ESTATE TAXATION

REVIEW NOTES

GROSS ESTATE
- Depends upon the citizenship and/or residence of the decedent:

Decedent Real Property Tangible Personal Property Intangible Personal Property

Within Without Within Without Within Without
1) Citizen 😊 😊 😊 😊 😊 😊
2) Resident 😊 😊 😊 😊 😊 😊
Alien
3) Non- 😊 😊 😊
resident Alien
(if there is
reciprocity)

Intangible personal property means incorporeal property which do not have any physical form, but represents rights and privileges.
Examples include bank deposits, trademarks, shares of stock, patents, copyrights, bonds, notes, interest in a partnership, etc.

Intangible Asset Situs

1) Receivable (promissory note) Residence of the debtor
2) Bank deposit Location of the bank
3) Other intangible properties:
a) Franchises, patents, copyrights, trademarks Where property is used or exercised
b) Investment in partnership Where partnership is established
c) Shares of stock (including corporate bonds)
(1) Domestic corporation
(2) Foreign corporation Within the Philippines
Except: Without the Philippines
i) If ≥85% of business in the Philippines
ii) If shares have acquired a business situs in Within the Philippines
the Philippines
Within the Philippines

PROPERTIES INCLUDED IN THE GROSS ESTATE OF A DECEDENT

- Includes all properties, rights, and interest which the decedent owns at the time of his death:
1) Properties owned by the decedent and physically present in his estate at the time of death;
2) Interest (whether legal or beneficial) in property owned or possessed by the decedent at the time of death (Ex. Usufructuary
rights, leasehold rights);
3) Taxable Transfers – made during lifetime, but are in the nature of testamentary dispositions (mortis causa in substance). Though he
has transferred the property during his lifetime, he remains in control of the property, and the transfer in intended to take effect only at or
after his death.
a) Transfers in Contemplation of Death
- Transfer is impelled by the thought of death.
Ex. Donation mortis causa – donations which takes effect upon the death of the donor, and therefore partakes of the nature of a
testamentary disposition.
1) No transfer of title or ownership to the donee;
2) The donor retains ownership (either legal or beneficial) and remains in full control of the property during his lifetime;
3) The transfer is revocable by donor at will during his lifetime; and
4) The transfer is void if the donee dies first.

b) Revocable transfers:
The transferors reserve the power to alter, amend, revoke, or terminate the enjoyment of the property by the transferee, or where such
power is relinquished in contemplation of the decedent’s death.
- Whether or not such power is exercised during lifetime. If not exercised during lifetime, it is considered exercised at the time of death.

c) Transfer with retention or reservation of certain rights over the income or enjoyment of the property transferred;
- Transferor reserves his right to the income of the property until his death.
- Transferor reserves his right to the possession or enjoyment of the property until his death.

d) Property passing under a general power of appointment (“GPA”)

- The decedent is the donee.
- The (appointed) property comes from a donor (of the power) with a GPA for the donee (of the power). The donee is authorized to
dispose of the property by exercising his power of appointment in designating any person, who shall possess or enjoy the property and/or
its income.
- A GPA makes the appointed property, for all purposes, the property of the donee of the power of appointment.

e) Transfer for insufficient consideration.

In all the taxable transfers above, if the transfer is a bona fide sale for adequate and full consideration in money’s worth, no value (of the
property transferred) shall be included in the gross estate.
However:
 1) If the transfer is not a bona fide sale for an adequate and full consideration in money or money’s worth, there shall be included
in the gross estate the excess of the FMV of the property at the time of death over the value of the consideration received by the
decedent;
Included in gross estate = FMV of property at time of death – Consideration received
2) If transfer is fictitious, the total value of the property at the time of death shall be included in the gross estate of the decedent.

f) Proceeds of Life Insurance

proceeds of life insurance taken out by the decedent upon his own life shall be included in his gross estate when:
1) His estate, his executor or administrator is the beneficiary; whether nor not the designation of the beneficiary is revocable; or
2) The beneficiary is any other person, but the decedent retains the power t revoke the designation.
Note: When designation of the beneficiary is not clear, it is presumed to be revocable.
Proceeds of life insurance are not included in gross estate when:
1) Beneficiary is other than estate, his executor or administrator, and the designation is revocable;
2) Proceeds of a group insurance policy;
3) Benefits from the GSIS, SSS, accruing by reason of death.

4) Claims Against Insolvent Persons

- Receivables due from persons who are insolvent
- Shall be included in the gross estate at its full amount
- Bad debt deduction is taken for the uncollectible portion

5) Conjugal/community properties, if decedent was married. Gross estate will include both his exclusive properties and the
conjugal
- The decedents gross estate will include both his exclusive properties and the conjugal/communities’ properties of his
marriage.
Note: Proceeds of life insurance are:
a) Conjugal or community property if the money used to pay the premiums comes from the conjugal or community funds;
b) Exclusive property of the decedent, if the money used to pay the premiums comes from the decedent’s exclusive properties;
c) Partly conjugal or community property and partly exclusive property of the decedent if the premiums were paid partly from
the conjugal funds and partly from the exclusive funds of the decedent.

PROPERTIES OF SPOUSES
- The extent of the gross estate of the decedent shall depend upon the property relations between the decedent and his/her
spouse.

Property Regimes:
1) Absolute Community of Property (“ACP”)
2) Conjugal Partnership of Gains (‘CPG)
3) Separation of Property
The spouse may, in a pre-nuptial agreement (marriage settlement), agree upon the regime that shall govern their property relations.

However, in the absence of marriage settlement, the property relations shall be governed by:
a) The CPG for those marriage before August 3, 1988; or
b) The ACP for those married on or after August 3, 1988

What is the CPG

Exclusive Property of Husband

1) Property owned before marriage;
2) Property acquired during the marriage by gratuitous title (by inheritance or donation);
3) Property acquired with the exclusive money of the husband, or exchanged for exclusive property of the husband.
4) Property designated as exclusive in a marriage settlement.
Exclusive Property of Wife
1) Property owned before marriage;
2) Property acquired during the marriage by gratuitous title (by inheritance or donation);
3) Property acquired with the exclusive money of the wife, or exchanged for exclusive property of the wife.
4) Property designated as exclusive in a marriage settlement.
Conjugal Properties
1) Properties acquired by onerous title using the common funds (even if the property is only for one of the spouses);
2) Properties obtained from the labor or work of the spouses during marriage;
3) Properties acquired by chance such as winnings from gambling or betting. (However, losses therefrom shall be borne
exclusively by the loser-spouse)
4) Fruits (natural or civil) and income of the conjugal properties;
5) Fruits (natural or civil), and income of the exclusive properties of each spouse;

What is the ACP?

Exclusive Property of Husband

1) Property acquired during the marriage by gratuitous title (by inheritance or donation) UNLESS the donor or testator expressly
provides that the property shall form part of the community property.
2) Fruits and income of exclusive properties;
3) Properties for the personal or exclusive used of the husband except jewelry;
4) Property acquired before marriage by the husband who has legitimate descendants from a previous marriage.
5) Property designated as exclusive in a marriage settlement.
Exclusive Property of Wife
1) Property acquired during the marriage by gratuitous title (by inheritance or donation) UNLESS the donor or testator expressly
provides that the property shall form part of the community property.
 2) Fruits and income of exclusive properties;
3) Properties for the personal or exclusive used of the wife except jewelry;
4) Property acquired before marriage by the wife who has legitimate descendants from a previous marriage.
5) Property designated as exclusive in a marriage settlement.
Community Properties
1) ALL properties owned by the spouses at the time of the marriage (except (4) above)
2) ALL properties acquired thereafter.
3) Fruits and income of community properties.

ACQUITIONS OR TRANSMISSIONS WHICH ARE NOT INCLUDED IN THE GROSS ESTATE OF THE DECEDENT

a) Merger of the usufruct in the owner of the naked title to the property;

b) Fideicommissary substitution – where the inheritance or legacy is delivered or transmitted by the fiduciary heir or legatee to
the second heir (fideicommissary);
c) The transmission from the first heir, legatee, or donee in favor of the another beneficiary, in accordance with the desire of the
predecessor;
Note: In the three (3) cases, there is actually one transfer involved. Such transfers were already subjected to estate tax, and taxing
these would amount to double taxation.

d) All bequests, devises, or transfers to social welfare, cultural, and charitable institutions, no part of the income of which inures to
the benefit of any individual: Provided, however, that not more than 30% of the said bequests, devices, legacies, or transfers
shall be used by such institutions for administrations purposes (Sec. 87, NIRC).

Other Exemptions from the estate tax:

e) Proceeds of life insurance and benefits received by members of the GSIS (P.D. No. 1146);
f) Benefits received by the members from the Social Security System by reason of death (R.A. No. 1161, as amended);
g) Amounts received from the Philippines and United States governments for war damages (R.A. 227);
h) Amounts received from the United States Veterans Administration (R.A. No. 360);
i) Retirement benefits of employees of private firms from private pension plans approved by the BIR;
j) Intangible personal property located in the Philippines of a non-resident alien decedent under the principle of reciprocity (Sec.
104, NIRC); and
k) Personal Equity and Retirement Account (“PERA”) assets shall not be considered assets of the contributor for purposes of estate
taxes (R.A. No. 9505)
Furthermore, Qualified PERA distributions received by the Contributor, or in case of the death of the Contributor, received by his
heirs or beneficiaries, whether in a lump sum or pension for the definite period or lifetime pension, shall not be subject to estate tax
(Sec. 10, Rev. Regs. No. 17-2011).
l) Proceeds of life insurance when the beneficiary is not the estate, the executor, or the administrator, and the designated is
irrevocable.
m) Bank deposit in the name of the decedent on which the 6% estate tax has been withheld and remitted by the bank to the BIR
upon withdrawal by the heirs.

VALUATION OF THE GROSS ESTATE

- Properties shall be valued at the time of death of the decedent
Property Valuation
Usufruct, use, habitation, annuity Value shall be based on the probable life of the beneficiary
in accordance with the latest Basic Standard Mortality Table
approved by the Department of Finance
Real property FMV which is the higher of the zonal value or the
assessor’s value
Personal property Generally, FMV at the time of death of the decedent
Stocks listed in the stock exchange Average of the lowest and highest quotes on the valuation
date (date of death) or day nearest to the valuation date
Stocks not listed in the stock exchange For common shares; Book value on the valuation date (date
of death) or day nearest the valuation date.
For preferred shares; par value
Notes; Accounts receivable FMV is the discounted amount of the unpaid principal plus
interest.
Units of participation in any association, recreation, or FMV is the bid price nearest the date of death published in
amusement club any newspaper or publication or general circulation.

DEDUCTIONS FROM THE GROSS ESTATE

I. ORDINARY DEDUCTIONS
A) CLUT (Claims, Losses, Unpaid Mortgages, Taxes, etc.)
1) Claim against the estate – consist of the bona fide unpaid personal obligations of the decedent of a
pecuniary nature. These can arise from contract, tort, or by operation of law. These must be incurred in good
faith by the decedent during his lifetime, and can be enforced against the estate by his creditors.
These include obligations of the decedent at the time of his death except unpaid obligation incurred
incidental to his death such as funeral or medical expenses.
(A) If the claim arises from the purchase of goods or services by the decedent, the following must be
submitted:
1) Documents evidencing the purchase (invoices, receipts, statements of accounts);
2) Creditor’s certification as to the unpaid balance of the debt, including interest; and
3) Certified true copy of the latest audited balance sheet of the creditor showing the unpaid balance of
the decedent.
 (B) If the claim is in the form of a loan, the following requirements must be complied with:
1) The instrument must be notarized except if it is not the business practice of the financial institution-
lender to notarize such instruments;
2) Notarized certification from the creditors as to the unpaid balance of the debt, inclusive of interest;
3) Proof of financial capacity of the creditor to led the amount at the time the loan was granted;
4) If the loan was contracted within 3 years prior to the death of the decedent, a statement under oath
executed by the administrator/executor of the estate stating the disposition of the proceeds of the
loan.
(C) Where settlement of the estate is made through the courts:
1) Documents filed with the court evidencing the claims;
2) The court order approving the claims;
3) The documents in (A) or (B) above.

2) Claims against insolvent persons

- must first be included in the gross estate;
- portion or amount that cannot be collected from the decedent’s debtor is deductible from the gross
estate.

3) Unpaid mortgages – the unpaid mortgage or indebtedness is deductible from the gross estate provided that
the decedents interest in the property, gross of the mortgage, is included in the gross estate.
- if the loan is an accommodation loan where the loan proceeds went to another person, the value of the
unpaid loan must be included in the gross estate as a receivable.

4) Income taxes and property taxes

- the following taxes can be deducted from the gross estate:
a) unpaid income taxes on income due or received before the death of the decedent;
b) real property taxes which have accrued prior to the death of the decedent.
Note: Real property taxes accrue at the beginning of the year.

5) Casualty Losses – on account of mishaps, accidents, casualties, acts of God, robbery, theft, embezzlement
can be deducted provided:
a) The loss is not compensated for by insurance or otherwise;
b) The loss is not claimed as a deduction in an income tax return;
c) The loss must occur not later than the last day for payment of the estate tax (generally, within 1 year
after death).

B) TRANSFERS for PUBLIC USE

1) Transfers made to the government or any political subdivision for public purposes; or
2) Transfers to social welfare, cultural, and charitable institutions, provided;
a) No part of its net income inures to the benefit of any individual; and
b) ≤ 30% of the bequest, devise, or legacy is used for administrative purposes.
Note: No purely religious organization

C) VANISHING DEDUCTION (Property Previously Taxed – “PPT”)

- to minimize double taxation on same property (located in the Philippines) which was previously received by the
decedent as a donation or inheritance.
1. Conditions for Allowance of the Vanishing Deduction
(a) The present decedent must have acquired the property by inheritance or donation within five (5) years
prior to his death;
(b) The property acquired formed a part of the gross estate of the prior decedent, or of the taxable gift of the
donor;
(c) The estate tax on the prior estate, or the gift tax on the gift must have been paid; and
(d) The estate of the prior decedent has not previously availed of the vanishing deduction.
2. Percentage of Vanishing Deduction
The rates depend on the interval between:
(a) The death of the present decedent, and the death of the prior decedent if the property previously taxed
(“PPT”) was acquired by inheritance, or
(b) The death of the present decedent, and the date of the gift, if the PPT was acquired by donation.
IF the interval is:
More Than Not More Than Percentage
xxx 1 year 100%
1 year 2 years 80%
2 years 3 years 60%
3 years 4 years 40%
4 years 5 years 20%
5 years xxx xxx

3. Procedure in Computing the Vanishing Deduction

(a) Determine the lower value of the PPT –
₱ xxxx
FMV of the PPT in the estate of the prior decedent,
or FMV of the PPT in the estate of the present
decedent, if PPT was inherited.

FMV of the PPT at the date of donation, or FMV of

the PPT in the estate of the present decedent if the
PPT was donated.
 Where the PPT consists of 2 or more properties,
the aggregate of the lower values shall be taken

(b) Deduct any mortgage or lien on the PPT which (xxx)

was paid by the present decedent, where such
mortgage or lien was used as a deduction in the
computation of the estate tax of the prior decedent,
or as a deduction in determining the donor’s tax. __________
Net Value of PPT ₱ xxxx
(c) Prorate the deductions and subtract from the net value:

Net Value of PPPT x Ordinary Deductions (xxx)

Gross Estate (excluding the Van Ded.)
___________
Final Basis ₱ xxxx
(d) Apply the rate of Vanishing Deduction %____
Rate (based on number of years interval)
Vanishing Deduction ₱ xxxx

II. SPECIAL DEDUCTIONS

- Deducted only after the ordinary deductions have been deducted from the gross estate.
A) FAMILY HOME
- Must be included in the gross estate.
- The deduction is only for one family home which must be the actual residential home of the decedent as certified to by the
barangay captain.
- Lower of:
1) FMV of the family home;
a) If family home is exclusive property of the decedent: FMV
b) If family home is conjugal property: FMV/2
c) If family land is exclusive while the family house is conjugal:
FMV of land + FMV of house/2
d) If family land is conjugal while family house is exclusive:
FMV of land/2 + FMV of house
OR
2) P10,000,000
B) STANDARD DEDUCTION
1) P5,000,000 for estates of citizens and resident aliens; P500,000 for estates of non-resident aliens.
2) Substantiation not required.
C) AMOUNTS RECEIVED BY HEIRS UNDER R.A. 4917
- Amounts/benefits received by the heirs from the decedent’s employer as a consequence of his death.
- Such benefits must first be included in the gross estate before the same can be deducted.

III. SHARE OF THE SURVIVING SPOUSE IN THE NET CONJUGAL PROPERTIES

- Share of the surviving spouse is not subject to estate tax and must therefore be deducted from the gross estate of the
decedent.
Amount of deduction = [Conjugal properties less obligations chargeable to such properties (conjugal deductions)] divided
by

SUMMARY OF DEDUCTIONS
I. What deductions are available against the estates of citizens, resident, or non-resident aliens?
Deductions Citizens/Resident Aliens Non-resident Alien
A. CLUT *
1. Claims against the estate √ √
2. Claims against insolvent
persons √ √
3. Unpaid mortgages
4. Taxes √ √
5. Losses √ √
√ √
B. Transfer for public use √ √
C. Vanishing deduction √ √
D. Family Home √ X
E. Standard deduction √ (P5.0M) √ (P0.5M)
F. Amounts received by heirs √ X
under R.A. 4917

G. Share of surviving spouse in √ √

conjugal net assets

*For the estate of a non-resident alien, the allowable CLUT deduction shall be prorated based on the size of the gross estate in
the Philippines relative to his entire worldwide gross estate, as follows:
Philippine Gross Estate x CLUT
Worldwide Gross Estate

II. If the decedent was married, how do we allocate the deductions between the exclusive and conjugal properties?
 Exclusive properties Conjugal/Community Total Gross Estate
Properties
A. CLUT
1. Claims against
the estate
2. Claims against
insolvent
persons √ √
3. Unpaid
mortgages
4. Taxes
5. Losses √ √

√ √

√ √

√ √

B. Transfer for √
public use
C. Vanishing √ √
deduction
Net Estate before xxxxx xxxxx Xxxxx
Special Deductions
D. Family Home √
E. Standard √
Deduction
F. Amounts √
received by
heirs under R.A.
4917
G. Share of √
surviving spouse
in conjugal bet
assets
NET ESTATE NET ESTATE

ESTATE TAX RATE – 6%

CREDIT FOR FOREIGN ESTATE TAX PAID

- Available only to estates of citizen or resident alien decedents

- Subject to Limits

Limits:

(A) Net Estate (per Foreign Country) x Philippine Estate Tax

Entire Net Estate

(B) Net Estate (in all Foreign Countries) x Philippine Estate Tax
Entire Net Estate

Rules:
1) If there is only one (1) foreign country, only Limit (A) is used.
2) If there are ≥ two (2) foreign countries, use both Limits

Formula:

Estate tax paid in Country 1

Lower (1)
Limit A (Country 1)
+
Estate tax paid in Country 2
Lower (2)
Limit A (Country 2) Limit (A)

Lower = Credit
Sum of estate taxes paid in
Countries 1 and 2
 Lower = Limit (B)
Limit B

Estate Tax Return

The estate tax return is required to be filed in the following cases:

a) When the transfer is subject to estate tax; or
b) When the gross estate includes properties for which clearance from the BIR (Certificate Authorizing Registration (CAR)) is
needed before transfer of ownership to the transferees/heirs can be effected (regardless of the value of the gross estate).

Who files?
The executor or administrator, or any of the legal heirs.

Time of filing?
Within 11 year from death of decedent.

Time of filing can be extended for another 30 days or less in meritorious cases. The application for the extension of time to file the estate
tax return must be filed with the Revenue District Officer (“RDO”) where the estate is required to secure its TIN and file its tax returns.
This request shall be approved by the Commissioner or his duly authorized representative.

Where filed?
1) If the decedent was a resident – the administrator or executor shall register the estate and secure a new TIN therefor from the
RDO where the decedent was domiciled at the time of his death.

The administrator/executor shall file the estate tax return with:

a. An Authorized Agent Bank (AAB), or
b. Revenue District Officer or Collection Officer having jurisdiction over the place where the decedent was domiciled at the
time of death, or
c. Duly authorized Treasurer of the city or municipality in which the decedent was domiciled at the time of his death.

Whichever is applicable following prevailing rules and procedures on collection.

2) If decedent was a non-resident (whether citizen or alien) – the TIN for the estate shall be secured from, and the estate tax
return shall be filed with:
a. With the RDO where the executor/administrator is registered.
b. If the executor/administrator is not registered with the BIR, with the RDO having jurisdiction over the legal residence of
the executor/administrator.
c. If there is no executor/administrator, with the Office of the Commissioner (RDO No. 39, South Quezon City).

Contents of the Estate Tax Return

1) Value of the Gross Estate;
2) Gross estate outside the Philippines for non-resident alien decedents;
3) Deductions allowed and taken;
4) Other supplemental data;
5) For estate tax returns showing a gross value exceeding P5,000,000, a statement certified by a CPA as to the assets, deductions,
and tax due.

Payment of the Estate Tax

When paid?
- Estate tax is paid at the time the return is filed (pay as you file).

Extension of time to pay:

When the Commissioner finds that the payment on the due date of the estate tax or any part thereof would impose undue hardship upon
the estate or any of the heirs, he may extend the time for payment of such tax or any part thereof not to exceed five (5) years in case the
estate is settled through the courts, or two (2) years in case the estate is settled extrajudicially.

The application for extension of time to pay the estate tax shall be filed with the RDO where the estate is required to secure its TIN and
file its estate tax return. This request shall be approved by the Commissioner or his duly authorized representative.

The Commissioner may require the executor, or administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not
exceeding double the amount of the tax, conditioned upon the payment of the said tax in accordance with the terms of the extension.

Any amount paid after the statutory due date of the tax, but within the extension period, shall be subject to interest but not to
surcharges.

Payment by Installment

In case of insufficiency of cash for the immediate payment of the total estate tax due, the estate tax may be allowed to pay the estate tax
due through the following options:

1) Cash Installment
a. The estate tax return shall be filed within one (1) year from the date of decedent’s death;
 b. The cash installment shall be made within two (2) years from the date of filing of the estate tax return;
c. The frequency (i.e., monthly, quarterly, semi-annually, or annually), deadline, and amount of each installment shall be
indicated in the estate tax return, subject to the prior approval of the BIR;
d. No civil penalties or interest may be imposed on estates permitted to pay the estate tax due by installment. However, the
Commissioner is not prevented from executing enforcements actions against the estate after due date of the estate tax,
provided that all the applicable laws and required procedures are followed/observed; and
e. In case of the lapse of 2 years without the entire estate tax due being paid, the remaining balance thereof shall be due and
demandable subject to the applicable penalties and interest reckoned from the prescribed deadline for filing the return, and
payment of the estate tax.

2) Partial Disposition of Estate and Application of its Proceeds to the Estate Tax Due

a) The estate tax return shall be filed within one (1) year from the date of decedent’s death;
b) The written request for the partial disposition of the estate shall be approved by the BIR. The said request shall be filed,
together with a notarized undertaking that the proceeds thereof shall be exclusively used for the payment of the total estate
tax due;
c) The computed estate tax due shall be allocated in proportion to the value of each property;
d) The estate shall pay to the BIR the proportionate estate tax due of the property intended to dispose of;
e) An electronic Certificate Authorizing Registration (‘eCAR”) shall be issued upon presentation of proof of payment of the
proportionate estate tax due of the property intended to be disposed. Accordingly, there may be as many eCARs issued as
there are properties intended to be disposed to cover the total estate tax due, net of the proportionate estate taxes previously
paid under this option; and
f) In case of failure to pay the total estate tax due out of the proceeds of the said disposition, the estate tax due shall be
immediately due and demandable subject to the applicable penalties and interest reckoned from the prescribed deadline for
filing the return and payment of the estate tax. This is without prejudice to the withholding of issuance of the eCARs on the
remaining properties until the payment of the remaining balance of the estate tax due, including the penalties and interest.

Who pays the estate tax?

1) The executor or administrator. Where there are 2 or more executors or administrators, all of them shall be severally liable for the
payment of the tax.
2) An heir shall be subsidiarily liable but only to the extent of his share in the net estate.

The application for payment by installment or partial disposition of the estate must be filed with the Revenue District Office (:RDO”)
where the state is required to secure its TIN an property, with the equivalent cash consideration d file its tax returns. This request shall be
approved by the Commissioner or his duly authorized representative.
For purposes of this option, disposition shall refer to the conveyance of property, whether real, personal, or intangible property, with the
equivalent cash consideration (Rev. Reg. No. 12-2018).

Payment of Estate Tax as a Prerequisite to Distribution

The estate tax clearance (CAR) issued by the Commissioner or the RDO having jurisdiction over the estate will serve as the authority to
distribute the remaining or distributable properties or shares in the inheritance to the heirs or beneficiaries.
No Judge shall authorize the executor or a judicial administrator to deliver a distributive share to any party interested in the estate unless a
certification from the Commissioner that the estate tax has been paid is shown.

Payment of Estate Tax as a Prerequisite to Transfer of Shares, Bonds, Rights

There shall not be transferred to any new owner in the books of any corporation, Sociedad anonima, partnership, business, or industry
organized or established in the Philippines any share, obligation bond, or right by way of gift inter vivos or mortis causa, legacy, or
inheritance, unless an eCAR is issued by the Commissioner or his duly authorized representative.

Payment of Tax as a Requirement for Withdrawal from Bank Account

The executor, administrator, or any of the legal heirs may be allowed to withdraw from a bank deposit of the decedent within 1 year from
the date of death. The amount withdrawn shall be subject to a 6% final withholding tax.
For joint accounts, the 6% final withholding tax shall be based on the share of the decedent in the joint bank deposit.
The bank is required to file the prescribed quarterly return on the final tax withheld on or before the last day of the month following the
close of the quarter during which the withholding was made. In all cases, the final tax withheld shall not be refunded nor credited against
the tax due on the net taxable estate of the decedent.
In instances where the bank deposit accounts have been duly included in the gross estate of the decedent, and the estate tax due thereon
paid, the executor, administrator, or any of the legal heirs shall present the eCAR issued for the said estate prior to withdrawal shall no
longer be subject to the withholding imposed under Section 97 of the Tax Code.

The bank shall issue the corresponding BIR Form No. 2306 (Certificate of Final tax Withheld At Source) certifying such withholding.
The non-availability of the withheld tax as a credit against the estate tax due necessarily means that the amount withdrawn (gross of the
6% withheld tax) is excluded from the gross estate.

ESTATE TAX
TRAIN

Estate tax rate is fixed at 6%

PRE - TRAIN

Estate Tax
Rates Sec. 84. Estate Tax Taxable
IF THE NET
is:
This tax shall
 Over But not over be Plus Of the Excess Over
200,000 Exempt
200,000 500,000 0 5% 200,000
500,000 2,000,000 15,000 8% 500,000
2,000,000 5,000,000 135,000 11% 2,000,000
5,000,000 10,000,000 465,000 15% 5,000,000
10,000,000 And Over 1,215,000 20% 10,000,000

Allowable Citizens or resident alien decedents were allowed the following

Deductions deductions:
I. ORDINARY DEDUCTIONS
(A) ELIT Expenses (Expenses, Losses, Indebtedness, Taxes)
(1) Funeral expenses – lowest of (a) actual expense, (b) 5% of gross estate, or
(c) ₱200,000.
(2) Judicial expenses – court/litigation expenses.
(3) Claims against the estate – unpaid obligations of the decedent of a
pecuniary nature.
(4) claims against insolvent persons.
(5) Unpaid mortgages.
(6) Income and property taxes.
(7) Losses.
(B) Transfers for Public Use
(C) Vanishing Deduction (on Property Previously Taxed)

II. SPECIAL DEDUCTIONS

(a) Family Home – lower of FMV of family home or ₱1,000,000.
(b) Medical Expenses – incurred within one (1) year of death; maximum of ₱500,000.
(c) Standard Deduction - ₱1,000,000.
(d) Amounts received by the heirs under R.A. 4917 – amounts/benefits consequence of his death.
III. SHARE OF THE SURVIVING SPOUSE IN THE NET CONJUGAL PROPERTIES

Non-resident alien decedents were allowed the following deductions:

I. ORDINARY DEDUCTIONS
(A) ELIT Expenses (Expenses, Losses, Indebtedness, taxes)
(1) Funeral expenses – lowest of (a) actual expense, (b) 5% of gross estate, or (c) ₱200,000.
(2) Judicial expenses – court/litigation expenses.
(3) Claims against the estate – unpaid obligations of the decedent of a
pecuniary nature.
(4) claims against insolvent persons.
(5) Unpaid mortgages.
(6) Income and property taxes.
(7) Losses.

Prorated: ELIT x Philippine Gross Estate

Worldwide Gross Estate
(B) Transfers for Public Use
(C) Vanishing Deduction (on Property Previously Taxed)

II. SPECIAL DEDUCTIONS – No special deductions were available for non-resident alien decedents

III. SHARE OF THE SURVIVING SPOUSE IN THE NET CONJUGAL PROPERTIES

Citizens or resident alien decedents were allowed the following

deductions:
I. ORDINARY DEDUCTIONS
(A) ELIT Expenses
Claims against the estate

Claims against insolvent persons

Unpaid mortgages
Income and property taxes
Losses
(B) Transfers for Public Use
(C) Vanishing Deduction (on PPT)
II. SPECIAL DEDUCTIONS
(a) Family Home – lower of FMV of family home or ₱10,000,000.
(b) Standard Deduction - ₱5,000,000.
(c) Amounts received by the heirs under R.A. 4917
III. SHARE OF THE SURVIVING SPOUSE IN THE NET CONJUGAL PROPERTIES

Non-resident alien decedents were allowed the following deductions:

I. ORDINARY DEDUCTIONS
(A) ELIT Expenses
 Claims against the estate

Claims against insolvent persons

Unpaid mortgages
Income and property taxes
Losses
Prorated: ELIT x Philippine Gross Estate
Worldwide Gross Estate

(B) Transfers for Public Use

(C) Vanishing Deduction (on Property Previously Taxed)

II. SPECIAL DEDUCTIONS

Standard Deduction - ₱500,000

III. SHARE OF THE SURVIVING SPOUSE IN THE NET CONJUGAL PROPERTIES

Filing a notice of death
Filing of Estate Tax returns
Time for filing
Payments of estate taxes
Payment of tax antecedent
to the transfer of shares,
bonds, or rights
Sec. 89. Written notice of death required for
gross estates exceeding PHP 20,000
Under Sec. 90 (A) of the Tax Code, an estate
tax return shall be filed in:
(1) All transfers subject to estate tax, or
(2) Where, though exempt from tax, the
gross value of the estate
(3) Regardless of the gross value, the
estate consists of registered or
registrable property.
Under Sec. 90(B), the estate tax return shall be
filed within 6 months from the death of the
decedent.
Sec. 91 Payment of estate tax
Sec. 97. A bank shall not allow withdrawal
from a decedent’s bank account without the
Commissioner certifying that taxes imposed
thereon have already been paid.
The administrator of the estate or any one of the
heirs may, when authorized by the
Commissioner, withdraw an amount not
exceeding PHP200,000 even without the
certification from Commissioner that the estate
taxes have been paid.
Repealed
An estate tax shall be filed in:
(1) All transfers subject to estate
tax, or
(2) Regardless of the gross value,
the estate consists of
registered or registrable
property.
The estate tax return must be filed
within 1 year form the death of the
decedent.
Additional provision:
An estate with insufficient cash is
allowed to pay the estate tax due by
installment within two years from the
statutory date for its payment without
civil penalty and interest.
Banks, which have knowledge of the
death of the peson, shall allow
withdrawals from a decedents deposit
account subject to a 6% final
withholding tax.