Assessed value is the figure your real property tax (amilyar) is actually computed on; fair market value (now being folded into a single “market value” under a 2024 reform) is the assessor’s base figure before that computation; and zonal value is a separate Bureau of Internal Revenue benchmark used only when a property changes hands through a sale, donation, or inheritance. Using the wrong one is the most common reason people miscalculate what they owe — a tax declaration’s assessed value is almost always the smallest of the three figures, so using it to estimate capital gains tax or donor’s tax on a transfer will understate the bill. The rules are also mid-change: Republic Act No. 12001, the Real Property Valuation and Assessment Reform Act, is merging these bases into one, though its rollout has been contested well into 2026 (RA No. 12001, via LawPhil).
Decision Snapshot
- What they are: Three different peso figures for the same property — fair market value (the assessor’s base appraisal), assessed value (a percentage of that base, used only for real property tax), and zonal value (the BIR’s separate benchmark for taxing a transfer).
- Where to check them: Fair market value and assessed value appear on the property’s tax declaration from the city or municipal assessor; zonal value is looked up separately at bir.gov.ph/zonal-values by Revenue District Office (RDO).
- The key qualifying detail: Assessed value = fair market value × a fixed assessment level (20% for residential land, for example), so it is always lower than fair market value and should never be used to estimate taxes on a sale.
- The main rule: Real property tax (amilyar) is computed on assessed value, at up to 2% in cities/Metro Manila or 1% in provinces, plus a mandatory 1% Special Education Fund levy. National transfer taxes — capital gains tax, documentary stamp tax, donor’s tax, estate tax — instead use the highest of zonal value, the assessor’s fair market value, or the actual selling price (Local Government Code, Secs. 233 and 235, via LawPhil).
- Important 2026 caveat: RA 12001 (2024) is supposed to merge fair market value and zonal value into one “market value” per LGU, but in August 2026 President Marcos asked Congress to temporarily suspend the rollout, and the Finance Secretary has since said full implementation now targets 2028 — so expect both old and new figures to coexist for a while longer.
- Next step: Pull a current tax declaration from the assessor for the fair market value and assessed value, and separately check the zonal value schedule for the property’s exact RDO, before estimating any tax.
What Each Term Actually Means
Under the Local Government Code of 1991, fair market value is defined as the price at which a property may be sold by a seller who is not compelled to sell and bought by a buyer who is not compelled to buy — essentially an open-market estimate. The city, municipal, or provincial assessor sets it for every property through a Schedule of Fair Market Values, and it is the base figure everything else is derived from (RA No. 7160, Sec. 199(l), via LawPhil).
Assessed value, also called taxable value, is fair market value multiplied by an “assessment level” — a percentage fixed by local ordinance that varies by property classification (residential, commercial, agricultural, and so on). It is always a fraction of fair market value, never equal to or higher than it, and it is the one figure that actually appears on a real property tax bill (RA No. 7160, Secs. 199(h) and 218, via LawPhil).
Zonal value is a separate figure altogether, set by the Bureau of Internal Revenue rather than the local assessor. It applies a peso-per-square-meter benchmark to each barangay or zone and exists for one purpose: to stop a buyer and seller from understating the price in a deed of sale to shrink their national tax bill. Our companion guide covers how to look it up by RDO (BIR Zonal Value of Property in the Philippines).
| Term | Who sets it | Governing basis | Primarily used for |
|---|---|---|---|
| Fair market value (becoming “market value”) | City/municipal/provincial assessor | RA 7160, Secs. 198–217; revised by RA 12001, Secs. 4(l) & 14–19 | The base figure for assessed value, and one input into the national-tax comparison |
| Assessed value (taxable value) | Computed by the assessor: fair market value × assessment level | RA 7160, Secs. 199(h) & 218; RA 12001, Sec. 4(b) | Real property tax (amilyar) — the only one of the three actually billed every year |
| Zonal value | BIR, approved by the Secretary of Finance, per Revenue District Office | Former NIRC Sec. 6(E) (repealed by RA 12001); transitioning into the Schedule of Market Values under RA 12001, Secs. 18(a)(3) & 29 | National taxes on a transfer: capital gains tax, DST, donor’s tax, estate tax |
Which Value Is Used for Real Property Tax (Amilyar)?
Real property tax is computed only on assessed value — never on fair market value directly, and never on zonal value. The formula is assessed value × the local tax rate, which a province may set at up to 1% and a city or a municipality within Metro Manila at up to 2%, plus a mandatory additional 1% for the Special Education Fund (RA No. 7160, Secs. 233 & 235, via LawPhil).
Assessed value, in turn, depends on the assessment level set for that property’s classification. The Local Government Code fixes the maximum levels local governments may apply; a sanggunian ordinance sets the actual rate up to that cap. For land, the ceilings are:
| Land classification | Maximum assessment level |
|---|---|
| Residential | 20% |
| Timberland | 20% |
| Agricultural | 40% |
| Commercial | 50% |
| Industrial | 50% |
| Mineral | 50% |
Buildings use their own graduated brackets that climb as fair market value increases rather than a single flat percentage (RA No. 7160, Sec. 218(b), via LawPhil). The practical takeaway is simpler than the table: a residential lot’s assessed value is typically only about a fifth of its fair market value, which is exactly why it understates what a sale would actually be taxed on. For the full computation, deadlines, and penalty rules, see our guide to real property tax rates and deadlines.
Which Value Is Used for National Taxes on a Sale, Donation, or Inheritance?
When real property changes hands — through a sale, a donation, or an inheritance — the Bureau of Internal Revenue does not use assessed value at all. Instead, for a capital-asset sale, it computes the applicable national taxes on whichever is highest of: the gross selling price stated in the deed, the BIR zonal value, or the assessor’s fair market value shown on the tax declaration (RA No. 7160, Sec. 18(a)(3), as applied under RA No. 12001, via LawPhil).
| Tax | Typical rate | When it applies |
|---|---|---|
| Capital gains tax | 6% of the tax base | Sale of real property classified as a capital asset |
| Documentary stamp tax | 1.5% of the tax base | Deed of sale, donation, or other conveyance |
| Donor’s tax | 6% of the net gift over the annual exempt amount | Property given as a gift, including to family |
| Estate tax | 6% of the net estate | Property transferred to heirs after death |
Because this “highest of three” comparison always includes zonal value and fair market value but never assessed value, the figure on an old tax declaration’s assessed-value line is the wrong number to anchor any sale, donation, or estate computation on. For documentary stamp tax specifically, see our guide to DST rates and computation; for the zonal-value lookup process itself, see BIR Zonal Value of Property in the Philippines.
The 2024 Reform That’s Merging These Figures — and Why It’s Stalled
Republic Act No. 12001, the Real Property Valuation and Assessment Reform Act (RPVARA), signed on June 13, 2024, is meant to end this three-way split. It adopts a single “market value” as the one valuation base for both local and national real-property-related taxes, to be set per LGU through a Bureau of Local Government Finance-supervised Schedule of Market Values (SMV) that eventually replaces both the assessor’s old fair market value schedule and the BIR’s separate zonal values (RA No. 12001, Secs. 3(b), 4(l) & 15–18, via LawPhil). The law’s saving clause keeps existing zonal values in force until each LGU’s new SMV is approved and formally replaces them (RA No. 12001, Sec. 31), and while an SMV is still being finalized, the Commissioner of Internal Revenue is directed to use whichever is higher of the existing zonal value, the existing SMV, or the actual transaction price (RA No. 12001, Sec. 29).
That transition has not gone to the original two-year schedule. In July 2026, Finance Secretary Frederick Go told reporters at a national forum on RPVARA implementation that the policy groundwork was complete and full implementation is now targeted for 2028, with local government units carrying the operational work of building their SMVs. Then, in August 2026, President Marcos asked both chambers of Congress to temporarily suspend the law’s implementation, citing concerns about additional costs landing on property owners and businesses and the need for “a gradual and reasonable transition.” Private-sector groups have separately asked for an even longer phase-in. As of this writing, Congress has not publicly confirmed what, if any, suspension has been enacted, so the practical result is that most LGUs are still using their old fair market value schedules and the BIR is still using existing zonal values side by side — treat any claim that one has fully replaced the other as something to verify locally, not assume.
Worked Example: Same Property, Three Different Tax Bills
The figures below are a hypothetical illustration only — not a real property, not real government-set values, and not tax advice. They exist to show why the three terms produce very different numbers, not to predict any specific transaction’s cost.
- The property: A residential house and lot. Assume the assessor’s fair market value is ₱1,500,000 for the lot and ₱2,500,000 for the house (₱4,000,000 total).
- Computing assessed value for real property tax: Residential land’s assessment level is 20%, so the lot’s assessed value is ₱300,000. Assume the house falls in the bracket carrying a 40% assessment level, giving an assessed value of ₱1,000,000. Total assessed value: ₱1,300,000.
- Computing the annual real property tax (property located in a city): 2% × ₱1,300,000 = ₱26,000, plus the 1% SEF levy × ₱1,300,000 = ₱13,000. Total annual RPT: ₱39,000.
- Now assume the owner sells the property for ₱5,000,000, and the hypothetical BIR zonal value for that lot and improvement works out to ₱5,800,000.
- Computing the tax base for the sale: Compare the selling price (₱5,000,000), the zonal value (₱5,800,000), and the assessor’s fair market value (₱4,000,000) — the assessed value of ₱1,300,000 never enters this comparison at all. The highest figure, ₱5,800,000, becomes the tax base.
- Resulting transfer taxes: Capital gains tax of 6% × ₱5,800,000 = ₱348,000, plus documentary stamp tax of 1.5% × ₱5,800,000 = ₱87,000.
The annual amilyar (₱39,000) and the one-time transfer taxes on a sale (₱435,000 combined in this illustration) are computed on entirely different bases — which is exactly why mixing up assessed value, fair market value, and zonal value leads to the wrong estimate in either direction.
What to Verify Before You Rely on These Figures
- Check whether your LGU has adopted an updated Schedule of Market Values under RA 12001, or is still using its old fair market value schedule alongside a separate BIR zonal value — this affects which figure is currently in force.
- Pull a current tax declaration from the city or municipal assessor rather than relying on an old copy; fair market value and assessed value both change after a general revision.
- Look up the zonal value separately, matched to the exact RDO and property classification, rather than assuming it tracks the assessor’s figure.
- Never use assessed value to estimate a sale, donation, or estate tax — it is the smallest of the three figures and is not part of that comparison at all.
- For an active transaction, have the final comparison of selling price, zonal value, and fair market value reviewed by the handling notary, broker, or a tax professional before paying, since errors here affect eCAR issuance and title transfer timelines.
- Watch for further announcements on RA 12001’s rollout, since the 2026 suspension request and the 2028 implementation target both mean the current split between fair market value and zonal value could persist longer than originally planned.
Frequently Asked Questions
Which is usually the highest: assessed value, fair market value, or zonal value?
Assessed value is almost always the lowest of the three, since it is fair market value multiplied by an assessment level of well under 100%. Fair market value and zonal value are usually much closer to each other and to actual market prices, though either can come out higher depending on the area and property type.
Can I use my tax declaration’s assessed value to estimate capital gains tax on a sale?
No. Capital gains tax, documentary stamp tax, donor’s tax, and estate tax are computed on the highest of the selling price, the zonal value, or the assessor’s fair market value — never on assessed value. Using assessed value will significantly understate what is actually due.
Does RA 12001 abolish BIR zonal values immediately?
No. The law’s saving clause keeps existing zonal values in force in a given locality until that LGU’s new Schedule of Market Values is approved and formally supersedes them. Given the 2026 suspension request and the Finance Secretary’s 2028 implementation target, zonal values are expected to remain in active use for some time yet.
Why did President Marcos ask Congress to suspend RA 12001 in 2026?
At an August 2026 Legislative-Executive Development Advisory Council meeting, the Palace said the request was meant to prevent additional costs landing on property owners and businesses and to allow a more gradual transition to the new valuation system, rather than to cancel the reform outright.
Who decides the assessment level applied to my property?
The local sanggunian (provincial, city, or municipal council) fixes the actual assessment level by ordinance, within the maximum ceilings set by the Local Government Code for each property classification. Different LGUs can and do set different rates up to those caps.
Will my real property tax go up once RA 12001 fully takes effect?
It could, since updated Schedules of Market Values are generally expected to bring outdated assessor valuations closer to current market levels. The law itself caps the increase: for the first year an LGU’s approved SMV applies, any resulting increase in real property tax is limited to 6% over what was previously assessed.
Is “market value” under RA 12001 the same thing as the old “fair market value”?
They serve the same role — the base figure assessed value is calculated from — but RA 12001 redefines it using international valuation standards and intends it to be the single base used for both local real property tax and national transfer taxes, replacing the separate assessor and BIR figures once each LGU’s new schedule is in force.
What to Do Next
If you’re budgeting for an annual real property tax bill, start with the assessed value on your current tax declaration and your LGU’s tax rate ordinance — not the fair market value, and not any zonal value. If you’re preparing to sell, donate, or transfer property instead, pull the zonal value for the exact RDO and the assessor’s fair market value, compare both against your intended selling price, and use whichever is highest as your starting point for capital gains tax and documentary stamp tax. Either way, because RA 12001’s rollout is actively contested as of late 2026, confirm with the assessor’s office or the RDO which schedule currently applies to your property before finalizing any computation.
Figures in this article reflect published BIR, Local Government Code, and RA 12001 sources, and news reporting on RPVARA’s status, as of October 22, 2026. Assessment levels, tax rates, and the pace of RA 12001’s rollout (including the August 2026 suspension request and the Finance Secretary’s 2028 implementation target) can all change by legislation, local ordinance, or further executive action. Always confirm the currently applicable fair market value, assessed value, and zonal value with the local assessor, the BIR, or a licensed tax professional before relying on any figure for an actual transaction.
