Computing Market Value from a Tax Declaration in the Philippines: A Comprehensive Legal Guide (2025 edition)
I.
Introduction
A
Philippine tax declaration is a sworn statement filed with,
and later issued by, the local assessor that contains the fair market
value (FMV) of real property and serves as the assessor’s official record
for real-property-tax (RPT) purposes. While it is not a
muniment of title, the tax declaration’s stated market value influences
multiple legal, fiscal, and commercial transactions—from RPT computation to
capital-gains-tax (CGT) assessments and even bank-loan appraisals.
This guide
consolidates every major rule, formula, and practical nuance involved in
deriving that market value.
II. Legal
Framework
|
Source |
Key
Provisions |
|
1987
Constitution |
Art. X,
§5 grants LGUs the power to create their own sources of revenue. |
|
Local
Government Code (LGC) of 1991, R.A. 7160 |
•
§199—statutory definitions (FMV, assessed value, etc.) |
|
DOF–BLGF
Assessor’s Manual & DOF Depart. Order 37-09 |
Detailed
appraisal methods and depreciation tables. |
|
BIR
Revenue Regulations No. 6-2013 (as amended) |
For
CGT/DST, the taxable base is the higher of (a) BIR zonal
value or (b) LGU FMV in the current tax declaration. |
III. Key
Terms and Distinctions
|
Term |
Essence |
Statutory
Basis |
|
Fair
Market Value (FMV) |
The
price a willing buyer will pay a willing seller in an arm’s-length
deal, per LGU schedule. |
LGC
§199(l) |
|
Assessed
Value |
FMV
× assessment level (a percentage set by sanggunian). This is the
RPT base. |
LGC
§199(d) |
|
Assessment
Level |
A
classification-based percentage (e.g., 20 % for residential land in many
cities). |
LGC §218 |
|
Zonal
Value |
Separate
FMV fixed by BIR for national taxes; updated by revenue district offices. |
|
|
Tax
Declaration (TD) |
Official
assessor’s record showing FMV & assessed value. |
IV. The
Schedule of Fair Market Values (SFMV)
1.
Preparation & Adoption
o Provincial/City/Municipal Assessor
drafts; Sanggunian passes ordinance (LGC §201).
2.
Frequency
o General revision at least once
every three (3) years.
3.
Transparency
o Public hearings are mandatory; SFMV
must be posted in bulletin boards and websites (if any).
4.
Granularity
o Separate unit values for each barangay,
broken down by:
§ Land use (residential, agricultural,
commercial, industrial, special, timber, mineral).
§ Building type (concrete,
semi-concrete, wood, etc.) and actual floor area.
§ Machinery class and
horsepower/tonnage.
V. How to
Compute FMV per Property Class
A. Land
Formula
FMV (Land)
= Area (sq m) × Unit Land Value (ULV)
Unit
Land Value is
taken straight from the SFMV table for the property’s classification and
location.
Example •
Barangay Sta. Ana, Residential ULV = ₱8,000/sq m • Lot area = 180 sq m FMV
= 180 × 8,000 = ₱1,440,000
B.
Buildings and Other Structures
Standard
Approach – Replacement Cost New Less Depreciation (RCNLD)
1.
Replacement Cost New (RCN)
o RCN = Total Floor Area × Unit
Construction Cost (per assessor’s building cost tables, derived from DPWH
data).
2.
Less Depreciation (Straight-Line)
o Depreciation Rate (%) = (actual age ÷
economic life) × 100
3.
FMV = RCN × (1 – Depreciation Rate)
Example •
Two-storey reinforced-concrete residence • Floor area = 240 sq m; Unit Cost =
₱20,000/sq m • RCN = 240 × 20,000 = ₱4,800,000 • Age = 10 yrs; Economic life =
50 yrs → Depreciation = 10/50 = 20 % FMV = ₱4,800,000 × 0.80 = ₱3,840,000
C.
Machineries
Under LGC
§199(o), machineries “directly used” in business are valued at acquisition
cost or current replacement cost, whichever is higher, minus depreciation but
not below 20 %.
Formula (BLGF
Table III-B):
FMV
(Machinery) = (RCN or Acquisition Cost) × [1 – (Depreciation Rate)]
Depreciation
rate normally
5 % per year for heavy industrial equipment, capped at 80 %.
VI. From
Market Value to Assessed Value & RPT
1.
Multiply FMV by the assessment level in the LGU’s revenue
code.
2.
Real Property Tax (RPT)
RPT =
Assessed Value × Basic Tax Rate
o Basic rate: 1 % of assessed
value for provinces; 2 % for cities/Manila.
o SEF (Special Education Fund)
additional 1 % across all LGUs.
o Other optional levies: ad valorem for
idle land, etc.
VII. Other
Uses of FMV in a Tax Declaration
|
Transaction |
Why FMV
Matters |
|
Sale /
Donation |
BIR will
tax CGT (6 %) or donor’s tax (6 %) on higher of (a) selling
price, (b) BIR zonal value, or (c) LGU FMV—thus a low
tax-declaration FMV can still drive tax cost. |
|
Estate
Settlement |
Estate-tax
return lists FMV per latest TD if higher than zonal value. |
|
Bank
Loans |
Banks
often start with TD FMV, then commission an independent appraiser. |
|
Expropriation |
Courts
may consider assessor’s FMV as a floor price, though just compensation
usually relies on recent comparable sales. |
VIII.
Common Pitfalls
1.
Using assessed value instead of FMV—only FMV is the market indicator;
assessed value already has an assessment-level discount.
2.
Assuming a decades-old TD remains valid—after each general revision, the
assessor issues Notice of Assessment with a new FMV.
3.
Failing to file the Sworn Statement of True Value (LGC
§202) within 60 days of acquisition, exposing owners to penalties and forced
assessor valuation.
4.
Mistaking TD as conclusive evidence of ownership—courts treat it merely
as corroborative evidence (see Heirs of Malate v. Gamboa, G.R.
221499, 31 Aug 2016).
IX.
Remedies & Appeals
|
Step |
Forum |
Deadline |
|
1 ️⃣ Protest/Revision with
Provincial/City/Municipal Assessor |
Within 60
days from receipt of Notice of Assessment. |
|
|
2 ️⃣ Appeal to Local Board of
Assessment Appeals (LBAA) |
Within
60 days from assessor’s action/in-action. |
|
|
3 ️⃣ Appeal to Central Board of
Assessment Appeals (CBAA) |
Within
30 days from LBAA decision. |
|
|
4 ️⃣ Petition for Review to Court
of Tax Appeals (CTA) |
Within
30 days from CBAA decision. |
X.
Documentary & Procedural Checklist
1.
For New TD
o Deed of Sale / Inheritance docs
o Transfer Certificate of Title (TCT) or
OCT
o Approved subdivision/relocation plan
o Sworn Statement of True Value
2.
For Building Declaration
o Approved building permit & plans
o Certificate of completion/occupancy
3.
Assessor’s Actions
o Ocular inspection & photos
o Record appraisal sheet & index
card
o Issue Tax Declaration and Notice of
Assessment
XI.
Selected Jurisprudence
|
Case |
Gist |
|
Republic
v. Ker & Co., G.R. 67995 (15 Dec 1986) |
Tax
declaration FMV alone cannot fix expropriation value. |
|
Estate
of Marcos v. CA, G.R. 93633 (27 Feb 1999) |
TD is
not conclusive proof of ownership but indicates claim on property. |
|
Laureano
v. CA, G.R.
43633 (29 Jan 1990) |
Regular
payment of RPT via TD strengthens presumption of ownership. |
XII.
Practical Tips
1.
Secure the latest SFMV from your assessor’s office before any sale
or estate filing.
2.
Check both zonal value and TD FMV—budget for taxes using the higher
number.
3.
For new constructions, declare the building within 30 days of completion
to avoid back taxes and surcharges.
4.
Keep copies of all prior TDs; they trace value
adjustments useful for appeals.
5.
When buying property, require seller to produce the most recent TD and
official RPT receipts; unpaid taxes become a lien on the land.
XIII.
Conclusion
Computing
the market value shown in a Philippine tax declaration is a
rule-bound, yet location-specific exercise anchored on the LGU’s Schedule
of Fair Market Values. By multiplying objective unit values (land) or
replacement-cost tables (buildings & machinery) with physical quantities
and adjusting for depreciation, assessors establish FMV, which then cascades
into RPT, national taxes, and even collateral valuations. Understanding every
step—from statutory sources to appeal remedies—equips property owners, buyers,
and practitioners to validate assessments, plan tax liabilities, and safeguard
property interests.
Disclaimer:
This article is for educational purposes only and does not constitute legal
advice. For specific concerns, consult the local assessor or a Philippine
tax‐law professional.
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