With the increasing importance of environmental protection and the change of agricultural policy, the farmland use policy has gone through dramatic change. Aiming at providing some suggestions for the making of agricultural policy in Taiwan, this paper takes the water resource protection area as an example to explore how German government handles the problems related to the losses caused by restricting on use of farmland in that area and the compensation for the losses. I will first analyze the literature of Germany and Japan concerning the content of property and utilization rights in land and evaluate them so as to establish the basic principles of compensation for the losses. I will then analyze the measures of NW State and BW state of Germany in processing the compensation caused by restrictions on use of farmland in water resource protection area. Finally, I will use real cases to demonstrate the estimation for the decrease in agricultural products caused by the prohibition of using pesticide and fertilizers. It is hoped that through the discussion in this paper, valuable suggestions could be provided for handling the losses caused by restrictions on use of farmland and the compensation for them in Taiwan in the future.