co-owners, or disputed marital property;
the title, tax declaration, land area, classification, or actual improvements do not match;
the property has no clear zonal classification or an official value appears to have been misapplied;
the agreed price is materially below the official value;
the transaction is an installment sale, exchange, foreclosure, dacion en pago, auction, or related-party transfer;
a principal-residence exemption is being claimed;
there are occupants, leases, easements, access problems, adverse claims, or unpaid taxes; or
the parties are considering antedating, understating, or using inconsistent documents.

Frequently asked questions

Can I sell property below its zonal value?

Yes, if that is the genuine agreement. But taxes may still be computed on the higher applicable official value, so the transaction can produce a larger effective tax burden relative to the cash received.

Which value should I use for my asking price?

Use current market evidence, the property’s condition and legal status, and—where justified—a reliable appraisal. Zonal value is primarily a tax reference, not a pricing instruction.

Does the highest appraisal automatically become the tax base?

No. A private or bank appraisal is not automatically part of the statutory BIR comparison. The applicable government schedule and actual consideration control unless another law or official process requires a different valuation.

Does a buyer have to pay the bank’s appraised value?

No. The buyer remains free to negotiate, and the bank remains free to adopt its own collateral and lending limits.

Is capital gains tax based on my actual profit?

For a capital-asset real property sale subject to the 6% final tax, no. The tax is imposed on gain presumed to have been realized and is computed from the applicable gross tax base, not the seller’s actual profit after deducting acquisition and improvement costs.

Who is legally liable for capital gains tax?

The seller is generally the taxpayer liable for capital gains tax. The contract may allocate the economic cost or require the buyer to facilitate payment, but a private agreement does not by itself change the statutory tax liability.

Can I challenge a wrong zonal classification or official value?

An unsupported private appraisal does not automatically replace an official schedule. If the BIR used the wrong street, classification, area, schedule, or effective date, present the title, certified tax declaration, vicinity plan, photographs, assessor certification, and other supporting records to the proper RDO. A challenge to an assessor’s valuation must follow the applicable local assessment remedies and deadlines.

Official references

This article provides general legal and tax information, not advice for a particular transaction. Property classification, valuation, tax treatment, exemptions, and filing obligations depend on the seller, documents, property use, location, transaction date, and applicable local schedule. Sources and procedures were checked as of 20 July 2026.