Zonal Value - BIR Property Valuation for Tax Assessment
Updated June 13, 2026
Definition
Zonal value is the fair market value of real property per square meter that the Commissioner of Internal Revenue sets for each zone or area, used as one of the minimum values for computing capital gains tax, documentary stamp tax, donor's tax, and estate tax on real property.
The Commissioner of Internal Revenue divides the country into zones or areas and, after consultation with private and public appraisers, sets the fair market value of real properties in each zone. Under Section 6(E) of the National Internal Revenue Code, as amended by the TRAIN Law, these zonal values were subject to adjustment once every three years and became valid only after publication. For computing any internal revenue tax, the value of real property is the higher of the Commissioner's zonal value and the fair market value in the provincial or city assessor's schedule. The Real Property Valuation and Assessment Reform Act (RA 12001, effective 2024) repealed Section 6(E) and moves national and local taxes to a single Schedule of Market Values (SMV) approved by the Department of Finance. Existing zonal values stay in force until replaced by the new SMVs. Until an updated SMV is available, the BIR uses the existing SMV, the zonal value, or the actual price in the transaction documents, whichever is higher. Zonal values affect capital gains tax on sales of real property held as capital assets (6% for individuals under Section 24(D) and 6% for corporations selling land or buildings held as capital assets under Section 27(D)(5)), documentary stamp tax on deeds of sale, donor's tax, and estate tax.
Why it matters
Zonal value often decides how much tax you pay in a property transaction. When you sell real property held as a capital asset, the 6% capital gains tax is computed on the gross selling price or the fair market value, whichever is higher, with fair market value being the higher of the zonal value and the assessor's value. This keeps taxpayers from lowering tax by declaring an artificially low price. Knowing the zonal value helps you budget for capital gains tax and documentary stamp tax before signing a deed of sale. For estate and donor's tax, real property is valued at the higher of the zonal value and the assessor's value at the time of death or donation, so zonal value directly affects the tax base.
How it works
The BIR sets zonal values per square meter for each street, barangay or area, by property classification such as residential, commercial or agricultural, after consultation with appraisers. Zonal values are approved by the Secretary of Finance and are published before they take effect. For a sale of real property held as a capital asset, the seller files BIR Form 1706 (Capital Gains Tax Return) within 30 days after the sale and pays 6% of the highest of the gross selling price, the zonal value and the assessor's fair market value. For an estate, the executor or heirs file BIR Form 1801 (Estate Tax Return), valuing real property at the higher of the zonal value and the assessor's value at the time of death. The land value is computed by multiplying the lot area by the per-square-meter zonal value for the property's location and classification. Buildings and other improvements are valued separately from the land. Under RA 12001, zonal values are being replaced by Schedules of Market Values approved by the Department of Finance. Until a new SMV applies to an area, the BIR uses the existing SMV, the zonal value, or the actual price, whichever is higher.
Examples
Example
Basic Property Sale Maria sells her Quezon City lot, a capital asset, for ₱3,000,000. The zonal value for her area is ₱25,000 per sqm for a 150-sqm lot (₱3,750,000), and this is higher than the assessor's value. The BIR uses ₱3,750,000 for capital gains tax: 6% × ₱3,750,000 = ₱225,000, instead of ₱180,000 on her declared price (NIRC §24(D)).
Example
Estate Tax Assessment Juan's father leaves a 200-sqm lot in Makati with a zonal value of ₱45,000 per sqm, higher than the assessor's value. Even if the property is run-down, the land is valued at ₱9,000,000 in the gross estate. If it is not the family home and the estate has no other property or deductions besides the ₱5,000,000 standard deduction, estate tax is 6% × (₱9,000,000 − ₱5,000,000) = ₱240,000 (NIRC §84, §86, §88(B)).
Example
Donation Between Family Parents donate a Cebu lot with a market value of ₱2,500,000 to their child. The zonal value is ₱15,000 per sqm for 200 sqm (₱3,000,000), higher than the assessor's value, so the gift is valued at ₱3,000,000. If this is their only gift for the year, donor's tax is 6% × (₱3,000,000 − ₱250,000) = ₱165,000 (NIRC §99, §102).
Example
Business Property Transfer ABC Corporation sells land it holds as a capital asset for ₱8,000,000. The zonal value is ₱30,000 per sqm for 300 sqm (₱9,000,000). Capital gains tax for a domestic corporation selling land held as a capital asset is 6% of the higher value: 6% × ₱9,000,000 = ₱540,000. If the land were an ordinary asset, the gain would instead be part of the corporation's taxable income (NIRC §27(D)(5)).
Example
Rural vs Urban Difference Zonal values differ widely by location. For example, a 1,000-sqm agricultural lot with a zonal value of ₱500 per sqm is valued at ₱500,000, while a 100-sqm commercial lot in a city business district with a zonal value of ₱80,000 per sqm is valued at ₱8,000,000.
Common misconceptions
- Myth: You can use the lower value between selling price and zonal value for tax purposes (FALSE - the tax is computed on the higher of the selling price, the zonal value and the assessor's value)
- Myth: Zonal values apply only to luxury properties (FALSE - all real estate transactions use zonal values)
- Myth: A zonal value issued after the sale applies to it (FALSE - the values in effect at the time of the sale, death or gift apply)
- Myth: Municipal assessed values are the same as BIR zonal values (FALSE - these are separate government valuations)
- Myth: You can negotiate the zonal value for your property with the BIR (FALSE - zonal values are set for whole zones after consultation with appraisers, not per transaction)
Questions people ask
What is zonal value in Philippine taxation?
Zonal value is the fair market value per square meter that the Commissioner of Internal Revenue sets for real property in each zone or area. For internal revenue taxes, real property is valued at the higher of the zonal value and the assessor's fair market value, and for sales the gross selling price is used if it is higher still.
How does BIR zonal value affect my property tax?
When you sell real property held as a capital asset, the 6% capital gains tax is computed on the highest of the gross selling price, the zonal value and the assessor's fair market value. If the zonal value is higher than your selling price, your tax goes up. Zonal value does not affect your local real property tax, which is based on the assessed value (NIRC §24(D)).
Where can I find the current zonal value for my property?
Zonal value schedules are available from the BIR, including through its website and your Revenue District Office. They vary by street, barangay or area and by property classification.
What's the difference between zonal value vs market value?
Zonal value is the BIR's valuation for tax purposes, while market value is what the property would actually sell for. For a sale, the tax base is the highest of the selling price, the zonal value and the assessor's value.
Can I use an old zonal value if my property sale was agreed upon last year?
The value that applies is the one in effect at the time of the sale, death or gift. A newer zonal value issued after the sale does not apply to it.
Why is zonal value important for estate planning?
For estate tax, real property is valued at the higher of the zonal value and the assessor's value at the time of death, even if the property appears less valuable. Estate tax is then 6% of the net estate after deductions such as the ₱5,000,000 standard deduction and the family home deduction of up to ₱10,000,000 (NIRC §84, §86, §88(B)).
How often does the BIR update zonal values?
Under the TRAIN Law, zonal values were subject to adjustment once every three years, published before taking effect. RA 12001 repealed that provision and is replacing zonal values with Schedules of Market Values approved by the Department of Finance; existing zonal values remain in force until replaced.
Who needs to know about zonal values?
Property sellers, buyers, estate executors, donation recipients, real estate brokers, lawyers handling property transactions, and anyone involved in transferring real estate ownership.
What happens if I declare a price below zonal value?
The tax is computed on the higher value, so declaring a price below the zonal value does not lower the capital gains tax, documentary stamp tax, estate tax or donor's tax. For property other than real property subject to capital gains tax, a sale for less than fair market value can also be treated partly as a gift (NIRC §24(D), §100).
Are zonal values the same as municipal assessed values?
No. Zonal values are set by the BIR for national internal revenue taxes, while the provincial or city assessor sets market values and assessed values for local real property tax. For national taxes, the higher of the zonal value and the assessor's fair market value is used.
Next steps
Learn more
Capital Gains Tax Calculator
Estate Tax Calculator
BIR Form 1706 Guide
BIR Form 1801 Guide
Real Property Tax Guide
Revenue District Office Directory
Property Transfer Tax Guide
Fair Market Value Assessment
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Taxpayer guides
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Sources & References (2)
Primary sources and the laws, regulations, and official issuances this page relies on. Links open the recorded source documents or references.
- LawPhil Project (Arellano Law Foundation). “NIRC §6(E): BIR Commissioner authority to set zonal values; BIR zonal valuation schedules.” lawphil.net. NIRC of 1997 (RA 8424), Sec. 6(E). Source checked .
- Bureau of Internal Revenue. “BIR: Zonal Values schedules.” bir.gov.ph. Bureau of Internal Revenue, Zonal Values. Source checked .