death.

This means that the tax obligation

arises at the moment of death, even though
Gross estate
the actual payment might occur later.

Although the tax is calculated based

Initial Law (1916): The first estate tax law
on the property's value, it should not be seen
was introduced in 1916 through Act 2601. It
as a direct tax on the property itself. Instead,
imposed graduated tax rates on the net
it's a tax on the privilege of passing on the
property left by someone who passed away.
property to heirs or beneficiaries.
Amendments Over Time: Over the years,
several amendments were made to this law.
The Administrative Code was revised to 1.​ Benefit-Received Theory:
include taxes on inheritances, gifts, and a.​ This theory suggests that
other transfers of property upon death. the government provides
Tax Reform Act (1998): The National services in distributing the
Internal Revenue Code (NIRC), also known estate according to the
as the "Tax Reform Act," was implemented decedent's wishes or the
on January 1, 1998. This act restructured law. In return for these
the tax base and rates for estate and donor's services and benefits to the
taxes. It also allowed deductions for estate and heirs, the state
medical expenses from the gross estate. collects the estate tax.
2.​ Privilege or State Partnership
Civil and Family Codes: The estate tax laws
Theory:
are also influenced by the Civil Code and
Family Code of the Philippines, which help a.​ According to this theory,
determine the tax base and rates. inheritance is seen as a
privilege granted by the
TRAIN Act (2018): The most recent
state, not a right. The state,
significant amendment came with the Tax
acting as a silent partner in
Reform for Acceleration and Inclusion
the accumulation of wealth,
(TRAIN) Act, effective January 1, 2018. This
has the right to claim a share
act simplified the estate tax by replacing the
through taxation.
graduated tax rates with a single rate of 6%
on the net taxable estate. It also revised the 3.​ Ability to Pay Theory:
thresholds for standard deductions and a.​ This theory is based on the
family home, and removed deductions for idea that receiving an
funeral, judicial, and medical expenses. inheritance is akin to
receiving unearned wealth or
a windfall (unexpected or
Estate tax unearned gain, often in the
form of money or assets.).
Estate tax is considered an excise
Since this increases the
tax. It's not directly imposed on the value of
financial capacity of the
the property itself but rather on the act of
heirs, they are in a better
transferring ownership of the property when
position to contribute to
someone dies.
government revenue through
The right of the state to impose this taxes.
tax begins immediately upon the person's
 4.​ Redistribution of Wealth Theory: resident citizen of a foreign country
that, at the time of their death, did
a.​ This theory addresses the
not impose any estate tax on
issue of wealth inequality. By
intangible personal property owned
imposing an estate tax, the
by Philippine citizens who do not
amount of property received
reside in that foreign country, then
by heirs is reduced,
the intangible assets of the
promoting a more equitable
non-resident alien in the Philippines
distribution of wealth in
are excluded from their gross estate.
society. The progressive
nature of the tax aims to ​ If the foreign country where
mitigate the concentration of the deceased nonresident alien lived
wealth that can result from does not charge estate tax on the
inheritance. intangible assets of Filipinos who
live abroad.

2.​ Similar Exemption by Foreign

Classification of decedents and Country: If the laws of the foreign
composition of gross estate country where the decedent was a
1.​ Citizens and Resident Aliens: For resident citizen allow a similar tax
these individuals, the value of the exemption for intangible personal
gross estate includes all property, property owned by a Philippine
whether real or personal, tangible or citizens not residing in that foreign
intangible, regardless of where it is country, then the intangible assets
located. This means their entire of the non-resident alien in the
estate, no matter where the assets Philippines are also excluded from
are situated globally, is subject to their gross estate.
estate tax. ​ If the laws of the foreign
2.​ Nonresident Aliens: For nonresident country allow a similar estate tax
aliens who are not citizens of the exemption for intangible assets
Philippines at the time of their death, owned by Filipinos who are not
only the portion of their gross estate residents there.
that is situated within the Philippines
is included in the taxable estate.
This means that only their assets Intangible assets are non-physical assets
located in the Philippines are subject that have value due to intellectual or legal
to estate tax. rights, like patents or trademarks. They
don't have a physical form but are
valuable because of the rights they
provide or the value they add to other
Reciprocity clause assets.

Exemption for "intangible" personal In general, the location (or "situs") of

property located in the Philippines from intangible assets is considered to be the
being included in the gross estate of a owner's home or "domicile." This is known
non-resident alien decedent, under certain as "mobilia sequntur personam," meaning
conditions. "movables follow the person." However,
this rule is just for convenience and can
1.​ No Estate Tax Imposed by Foreign change if the intangible asset is used or
Country: If the decedent was a has a business presence in another
 location. For example, the situs of a debtor
franchise is not where the owner lives but
where the franchise operates. The actual Bank deposit Location of the
location where the asset is used or has depository bank
business activities takes precedence over
the owner's domicile.
Valuation of gross estate

SectionS 104 of the Tax Code enumerates 1.​ General Rule: The estate is valued at
the following intangible personal property its fair market value (FMV) at the
with situs in the Philippines, for estate tax time of the decedent's death.
purposes: 2.​ Real Property: The value is
determined by taking the higher of:
1.​ Franchise which must be exercised
in the Philippines. a.​ The FMV determined by the
Commissioner.
2.​ Shares, obligations or bonds issued
by any corporation or sociedad b.​ The FMV as shown in the
anonima organized or constituted in schedule of values set by
the Philippines in accordance with provincial and city assessors
its laws. (also known as the assessed
value for real estate tax
3.​ Shares, obligations or bonds issued
purposes).
by any foreign corporation, 85% of
the business of which is located in 3.​ Personal Property: Valued at the
the Philippines. FMV at the time of death.
4.​ Shares, obligations, or bonds issued 4.​ Shares of Stock:
by-any foreign corporation if such
a.​ Unlisted Common Shares:
shares, obligations or bonds have
Valued at the book value per
acquired a business situs in the
share of the issuing
Philippines.
corporation. Appraisal
5.​ Shares or rights in any partnership, surplus and amounts
business or industry established in assigned to preference
the Philippines shares are not considered.
b.​ Unlisted Preference Shares:
Valued at the par value per
Property Situs share.
Real property and Location of the c.​ Listed Shares: Valued at the
tangible personal property arithmetic mean between
property the highest and lowest
quotation on the date
Shares, franchise, Where the
copyright, and the intangible is nearest to the date of death
like exercised if no quotation is available
regardless of where on the date of death itself.
the corresponding
certificate is stored 5.​ Units of Participation in Clubs: For
associations, recreation, or
Receivables Residence of the amusement clubs (like golf or polo
 clubs), the value is based on the bid b.​ Property outside the
price nearest the date of death as Philippines of a
published in any newspaper. non-resident alien decedent
6.​ Rights to Usufruct, Use, or - only properties located in
Habitation, and Annuity: These are the Philippines are included
valued according to the latest Basic in their gross estate for tax
Standard Mortality Table, purposes. This means that
considering the probable life of the any properties they own
beneficiary. This valuation must be outside the Philippines are
approved by the Secretary of excluded from estate tax
Finance upon the recommendation computation.
of the Insurance Commissioner.

c.​ Intangible personal property

in the Philippines of a
Exemptions and exclusions from the
gross estate non-resident alien under the
reciprocity law - Intangible
A.​ Exclusions under Sec 85 and 104 of personal property (such as
the tax code. stocks, bank deposits, and
a.​ Exclusive property of the other financial assets) of a
surviving spouse - When a nonresident alien decedent
person dies, only their own in the Philippines is excluded
properties are included in the from the gross estate if
gross estate for taxation. reciprocity exists.
The exclusive properties of
the surviving spouse are
excluded since they were Reciprocity means that the foreign
never owned by the country where the decedent was a
resident also exempts or does not impose
deceased. Under Article 135
estate tax on similar properties of Filipino
of the Civil Code, a citizens.
husband’s exclusive
properties are called
"capital," while a wife’s are
"paraphernal." Whether a
property is exclusive or Exclusions under sec 87 of the tax code
shared depends on the A.​ Merger of usufruct in the owner of
couple’s marriage the naked title
settlement. Only the
deceased’s share in conjugal B.​ Transmission or delivery of the
or community property is inheritance or legacy by the fiduciary
subject to estate tax, heir or legatee to the
ensuring the surviving fideicommissary
spouse’s assets remain C.​ Transmission from first heir. Legatee
untaxed. or donee in favor of another
beneficiary, in accordance with the
desire of the predecessor. “Transfer
 under special power of
removed from the first heir, meaning the
appointment” first heir must be closely related to the
D.​ Institutions should use the bequests, second heir (e.g., a father can transfer
devises, or legacies for their property to a son, but not to a distant
relative). Additionally, both the first heir
intended purposes, ensuring no part
(the fiduciary) and the second heir (the
of the net income benefits any fideicommissary) must be alive at the
individual. However, there is a time of the testator's death for the
stipulation: no more than 30% of the substitution to take effect. This ensures
bequest, devise, or transfer can be that the property is transferred to the
used by the institutions for second heir only after the first heir’s
administrative purposes.
passing.

DBM - dagdag bawas method, include to

gross estate then deduct.

The merger of usufruct in the owner of Exclusions under special laws

the naked title happens when the person A.​ Proceeds of life insurance and
who had the right to use and enjoy a
benefits received by members of
property (the usufructuary) dies. In this
case, the usufructuary only had the right the GSIS.
to use the property but didn’t own it. The B.​ Accruals and benefits received by
real ownership belonged to the naked members from the SSS by reason
owner. Upon the death of the of death.
usufructuary, their right to use the C.​ Amounts received from the
property ends and merges with the Philippines and United states
ownership of the naked owner, who now
governments for war damages.
fully owns the property. This means the
person who is the intended beneficiary of D.​ Amounts received from the United
the property becomes the complete States veterans administration.
owner once the usufruct is gone. E.​ Payments from the Philippines of
the US government to the legal
heirs of deceased of world war ii
A Special Power of Appointment is a legal veterans and disease civilians for
right given to someone (the supplies or services furnished to
donee-decedent) to decide who will the US and philippine army.
receive a property, but only from a specific F.​ Retirement benefits of officials or
group of people. The donee-decedent
employees of a private firm.
cannot choose themselves to receive the
property. When the property is transferred G.​ Personal equity and retirement
using this power, it is excluded from the account assets of the Decedent-t
donee-decedent’s gross estate because contributor.
they are merely holding the property in H.​ Compensation paid to private and
trust, not owning it outright. This means public health workers who have
that the donee-decedent is only managing
contracted covid-19 in case of
the property for others, and it doesn’t
count as part of their estate for tax
death, shall not be included as
purposes. part of the gross estate of the
decedent subject to estate tax as
provided under the republic act
Fideicommissary substitution, the number 11494 or the bayanihan to
transfer must be made to a second heir recover as one act.
who is no more than one degree
 transfer. One example of this is a
donation mortis causa, a gift made
Composition of the gross estate
in anticipation of death.
1.​ Real property b.​ Revocable transfers - situation
2.​ Personal tangible property where the decedent could change
3.​ Intangible property the terms of how property is
enjoyed, even after the property
Property owned by the decedent that was transferred. It’s enough that
are actually and physically present in the decedent had the power to
his estate at the time of death make such changes, even if they
Decedent's Interest refers to the didn’t actually exercise it.
ownership or equity that the decedent (the
person who has passed away) held in any
property at the time of their death. This Status Included in Gross
estate
includes physical assets like land,
buildings, vehicles, shares of stock, and Exercised the right yes
bank deposits, whether or not the
decedent had control or possession of Not exercised right yes
them. According to the Tax Code (Section
Waived the right no
85(A)), the decedent's interest in these
properties is included in the gross estate Expiration before no
for tax purposes. This means that the death
value of any property or interest in
property owned by the decedent, which Expiration after yes
death
has value or can be transferred, is
considered part of their estate when
calculating taxes after death. For conditional transfer:
Interest must exist at the time of
the decedent’s death to be included as status Included?
part of the gross estate.
Fulfilled before no
Property NOT PHYSICALLY IN THE death
ESTATE but are still subject to payment
Fulfilled after yes
of estate tax death
​ Even if the decedent gave away
some of their property while they were still Not fulfilled yes
alive, it can still be counted in their estate
Waived no
if the property was meant to be fully
transferred only after their death, or if the
decedent didn't fully give up control of the
property. According to Section 85(C) of the Tax
Code, if a decedent transferred
a.​ Transfers in contemplation of property through a trust or other
death (Estate tax)- happens when means but kept the power to change
someone gives away their property the terms, revoke, or terminate the
enjoyment of the property, that
because they are thinking about
property is included in their gross
their impending death. The idea of estate. This applies even if the
death is the main reason for the
 does not in fact and before his
decedent didn’t use that power before
they passed away. If the decedent had death.
the power to make these changes, it is d.​ The possession or enjoyment of or
considered as if the power was the right to the income from the
exercised at the time of their death, property.
whether or not they actually made any e.​ The right either alone or in
changes conjunction with any person to
designate the persons who shall
Transfers under a general power of possess or enjoy the property or
appointment the income there from.
​ power of appointment is the right to
decide who will inherit or receive property Transfers for insufficient consideration
from a prior decedent. There are two types (complex transfer both onerous and
of powers of appointment: general and gratuitous)
special.
​ When property is sold or
1.​ General power of appointment transferred for less than its fair market
allows the donee (the person given value (FMV) at the time of the sale or
the power) to appoint anyone they transfer, the difference between the FMV
choose, including themselves. The at the time of the decedent's death and
donee has full control over the the consideration (payment) received is
property, and the property is included in the decedent's gross estate for
treated as part of the donee's tax purposes.
estate for tax purposes upon their
death. FMV - Consideration
2.​ Special power of appointment
If the consideration received is
limits the donee to appointing only
nearly the same as the FMV at the time of
from a specific group of people,
the transfer, it is considered a legitimate
and the donee cannot choose
sale, or a bona fide sale, and not subject
themselves. Property transferred
to estate tax. However, if the consideration
under a special power of
is much lower than the FMV at the time of
appointment is excluded from the
the sale, the difference will be added to
donee's gross estate because the
the decedent's gross estate when they
donee is considered to hold the
pass away.
property in trust, not as full
ownership.
If no payment was made at the
time of the transfer and the transfer was
May be exercised by the donor-decedent
made "in contemplation of death" (a
through:
donation mortis causa), the property’s
a.​ By will FMV at the time of death, not at the time
b.​ By deed to take effect in of transfer, will be included in the gross
possession or enjoyment at or after estate.
his death.
If the transfer wasn't made in
c.​ By death under which he has
contemplation of death, it’s treated as a
retained for his life or any period
gift (donation inter vivos) and subject to
not ascertainable without reference
donor’s tax, based on the FMV of the
to his death or for any period which
property at the time the donation was ○​ The estate or its
made. executor/administrator
(whether revocable or not).
○​ A third person, if the
designation is revocable.

If the policy does not state that

the beneficiary is irrevocable, it is
assumed revocable and taxable.
However, group life insurance from an
employer is not taxed.

Under the Insurance Code (RA

10607, Sec. 11), a beneficiary is revocable
unless the insured explicitly waives the
Miscellaneous Items right to change them. If they never change
it, the designation becomes irrevocable
a.​ Claims against insolvent
by default.
persons
For estate tax purposes, an Not included in gross estate:
insolvent person is someone
whose properties are not enough 1.​ 3rd person designated as
to fully or partially pay off their irrevocable
debts. This means they owe more 2.​ 3rd person designated as
than what they own. revocable but the insurer did not
change the beneficiary during his
A court declaration of life time
insolvency is not needed, but 3.​ Group insurance
there must be proof that the person 4.​ SSS and GSIS
truly cannot pay their debts.

When calculating the estate

tax, the full amount of the debt
owed to the insolvent person is still
included in the estate’s total value
(gross estate). However, any
portion of that debt that cannot be Transfer with retention/ reservation of
collected is allowed as a rights
deduction from the gross estate,
​ Allows the transfer to continue
reducing the taxable amount
enjoying. Processing or controlling the
b.​ Proceeds of life insurance property because only the naked title has
been transferred.
​ Life insurance proceeds are
included in the taxable estate if: Estate tax rate

1.​ The policy was on the decedent’s Starting January 1, 2018, under
own life. the TRAIN Law (RA 10963), the net
2.​ The beneficiary is either: estate of a deceased person, whether a
resident or non-resident of the b. Itemized deductions allowed
Philippines, is subject to a 6% estate tax. under Section 86 of the Tax Code.​
This tax applies to the estate value as c. Total estate tax due, whether
determined under the Tax Code. already paid or still outstanding.

Law that governs the imposition of estate Time for Filing the Estate Tax Return
tax and accrual of estate tax
●​ The estate tax return must be
​ Estate taxation follows the law in filed within one (1) year from the
effect at the time of the decedent's decedent’s death.
death. The estate tax accrues on the ●​ If a court approves the project of
date of death, but the obligation to pay partition, it must send a certified
the tax is separate from when it actually copy of its order to the BIR
becomes due. Commissioner within 30 days.
●​ The estate tax accrues at the
Filing of tax return and payment of estate time of death, but the one-year
tax due period is the time allowed to file
without penalties.
Filing and Payment of Estate Tax
Extension of Filing Deadline
●​ The executor or administrator is
primarily responsible for filing and ●​ The BIR Commissioner or an
paying the estate tax. authorized Revenue Officer can
●​ If there is no grant an extension of up to 30
executor/administrator, any legal days for valid reasons.
heir may file and pay. ●​ The request must be filed at the
●​ The tax must be paid upon filing Revenue District Office (RDO)
(Pay-as-you-file system). where the estate is registered for
TIN and tax return filing.
When to File an Estate Tax Return (RR
12-2018): Time for Payment of Estate Tax
1.​ If the estate is subject to estate ●​ Estate tax must be paid when
tax. filing the return (Pay-as-you-file
2.​ If the estate includes registered or system).
registrable properties (e.g., real ●​ Since filing is allowed within one
estate, vehicles, stocks) that need (1) year from death, payment can
a Certificate Authorizing also be made within that period.
Registration from the BIR to
transfer ownership. Extension of Payment Deadline

Additional Requirement for Large Estates ●​ The BIR Commissioner may

(>₱5 Million): allow an extension if paying
immediately would cause undue
●​ A Certified Public Accountant hardship:
(CPA) must prepare a statement ○​ Up to 5 years for judicial
detailing:​ settlements
a. Itemized assets of the (court-supervised).
decedent and their values.​
 ○​ Up to 2 years for payments are made on
extrajudicial settlements time. However, the
(without court involvement). government can still take
●​ The request must be filed at the legal action if necessary.
Revenue District Office (RDO)
and approved by the 2. Paying Through Property Sales (Partial
Commissioner or an authorized Disposition of Estate)
officer.
●​ No extension will be granted if the ●​ Instead of paying in cash, the
delay is due to negligence, fraud, estate may sell or transfer property
or intentional disregard of tax (real estate, stocks, etc.) and use
rules. the proceeds to pay the estate tax.
●​ The estate tax return must still be
Bond Requirement filed within one (1) year from the
decedent’s death.
●​ If an extension is granted, the BIR ●​ The BIR must approve the sale in
may require a bond (up to double writing, and the estate must
the tax amount) to ensure full promise in a notarized document
payment. that the sale proceeds will only be
used for estate tax payment.
●​ The tax will be divided based on
the value of each property. The
Payment of estate tax by installment estate must pay the proportionate
and partial disposition of estate. estate tax for each property before
it can be transferred.
1.​ Paying in Installments (Cash ●​ Once tax on a property is paid, the
Installment) BIR will issue an eCAR
●​ The estate can pay the tax (Electronic Certificate
in multiple payments within Authorizing Registration),
two (2) years from filing allowing the new owner to register
the estate tax return. the property in their name.
●​ The estate tax return must ●​ If the estate fails to pay the full
be filed within one (1) year estate tax from the property sale,
of the decedent’s death. the unpaid balance will become
●​ The BIR (Bureau of Internal due immediately with penalties
Revenue) will approve the and interest. The BIR may hold
payment plan, which may back eCARs for other properties
be monthly, quarterly, until the full tax is paid.
semi-annually, or
annually. Requesting Extensions & Installment
●​ If the estate fails to pay the Payments
full tax within two years,
●​ If more time is needed to file the
the remaining balance will
estate tax return or pay the
become due immediately
estate tax, or if the estate wants to
with penalties and
pay in installments, a formal
interest.
request must be submitted.
●​ No penalties or interest will
be charged as long as
 ●​ This request must be filed with the Special Cases:
Revenue District Office (RDO)
where the estate is registered. ●​ The Commissioner of Internal
●​ The request must be approved by Revenue has the authority to
the Commissioner of Internal change the filing location if
Revenue or an authorized needed.
representative.
Liability for the payment of estate tax
Where to File the Estate Tax Return
​ The executor or administrator of an
For Resident Decedents (those who estate is primarily responsible for paying
lived in the Philippines before passing): the estate tax. However, heirs or
beneficiaries are secondarily liable for a
●​ The executor or administrator portion of the tax based on their share of
must register the estate and the estate, though their liability can't
secure a new TIN from the RDO exceed the value of their inheritance. If no
where the decedent lived before executor or administrator is appointed in
death. the Philippines, anyone possessing the
●​ The estate tax return must be filed, decedent's property must file the return.
and the tax must be paid at: The estate tax must be paid before any
○​ An Accredited Agent share of the estate is distributed. If there
Bank (AAB), are multiple executors or administrators,
○​ The Revenue District all are individually responsible for the tax.
Office (RDO), or A clearance from the tax authorities is
○​ A Revenue Collection required before distributing the
Officer in the same inheritance.
jurisdiction.
Payment in installment
For Non-Resident Decedents (those
who lived abroad before passing): ​ If the estate lacks enough cash to
pay the estate tax, the tax can be paid in
●​ If the executor or administrator is installments within two years from the due
in the Philippines, the estate tax date without additional penalties or
return must be filed at the RDO interest. The first payment should be
where the made using the estate tax return and
executor/administrator is BIR Form 0605 or another designated
registered. payment form. Subsequent installments
●​ If the executor or administrator is can be made using the same form.
not registered, the return must be
filed at the RDO where they Civil penalties and interest
legally reside.
​ If the estate tax is paid after the
●​ If there is no executor or
due date but within the extension
administrator in the Philippines,
period, it will incur interest but no
the return must be filed with the
surcharge. If the delay is not due to
Office of the Commissioner
fraudulent intent, a 25% penalty will apply;
through RDO No. 39 in South
if there was fraudulent intent, a 50%
Quezon City.
penalty is imposed. Interest is charged on
the unpaid tax from the due date until full
payment, at a rate of 20% before the
TRAIN Law and 12% after the law took
effect.

Payment of tax antecedent to the

transfer of shares, bonds or rights

​ No transfer of shares, bonds, or

rights in any corporation, partnership, or
business in the Philippines can occur
unless the applicable taxes (like estate
tax) are paid and the Commissioner of
Internal Revenue provides a
certification confirming the payment. In
the case of a deceased person with a
bank deposit, if the bank is aware of the
death, it will allow withdrawals from the
account, but a 6% final withholding tax will
apply. Withdrawal slips must include an
affidavit confirming that all joint
depositors are alive at the time of
withdrawal. Under the TRAIN Law (RA
No. 10963), if the estate lacks enough
cash to pay the full estate tax, installment
payments are allowed within two years
from the due date without penalties or
interest.