TAX 2: TRANSFER & BUSINESS TAXATION

CHAPTER 1
Property embraces everything which is or may be the subject of ownership. It includes not only
ownership and possession but also the right to use and enjoyment for lawful purposes.
Owner is the person in whom the ownership, dominion or ;tle of property is vested.
Ownership is the exclusive right of possessing, enjoying and disposing of a property.

Modes of Acquiring Ownership

Under the Civil Code, ownership may be exercised over things or rights. The owner has the right
to enjoy and dispose of a thing, without other limita;ons than those established by law.

The effec;veness of the various modes of acquiring ownership and other real rights over
property is premised on the existence of ;tle or judicial jus;fica;on.
1. Occupa:on. The property seized is without a known owner.
2. Intellectual Crea:on. The composer owns his musical composi;ons while the author
owns his literary, legal historical, scien;fic or other work.
3. Dona:on. An act of liberality whereby a person disposes gratuitously of a thing or right in
favor of another, who accepts it.
4. Succession. By virtue of which the property, rights and obliga;ons to the extent of the
value of the inheritance, of a person are transmiJed through his death to another.
5. Prescrip:on. One acquires ownership and other legal rights through the lapse of ;me I
the manner and under the condi;ons laid down by law (acquisi:ve). In the same way,
rights and ac;ons are lost by prescrip;on (ex:nc:ve).

Concept and Nature of Transfer Taxes

In succession, estate tax is levied on the transmission of property from a prior decedent to his
heirs. Estate encompasses the totality of assets and liabili;es a decedent owns at the :me of his
death.
In dona:on, donor’s tax is imposed as ownership of the property passes from the donor to the
done.
Transfer Taxes are taxes imposed upon the gratuitous disposi;on of private property.
Gratuitous when there is no considera;on for the transfer. Onerous when a considera;on is
received (examples: sale, barter or exchange which are subject to business taxes).
Estate and Donor’s Taxes are both Excise Tax. Imposed upon the right of a person to transfer his
property that may take effect during his life;me or upon his death.

CHAPTER 2
Estate is the sum total of all the property of a deceased individual. That property passes to the
deceased’s heirs at law, if he dies without a will, or to his beneficiaries under his will.
Succession is a mode of acquisi;on by virtue of which the property, rights and obliga;ons to the
extent of the value of the inheritance, of a person are transmiJed through his death to another
or others either by his will or by opera;on of law.
The rights to the succession are transmiJed from the moment of death of the decedent.

Kinds of Succession
1. Testamentary or Testate. Results from the designa;on of an heir, made in a will executed
in the form prescribed by law.
2. Legal or Intestate. Effected by opera;on of law since the decedent did not execute a will.
3. Mixed. Effected partly by will and partly by opera;on of law.

Elements of Succession
1. Death of the Decedent. Decedent is the general term applied to the person whose
property is transmiJed through succession, whether or not he leU a will (Testator or
Testatrix).
 2. Inheritance. Includes all property, rights and obliga;ons of a person which are not
ex;nguished by his death. It includes those which have accrued thereto since the opening
of the succession. However, a personal right, cannot be inherited.
3. Successors. Heirs, Devisees (real estate) and legatees (personal property) are all
successors.
4. Acceptance. May be express (public or private document) or tacit (acts by which the
inten;on to accept is implied)
An heir may accept or repudiate an inheritance. It is an act which is purely voluntary and free.
The effect shall always retroact to the moment of the death of the decedent. Any person having
the free disposal of his property may accept or repudiate an inheritance.

Executor is a person appointed by a testator to carry out the direc;ons and request in his will,
and to dispose of the property according to his testamentary provisions aUer his death.
Administrator is a person (usually a rela;ve) appointed by the court to administer the assets and
liabili;es of a decedent.
All maJers rela;ng to the appointment, powers and du;es of executors and administrators and
concerning the administra;on of estates shall be governed by the Rules of the Court.

Testamentary Succession
Will is legal declara;on of the decedent before his death regarding how he wants his property
transferred aUer his death.
If a person dies leaving a will, the person is said to have died testate, a status known as testacy.

Will is an act whereby a person is permiJed, with the formali;es prescribed by law, to control to
a certain degree the disposi;on of his estate to take effect aUer his death.
The making of a will is a strictly personal act; it cannot be leU in whole or in part to the discre;on
of a third person, or accomplished through the instrumentality of an agent or aJorney.
Codicil is an instrument that amends the provisions of a will. It must be executed with the same
formali:es as a will, but is only required to have a provision/s amending a will.
Probate of a Will is the court procedure by which a will is proved to be valid or invalid.

Capacity and Intent to Make a Will

All persons who are not expressly prohibited by law may make a will.

It is essen;al that the testator be of sound mind at the :me of its execu:on. It is not necessary
that the testator be in full possession of all his reasoning facul:es, or that his mind be wholly
unbroken, unimpaired, or unshaNered by disease, injury or other cause. It shall be sufficient if
he was able at the :me of making the will to know the nature of the estate to be disposed of,
the proper objects of his bounty, and the character of the testamentary act.

The law presumes that every person is of sound mind, in the absence of proof to the contrary.
The burden of proof that the testator was not of sound mind at the of making the will is on the
person who opposes the probate of the will; but if the testator, one month or less, before making
his will was publicly known to be insane, the person who maintains the validity of the will must
prove that the testator made it during a lucid interval.

If someone who signs an instrument did not know what the instrument said at the ;me of
signing, the instrument is not a will. If one who signs an instrument is forced to sign it “against
his will” as the result of duress, the instrument is not a will. A will or a provision in a will, may
also be invalidated by fraud.

A married woman may make a will without the consent of her husband, and without the
authority of the court. A married woman may dispose by will of all her separate property as
well as her share of the conjugal partnership or absolute community property.

Capacity to Succeed by Will or by Intestacy

Persons not incapacitated by law may succeed by will or ab intestato. In order to be capacitated
to inherit, the heir, devisee or legatee must be living at the moment the succession opens, except
in case of representa;on, wherein it is proper.

A child already conceived at the :me of the death of the decedent is capable of succeeding
provided it be born later. The fetus is considered born if it is alive at the :me it is completely
delivered from the mother’s womb. However, if the fetus had an intra-uterine life of less than 7
months, it is not deemed born if it dies within 24 hours aUer its complete delivery from the
maternal womb.

A testamentary disposi:on may be made to the State, provinces, municipal corpora;ons, private
corpora;ons, organiza;ons, or associa;ons for religious, scien;fic, cultural, educa;onal, or
charitable purposes. All other corpora:ons or en::es may succeed under a will, unless there is
a provision to the contrary in their charter or the laws of their crea;on, and always subject to the
same.

Forms of Will
Every will must be in wri:ng and executed in a language or dialect known to the testator. Every
will must be subscribed at the end thereof by the testator himself or by the testator’s name
wriNen by some other person in his presence, and by his express direc:on, and aNested and
subscribed by 3 or more credible witnesses in the presence of the testator and of one another.

Every will must be acknowledged before a notary public by the testator and the witnesses. It
shall not be required to retain a copy of the will, or file another.

Holographic Will is a will wriNen en:rely by the testator with his own hand and not witnessed
or aNested. It is subject to no other form, and may be made in or out of the Philippines, and
need not be witnessed. The testator’s handwri:ng is deemed a sufficient assurance of the will’s
authen:city.

In the probate of a holographic will, it shall be necessary that at least one witness who knows
the handwri:ng and signature of the testator explicitly declare that the will and the signature
are in the handwri;ng of the testator himself. If contested, at least 3 of such witnesses shall be
required.

Revoca:on of Wills and Testamentary Disposi:ons

A will may be revoked by the testator at any ;me before his death. Any waiver or restric:on of
this right is void.

A revoca:on done outside the Philippines by a person who does not have his domicile in this
country, is valid when it is done according to the law of the place where the will was made, or
according to the law of the place in which the testator had his domicile at the ;me.

Subsequent will which do not revoke the previous in an express manner, annul only such
disposi:ons in the prior will as are inconsistent with or contrary to those contained in the later
wills.

A revoca:on of a will based on false cause of an illegal cause is null and void.

Ins:tu:on of Heir
An act by virtue of which a testator designates in his will the person/s who are to succeed him
in his property and transmissible rights and obliga;ons.

A will shall be valid even though it should not contain an ins:tu:on of an heir. In such cases,
the testamentary disposi:ons made in accordance with law shall be complied with and the
remainder of the estate shall pass to the legal heirs.

Legi:me
That part of the testator’s property which he cannot dispose of because the law has reserved it
for certain heirs who are called compulsory heirs.

Compulsory Heirs
1. Legi;mate children and descendants, with respect to their legi;mate parents and
ascendants
2. Legi;mate parents and ascendants, with respect to their legi;mate children and
descendants
3. The widow/er
4. Acknowledged natural children, and natural children by legal fic:on
5. Other illegi:mate children

If the decedent is survived by his legi:mate child and his widow, both of them shall inherit.

One who has no compulsory heirs may dispose by will of all his estate or any part of it in favor
of any person having capacity to succeed.

Disinheritance
A compulsory heir may, in consequence of disinheritance, be deprived of his legi:me, for causes
expressly stated by law. It can be affected only through a will wherein the legal cause therefor
shall be specified.

Sufficient Causes for the Disinheritance of Children and Descendants, Legi:mate as well
as Illegi:mate:
1. Found guilty of an aJempt against the testator, his or her spouse, descendants or
ascendants
2. Accused the testator of a crime for which the law prescribes imprisonment for 6 years
or more, if groundless
3. Convicted of adultery or concubinage with the spouse of the testator
4. By fraud, violence, in;mida;on, or undue influence causes the testator to make a will
or to amend a will
5. A refusal without jus;fiable cause to support the parent or ascendant who disinherits
such child or descendant
6. Maltreatment of the testator by word or deed, by child or descendant
7. Leads a dishonorable or disgraceful life
8. Convic;on of a crime which carries with it the penalty of civil interdic;on

Sufficient Causes for the Disinheritance of Spouse:

1. Convicted of an aJempt against the testator, his or her descendants, or ascendants
2. Accused the testator of a crime for which the law prescribes imprisonment for 6 years
or more, if groundless or false
3. By fraud, violence, in;mida;on, or undue influence causes the testator to make a will
or to amend a will
4. Given cause for legal separa;on
5. Given grounds for the loss of parental authority
6. Unjus;fiable refusal to support the children or the other spouse

Legal or Intestate Succession

If a person dies without leaving a will, the person is said to have died intestate, a status known
as intestacy. In this case, the government provides a default estate plan under which the
decedent’s estate is disposed.

A person who succeeds in the ownership of an intestate decedent’s property is said to take the
property by intestate succession.

Instances Legal or Intestate Succession takes place:

1. Dies without a will, or with a void will, or one which has subsequently lost its validity
 2. Will does not ins;tute an heir to, or dispose of all the property belonging to the
testator, only with respect to the property of which has not been disposed
3. If the suspensive condi;on aJached to the ins;tu;on of heir does not happen or is
not fulfilled, or if the heir dies before the testator, or repudiates the inheritance, there
being no subs;tu;on, and no right of accre;on takes places
4. When the heir ins;tuted is incapable of succeeding

In every inheritance, the rela:ve nearest in degree excludes the more distant ones, saving the
right of representa;on when it properly takes place. Proximity of rela:onship is determined by
the number of genera:ons. Each genera:on forms a degree.

Consanguinity is the rela:on of persons descending from the same stock or common ancestor.
These persons are known as blood rela:ves, and are said to be related by blood or consanguinity.
1. Lineal Consanguinity. Which may be descending or ascending that subsists between
persons of whom one is descended in a direct line from the other
2. Collateral Consanguinity. Which subsists between persons who have the same
ancestors, but who not descend or ascend one from the other.

Affinity is the connec:on exis:ng in consequence of a marriage between each of the married
spouse and the kindred of the other.

Right of Representa:on
Representa:on is a right created by fic:on of law, by virtue of which the representa:ve is raised
to the place and the degree of the person represented and acquires the rights which the laJer
would have if he were living of if he could have inherited. The right of representa:on takes place
in the direct descending line, but never in the ascending.

In the collateral line, it takes place only in favor of the children of brothers or sisters, whether
they be of the full of half-blood.
1. Full Blood Rela:onship. Exis;ng between persons who have the same father and mother.
2. Half Blood Rela:onship. Exis;ng between persons who have the same father, but not the
same mother; or vice versa

Order of Intestate Succession

1. Descending Direct Line (Legi;mate children/descendants)
2. Ascending Direct Line (Legi;mate parent/ascendants)
3. Illegi;mate Children/Descendants
4. Surviving Spouse
5. Collateral Rela;ves within the 5th Degree
6. The State

When Distribu:on of Hereditary Estate Takes Place

The executor or judicial administrator has the task of making sure that the estate tax has been
paid before he delivers a distribu:ve share to any party interested in the estate.

In estate taxa:on, the gross estate of ci;zens and residents include all their property wherever
situated. This gross estate is allowed deduc:on under the tax law; the difference called the net
taxable estate is the basis of the estate tax to be imposed.

Once the estate is closed and a final distribu:on of assets is made to the beneficiaries, the
executor transfers the assets to be held in trust to the trustee.

CHAPTER 3
Estate Tax is the tax on the right to transmit property at death and on certain transfers which
are made by law the equivalent of testamentary disposi;ons. It is an excise tax or privilege tax
and its object is to tax the shiUing of economic benefits and enjoyment of property from the dead
to the living.
Law that Governs the Imposi:on of Estate Tax
1. Estate taxa;on is governed by the statute in force at the ;me of death of the decedent
2. Estate tax accrues as of the death of the decedent. The accrual of the tax is dis;nct from
the obliga;on to pay the same.
3. Succession takes place upon the death of the decedent. The right of the State to tax the
privilege to transmit the estate vests instantly upon death.
4. The tax rates and procedures prescribed under RA 10963 or the Tax Reform for
Accelera:on and Inclusion Law (TRAIN Law) and Sec:on 3 of Revenue Regula:ons 12-
2018 shall govern the estate of the decedent who dies on or aUer January 1, 2018.

Purpose of Estate Tax

Transfer taxes provide income to the government.
1. Benefit-received Theory. Recognizes the role of the State in the distribu;on of the estate
of a decedent to the heirs whether it be in accordance with the decedent’s will or by
opera;on of law. (Estate Tax)
2. Privilege Theory or State Partnership Theory. Inheritance is a privilege granted by the
State and since the estate acquired and accumulated is under the State’s protec;on, it is
but righteous that the State collect its share.
3. Ability to Pay Theory. Asserts that the heirs because of the inheritance they received are
able and capable to pay taxes due the State.
4. Redistribu:on of Wealth Theory. Reduces the property received by the heirs through
taxes hence there is a more equitable distribu;on of wealth in the society.

Gross Estate
Comprised of proper:es and interests therein at the :me of his/her death, including revocable
transfers and transfers for insufficient considera;on, etc.

It provides that amount withdrawn from the deposit accounts of a decedent subjected to the
6% final withholding tax imposed under Sec;on 97 of the NIRC, shall be excluded from the gross
estate for purposes of compu;ng the estate tax.

A decedent’s estate is defined as all property, wherever located, in which the decedent owned a
beneficial interest at the :me of death. It includes any right to income that had accrued, but not
yet been received as of the date of the decedent’s death. It does not include a mere expectancy
such as an expected inheritance.

1. Resident Ci:zen, Non-resident Ci:zen, and Resident Alien Decedents. Shall include all
proper:es and interests therein wherever situated.
a. Tangible Personal Property. Can be seen and touched (examples: appliances,
jewelry, car)
b. Intangible Personal Property. Cannot be seen and touched, no physical form
(examples: bank deposits, bonds, promissory notes, copyright, trademark,
mortgages, patent, and licenses)
c. Real or Immovable Property. Consists of land, building, or anything aJached to
the soil with permanence
d. Taxable Transfers. Inter vivos, during the life;me, they are actually mor;s causa in
substance as they are intended to take effect upon or aUer the death
i. Transfer in Contempla:on of Death. The thought of death is the
mo:va:ng factor for the transfer although death may not be imminent. It
partakes of the nature of a testamentary disposi;on (Dona;on Mor;s
Causa).
• Age and State of Health of the decedent at the ;me of the giU
• Length of Time between the giU and death
• Execu;on of a will within a short ;me of the making of the giU
ii. Revocable Transfer. A transfer by trust or otherwise where the decedent
may revoke, alter, amend or terminate the terms of enjoyment of the
property.
 • Trust. The legal rela:onship created when a grantor known as the
trustor, transfers property with the inten:on that it be managed
by a trustee for the benefit of a beneficiary/ies. Even though the
decedent did not exercise his power to revoke, the transfer is
included in gross estate.
• Proceeds of Life Insurance. An insurance contract (policy) is a
common will-related document. Insurance is a contract of
protec:on against natural risk. Proceeds of insurance under
policies taken out by the decedent upon his life shall cons:tute part
of the gross estate.
a. The estate of the decedent, executor or administrator
b. A third person other than, whereas designa;on of
beneficiary is revocable
• Transfer under a General Power of Appointment. Power of
Appointment is the right to designate the person/s who will
succeed to the property of the prior decedent. Donor of the Power
is the person who creates the power of appointment. Donee of the
Power is the person who is given the right to exercise the power.
Appointed Property is the subject of the power which is the
property being transferred. General Power of Appointment is one
which authorizes donee to appoint any person to possess or enjoy
the property (owner). Special or Limited Power of Appointment is
one which authorizes the donee to appoint only from among a
designated class or group of persons other than himself (trustee).

A B C
1. FMV at the 500 500 500
:me of
transfer
2. Considera:on 500 300 0
Received at
the :me of
transfer
3. FMV at the 750 750 750
:me of death
4. Value FMV at the ;me of FMV at the ;me of No considera;on =
included in transfer = transfer not enough = FMV at the ;me of
Gross Estate Considera;on = None FMV at the ;me of death is included
death - Considera;on

2. Non-resident Alien Decedent. Only his property located in the Philippines shall form part
of his gross estate.
a. Franchise. Exercised in the Philippines
b. Shares, Obliga:ons, or Bonds. Cons;tuted in the Philippines
c. Shares, Obliga:ons, or Bonds. 85% located in the Philippines
d. Shares, Obliga:ons, or Bonds. Situs in the Philippines
e. Shares or Rights. Established in the Philippines

Property RC, NRC, RA NRA (Reciprocity) NRA (No Reciprocity)

Real Property:
Within Yes Yes Yes
Without Yes No No
Personal Property:
Tangible Yes Yes Yes
Within
Tangible Yes No No
Without
 Intangible Yes No Yes
Within
Intangible Yes No No
Without

Valua:on of Gross Estate

Generally, the proper;es comprising the gross estate shall be valued based on their fair market
value as of the :me of death.
1. Real Property
a. FMV (Zonal Value) by the Commissioner
b. FMV in the Schedule of Values, whichever is higher
2. Shares of Stock
a. Unlisted Shares
i. Common Shares – Book Value
ii. Preferred Shares – Par Value
b. Listed Shares (Arithme;c Mean between Highest and Lowest Quota;on)
3. Right to Usufruct, Use or Habita:on, Annuity – probable life of the beneficiary in
accordance with the latest basic standard morality table
4. Units of Par:cipa:on – FMV is the bid price nearest the date of death published in any
newspaper or publica;on of general circula;on

Situs of Property
General Rule, the situs of real property is the place or country where it is situated.
The situs of tangible personal property is the place or country where such is actually located at
the ;me of death.
The situs of intangible personal property is the domicile or residence of the owner.
1. Accounts Receivable. Residence of the debtor
2. Bank Deposit. Loca;on of depository bank
3. Copyright, Trademark, Patent & Franchise. Place or country where the intangible is used
or exercised

Exemp:ons from Estate Tax

1. The merger of usufruct in the owner of the naked :tle
2. The transmission or delivery of the inheritance or legacy of the fiduciary heir or legatee
to the fideicommissary
3. The transmission from the first heir, legatee or donee in favor of another beneficiary, in
accordance with the will of the predecessor
4. All bequests, devices, legacies or transfers to social welfare, cultural and charitable
ins:tu:ons no part of the net income of which inures to the benefit of any individual,
provided that no more than 30% of the said bequests, legacies or transfers shall be used
by such for administra:on purposes
5. Separate property of the surviving spouse
6. Proceeds of life insurance where the beneficiary is irrevocably designated

Other Exemp:ons from Estate Tax

1. Benefits received by members from GSIS and SSS because of death
2. Amounts received from the Philippine and US Governments for damages during the last
war
3. Benefits received by Philippine residents under laws administered by the US Veterans
Administra;on
4. Bequests, legacies or dona:ons mor:s causa to social welfare, cultural or charitable
organiza:ons
5. Grants and dona:ons to the Intramuros Administra:on
6. Proceeds of group insurance policy taken out by the company for the benefit of its
employees
7. Proceeds of accident insurance
8. All grants, endowments, dona:on or contribu:on used actually, directly and exclusively
for educa:onal purposes
CHAPTER 4
Deduc:on from Gross Estate
1. Resident Ci:zen, Non-resident Ci:zen, Resident Alien Decedents.
a. Standard Deduc;on (5M Equivalent)
b. Claims against the Estate
c. Claims of the Deceased against Insolvent Persons
d. Unpaid Mortgages, Taxes and Casualty Losses
e. Property Previously Taxed
f. Transfers for Public Use
g. Family Home (10M Max)
h. Amount received by Heir under RA No. 4917
i. Net Share of the Surviving Spouse in the Conjugal Partnership or Community
Property
2. Non-resident Alien Decedents.
a. Standard Deduc;on (500K Equivalent)
b. Losses and Indebtedness Subject to Limita;on
c. Property Previously Taxed
d. Transfers for Public Use
e. Net Share of the Surviving Spouse in the Conjugal partnership or Community
Property

Claims Against the Estate

An obliga:on contracted by the decedent when he was alive which he should have seNled or
paid during his life:me. The said obliga:on is not terminated by his death, his estate is being
allowed to deduct the claim for his creditor to collect from the estate.

Claims against the Estate or indebtedness in respect of property may arise out of: contract, tort
or opera:on of law.

Requisites for Deduc;bility:

1. The liability represents a personal obliga:on of the deceased exis:ng at the :me of
his death (except unpaid obliga;ons incurred incident to his death such unpaid funeral
and medical expenses)
2. The liability was contracted in good faith and for adequate and full considera:on in
money or money’s worth.
3. The claim must be a debt or claim which is valid in law and enforceable in court
4. The indebtedness must not have been condoned by the creditor or the ac:on to
collect from the decedent must not have prescribed
In addi;on to the requisites above, substan:a:on requirements have to be complied with.

Claims Against Insolvent Persons

The decedent-creditor dies unable to collect from the debtor because of the debtor’s insolvency.
Although the creditor’s death does not ex:nguish the right of his estate to collect from his
debtor, the estate is being allowed a deduc:on for the claim because of hopelessness of
collec;on from the debtor by the estate.

The incapacity of the debtors to pay their debts due to insolvency must be proven. The amount
of receivable which is uncollec:ble may be allowed as a deduc:on from the gross estate. The
full amount of the claim must be included in the gross estate. While the propor:onate amount
that is uncollec:ble is deducted from the gross estate.

Unpaid Mortgages
Exists when the decedent leaves property encumbered by mortgage.

To be deduc:ble, the fair market value of the property mortgaged must be included in the gross
estate in full. The unpaid mortgage deduc:ble shall be to the extent that it was contracted bona
fide and for an adequate and full considera:on in money or money’s worth.
In case unpaid mortgage payable is being claimed by the estate, verifica:on must be made as
to who was the beneficiary of the loan proceeds.
1. If the loan is found to be merely an accommoda:on loan where the loan proceeds went
to another person, the value of the unpaid loan must be included as a receivable of the
estate.
2. If there is a legal impediment to recognize the same as receivable of the estate, said
unpaid obliga:on/mortgage payable shall not be allowed as a deduc:on from the gross
estate.
3. In all instances, the mortgaged property, to the extent of the decedent’s interest therein,
should always form part of the gross taxable estate.

Unpaid Taxes
These are taxes which have accrued as of the death of the decedent but which were unpaid as
of the :me of death. This deduc:on will not include:
1. Income tax upon income received aUer death
2. Property taxes not accrued before his death
3. Estate tax due from the transmission of his estate

The above-men:oned taxes shall be chargeable against the income of the estate because the
same accrue aUer the death of the decedent.

Casualty Losses
There shall also be deducted losses incurred during the seNlement of the estate arising from:
1. Fires, Storms, Shipwreck, or other casual;es
2. Robbery, TheU or Embezzlement

Subject to the following condi:ons that such losses:

1. Are not compensated for by insurance or otherwise
2. At the :me of the filing of the return, have not been claimed as a deduc:on for income
tax purposes in an income tax return
3. Were incurred not later than the last day for payment of the estate tax

Property Previously taxes or Vanishing Deduc:ons

The Tax Code also allows as deduc:on from the gross estate certain amount pertaining to
property previously taxed (PPT). This deduc;on is being allowed to lessen the impact of
successive taxa:on of the same property within a very short period due to the death of the
decedent-transferee.

Requisites for Deduc;bility:

1. Present decedent must have died within 5 years from date of death of prior decedent
or date of giU.
2. The property with respect to which the deduc:on is claimed must have formed part
of the gross estate situated in the Philippines of the prior decedent or taxable giU of
the donor.
3. The property must be iden:fied as the same property received from prior decedent
or donor or the one received in exchange therefor.
4. The estate taxes on the transmission of the prior estate or the donor’s tax on the giU
must have been finally determined and paid.
5. No vanishing deduc:on on the property or the property given in exchange therefor
was allowed to the prior estate.

Limita;on on Amount Deduc;ble:

1. Value of the Property. The deduc:on is limited by the value of the property
previously taxed or the aggregate value of such property if more than one item, as
finally determined for the purpose of the prior estate tax (or giU tax) or the value of
such property in present decedent’s gross estate, whichever is lower.
2. Deduc:on for Mortgage or other Lien. The ini:al value shall be reduced by the total
amount paid, if any, by the present decedent, on any mortgage or other lien on the
 property where a deduc;on was allowed, by reason of the payment, of such mortgage
or other lien from the gross estate of the prior decedent, or giU of the donor, in
determining the estate tax of the prior decedent or the donor’s tax.
3. Deduc:ons for Losses, etc. The value is reduced shall be further reduced by an
amount which bears the same ra:o to the amounts allowed as deduc:ons for losses,
indebtedness, taxes, and transfers for public use as the amount otherwise deduc;ble
for property previously taxed bears to the value of the decedent’s gross estate.
4. Percentage of Deduc:ons. The vanishing deduc;on shall be the value (final basis)
mul;plied by the following percentage of deduc;on:

Percentage Transfer more than But not more than

100% One year
80% One year Two years
60% Two years Three years
40% Three years Four years
20% Four years Five years

Step-by-Step Computa;on of the Vanishing Deduc;on:

1. Value taken of PPT
Less: Mortgage Debt
Ini;al Basis
!"#$#%& (%)#)
2. *%&+, -. /0-)) 1)$%$, -. 20,),"$ 3,4,5,"$ × 𝐿𝑜𝑠𝑠𝑒𝑠, 𝑒𝑡𝑐. = 2𝑛𝑑 𝐷𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛
3. Ini;al Basis
Less: 2nd Deduc;on
Final Basis
Mul;ply: Percentage of Deduc;on
Vanishing Deduc;on

If there is no mortgage debt paid, the value taken of PPT would be the ini:al basis. If
only part of the mortgage is paid, then only that part is deduc:ble.

Transfer for Public Use

There shall be allowed as deduc:on from gross estate the amount of all bequests, legacies,
devises or transfers to or for the use of the Government of the Republic of the Philippines, or
any poli:cal subdivision thereof, for exclusive public purposes.

Family Home
The amount deduc:ble shall be the current fair market value of the decedent’s family home at
the :me of death. If the current fair market value exceeds 10 million, the excess shall be subject
to estate tax (TRAIN Law).

Family Home is the dwelling house, including the land on which it is situated, where the husband
and wife, or a head of the family, and members of their family reside, as cer;fied by the Barangay
Captain of the Locality. It is deemed cons:tuted on the house and lot from the :me it is actually
occupied as a family residence and is considered as such for as long as any of its beneficiaries
actually resides therein.

Family Home is generally characterized by permanency, that is, the place to which, whenever
absent for business or pleasure, one s;ll intends to return.

The family home must be part of the proper:es of the absolute community or the conjugal
partnership, or the exclusive proper:es of either spouse depending upon the classifica;on of
the property and the property rela;ons prevailing on the proper;es of the husband and wife. It
may also be cons:tuted by an unmarried of a family on his or her own property.

For purposes of availing of a family deduc:on to the extent allowable, a person may cons:tute
only one family home.
 Beneficiaries of a Family Home:
1. The husband and wife (legally married), or the head of a family (unmarried or legally
separated man/woman)
2. Their parents, ascendants, descendants including legally adopted children, brothers
and sisters, whether the rela;onship be legi;mate or illegi;mate, who are living in the
family home and who depend upon the head of the family for legal support.

Requisites for Deduc;bility:

1. The family home must be the actual residen:al home of the decedent and his family
at the ;me of his death, cer;fied by the Barangay Captain of the locality where the
family home is situated
2. The total value of the family home must be included as part of the gross estate of
the decedent
3. Allowable deduc:on must be in an amount equivalent to the current FMV of the
family home as declared or included in the gross estate, or the extent of the
decedent’s interest, whichever is lower but not exceeding 10 million.

Standard Deduc:on
A deduc:on in the amount of 5 million shall be allowed as an addi:onal deduc:on without
need of substan;a;on. The full amount shall be allowed as deduc:on for the benefit of the
decedent (TRAIN Law).

Amount Received by Heirs under RA 4917

Any amount received by the heirs from the decedent’s employer as a consequence of the death
of the death of the decedent-employee shall be deduc:ble. It must be included in the gross
estate of the decedent.

Net Share of the Surviving Spouse

AUer deduc:ng the allowable deduc:ons pertaining to the conjugal or community proper:es
included in the gross estate, the one-half share of the surviving spouse must be removed to
ensure that only the decedent’s interest in the estate is taxed.

CHAPTER 5
Net Taxable Estate
The transfer of the net estate of every decedent, whether resident or non-resident of the
Philippines, shall be subject to the estate tax.

The basis of estate tax is the net estate. This is arrived at by deduc:ng from the gross estate
the allowable deduc:ons.

The TRAIN Law or RA 10963 amended the graduated rates of estate tax under Sec;on 84 of
the NIRC to a fixed rate of 6% based on net estate.

Proforma:
Real and Personal Proper;es
Add: Inclusions
Gross Estate
Less: Deduc;ons
Net Taxable Estate
Mul;ply: 6%
Estate Tax Due

CHAPTER 6
Net Estate and Estate Tax: Unmarried Decedent
All property comprising the gross estate and all deduc:ons of an unmarried decedent are
exclusive.

If non-resident alien, the deduc;on his estate may claim is subject to limita;on.

Proforma:
𝑃ℎ𝑖𝑙𝑖𝑝𝑝𝑖𝑛𝑒 𝐺𝑟𝑜𝑠𝑠 𝐸𝑠𝑡𝑎𝑡𝑒
𝑥 𝑊𝑜𝑟𝑙𝑑 𝑙𝑜𝑠𝑠𝑒𝑠, 𝑒𝑡𝑐. = 𝐷𝑒𝑑𝑢𝑐𝑡𝑖𝑜𝑛 𝐴𝑙𝑙𝑜𝑤𝑒𝑑
𝑊𝑜𝑟𝑙𝑑 𝐺𝑟𝑜𝑠𝑠 𝐸𝑠𝑡𝑎𝑡𝑒

Chapter 7
Net Estate and Estate Tax: Conjugal Partnership of Gains
Marriage seJlements may fix the property rela:ons during the marriage within the limits
provided by the Family Code. The property rela;ons between husband and wife shall be
governed in the following order:
1. By marriage seNlements executed before the marriage
2. By the provisions of the Family Code, and
3. By the local customs.

The future spouses may, in the marriage seNlements agree upon any of the following regimes:
1. Absolute Community
2. Conjugal Partnership of Gains
3. Complete Separa;on of Property
4. Any Other Regime

In the absence of marriage seNlements, or when the regime agreed upon is void,
1. The system of conjugal partnership of gains under the Civil Code of the Philippines shall
govern marriages contracted before August 3, 1988, or
2. The system of absolute community of property shall govern marriages contracted on or
aUer August 3, 1988, the effec:vity of the Family Code of the Philippines (E.O. 209).

Conjugal Partnership of Gains

Under the regime of conjugal partnership of gains, the husband-and-wife place in a common
fund the proceeds, products, fruits and income from their separate property and those
acquired by either or both spouses through their effort or by chance.

Upon dissolu:on of the marriage or of the partnership, the net gains or benefits obtained by
either or both spouses shall be divided equally between them, unless otherwise agreed in the
marriage seJlements.

The conjugal partnership shall be governed by the rules on the contract of partnership in all
that it is not in conflict with what is expressly determined in the Family Code or by the spouses
in their marriage seJlement.

Proforma:
Exclusive Conjugal Total
Conjugal Proper;es Pxxx Pxxx
Exclusive Proper;es Pxxx xxx
Gross Estate Pxxx Pxxx Pxxx
Less: Deduc;ons
Ordinary
Deduc;ons Pxxx Pxxx
Net Conjugal
Estate Pxxx
Exclusive
Deduc;ons Pxxx xxx
Special
Deduc;ons xxx
 Net Estate Pxxx
Less: ½ Share of
Surviving Spouse on
Net Conjugal Estate xxx
Net Taxable Estate Pxxx

Gross Estate
The gross estate of a married decedent during the marriage shall be composed of the following:
1. Exclusive Property of the decedent, and
2. Conjugal Partnership

Exclusive Property of Each Spouse

The following shall be the exclusive property of each spouse:
1. That which is brought to the marriage as his or her own
2. That which each acquired during the marriage by gratuitous :tle
3. That which is acquired by right of redemp:on, by barter or by exchange with property
belonging to only one of the spouses, and
4. That which is purchased with exclusive money of the wife or of the husband

The spouses retain the ownership, possession, administra:on and enjoyment of their exclusive
property. Either spouse may, during the marriage, transfer the administra:on of his or her
exclusive property to the other by means of a public instrument, which shall be recorded in the
registry of property of the place where the property is located.

A spouse of age may mortgage, encumber, alienate or otherwise dispose of his or her exclusive
property, without the consent of the other spouse, and appear alone in court to li:gate with
regard to the same. The aliena:on of any exclusive property of a spouse administered by the
other automa:cally terminates the administra:on over such property and the proceeds of the
aliena:on shall be turned over to the owner-spouse.

Property donated or leU by will to the spouses, jointly and with designa:on of determinate
shares, shall pertain to the donee-spouse as his or her own exclusive property.

Re:rement benefits, pensions, annui:es, gratui:es, usufructs and similar benefits shall be
governed by the rules on gratuitous or onerous acquisi:ons as may be proper in each case.

Conjugal Partnership Property

All property acquired during the marriage, whether the acquisi:on appears to have been made,
contracted or registered in the name of one or both spouses, is presumed to be conjugal unless
the contrary is proved. The following are conjugal partnership property:
1. Those acquired by onerous :tle during the marriage at the expense of the common
fund, whether the acquisi;on be for the partnership, or for only one of the spouses
2. Those obtained from the labor, industry, work or profession of either or both of the
spouses
3. The fruits, natural, industrial, or civil, due or received during the marriage from the
common property, as well as the net fruits from the exclusive property, of each spouse
4. The share of either spouse in the hidden treasure which the law awards to the finder or
owner of the property where the treasure is found
5. Those acquired through occupa:on
6. Livestock exis:ng upon the dissolu:on of the partnership in excess of the number of
each kind brought to the marriage by either spouse, and
7. Those which are acquired by chance, such as winnings from gambling or betng. However,
losses therefrom shall be borne exclusively by the loser-spouse.

Proceeds of Life Insurance

Proceeds of life insurance policy payable to the insured estate may be conjugal or exclusive in
character. The :me when the policy was taken and the source of premium payment shall
determine whether the proceeds are to form part of the gross estate of the decedent spouse.
 1. If policy was taken before marriage:
a. And premiums were fully paid by the decedent spouse, proceeds are the
exclusive property of the decedent spouse.
b. And premiums were fully paid with the exclusive property of the surviving
spouse, proceeds are the exclusive property of the surviving spouse.
c. But premiums were paid partly with exclusive and partly with conjugal funds
during the marriage; proceeds shall likewise be propor:onately exclusive and
conjugal.
2. If policy was taken during the marriage, proceeds are conjugal because it is presumed
that property acquired during the marriage is conjugal. In this case, the one-half share
of the surviving spouse in the proceeds is excluded in the taxable gross estate.

Claims Against Insolvent Person

The inclusion of claims against insolvent person in the gross estate of the decedent spouse as
either exclusive or conjugal property will depend on the nature of the claim, whether it is for an
exclusive or for conjugal property.

Deduc:ons from Gross Estate

1. Standard Deduc;on (equivalent 5M)
2. Claims against the Estate
3. Claims of the Deceased Against Insolvent Persons
4. Unpaid Mortgages, Taxes and Casualty Losses
When founded upon a promise or agreement, be limited to the extent that they were
contracted bona fide and for an adequate and full considera:on in money or money’s
worth.
5. Property Previously Taxed
6. Transfers for Public Use
7. Family Home (maximum 10M)
Must be part of the conjugal partnership property or of the exclusive property of either
spouses with the other spouse’s consent.
8. Amount Received by Heirs under RA No. 4917
9. Net Share of the Surviving Spouse in the Conjugal Partnership or Community Property
𝐺𝑟𝑜𝑠𝑠 𝐶𝑜𝑛𝑗𝑢𝑔𝑎𝑙 𝐸𝑠𝑡𝑎𝑡𝑒 − 𝐶ℎ𝑎𝑟𝑔𝑒𝑠 = 𝑁𝑒𝑡 𝐶𝑜𝑛𝑗𝑢𝑔𝑎𝑙 𝐸𝑠𝑡𝑎𝑡𝑒
𝑁𝑒𝑡 𝐶𝑜𝑛𝑗𝑢𝑔𝑎𝑙 𝐸𝑠𝑡𝑎𝑡𝑒 ÷ 2 = 𝑁𝑒𝑡 𝑆ℎ𝑎𝑟𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑆𝑢𝑟𝑣𝑖𝑣𝑖𝑛𝑔 𝑆𝑝𝑜𝑢𝑠𝑒

Deduc:ons must appropriately be classified as either chargeable against exclusive or conjugal

property.

Family Home and Standard Deduc:on

1. Family Home is conjugal property and more than 10M, extent of 10M deduc;on only.
2. Family Home is exclusive property and more than 10M, extent of 10M deduc;on only.
3. Family is conjugal property and below 10M, extent of the Family Home divide by 2.
4. Family Home is exclusive property and below 10M, extent of the Family Home.

Chapter 8
Net Estate and Estate Tax: Absolute Community of Property
The future spouses agree in the marriage seJlements that the system of absolute community
shall govern their property rela:ons during marriage, there are provisions in the Family Code
that shall apply.

In both conjugal partnership of gains and absolute community of property, proper:es and
deduc:ons must be classified as conjugal/communal (or community) or exclusive for purposes
of compu;ng the estate tax of the decedent-spouse.

Net Taxable Estate

The net estate subject to tax or net taxable estate is the basis for the computa;on of estate tax.
Exclusive Conjugal Total
 Community
Proper;es Pxxx Pxxx
Exclusive Proper;es Pxxx xxx
Gross Estate Pxxx Pxxx Pxxx
Less: Deduc;ons
Ordinary
Deduc;ons Pxxx Pxxx
Net
Community
Estate Pxxx
Exclusive
Deduc;ons Pxxx xxx
Special
Deduc;ons xxx
Net Estate Pxxx
Less: ½ Share of
Surviving Spouse on
Net Community
Estate xxx
Net Taxable Estate Pxxx

Gross Estate
The gross estate of a married decedent under the system during the marriage shall be composed
of the following:
1. Exclusive property of the decedent, and
2. Absolute community (communal) property

Exclusive Property of Each Spouse

The following shall be the exclusive property of each spouse:
1. Property acquired during the marriage by gratuitous :tle by either spouse, and the fruits
as well as the income thereof, if any, unless it is expressly provided by the donor, testator
or grantor that they shall form part of the communal property
2. Property for personal and exclusive use of either spouse, however, jewelry shall form
part of the communal property, and
3. Property acquired before the marriage by either spouse who has legi:mate descendants
by a former marriage, and the fruits as well as the income, if any, of such property.

Communal Property
Unless otherwise provided in the Family Code or in the marriage seNlements, the communal
property shall consist of all the property owned by the spouses at the :me of the celebra;on
of the marriage or acquired thereaUer.

Property acquired during the marriage is presumed to belong to the community, unless it is
provided that it is one of those excluded therefrom.

Proceeds of Life Insurance

Proceeds of life insurance policy payable to the insured’s estate may be communal or exclusive
in character. The :me when the policy was taken and the source of premium payment shall
determine whether the proceeds are to form part of the gross estate of the decedent spouse.
1. If policy was taken before marriage:
a. And premiums were fully paid by the decedent spouse, proceeds are the
exclusive property of the decedent spouse.
b. And premiums were fully paid with the exclusive property of the surviving
spouse, proceeds are the exclusive property of the surviving spouse.
c. But premiums were paid partly with exclusive and partly with communal (or
conjugal) funds during the marriage; proceeds shall likewise be propor:onately
exclusive and communal (or conjugal).
 2. If policy was taken during the marriage, proceeds are communal (or conjugal) because it
is presumed that property acquired during the marriage is communal (or conjugal). In
this case, the one-half share of the surviving spouse in the proceeds is excluded in the
taxable gross estate.

Claims Against Insolvent Person

The inclusion of claims against insolvent person in the gross estate of the decedent spouse as
either exclusive or communal property will depend on the nature of the claim, whether it is for
an exclusive or for communal property.

Deduc:ons from Gross Estate

1. Standard Deduc;on (equivalent 5M)
2. Claims against the Estate
3. Claims of the Deceased Against Insolvent Persons
4. Unpaid Mortgages, Taxes and Casualty Losses
When founded upon a promise or agreement, be limited to the extent that they were
contracted bona fide and for an adequate and full considera:on in money or money’s
worth.
5. Property Previously Taxed
6. Transfers for Public Use
7. Family Home (maximum 10M)
Must be part of the conjugal partnership property or of the exclusive property of either
spouses with the other spouse’s consent.
8. Amount Received by Heirs under RA No. 4917
9. Net Share of the Surviving Spouse in the Community Partnership or Conjugal Partnership
𝐺𝑟𝑜𝑠𝑠 𝐶𝑜𝑚𝑚𝑢𝑛𝑎𝑙 𝐸𝑠𝑡𝑎𝑡𝑒 − 𝐶ℎ𝑎𝑟𝑔𝑒𝑠 = 𝑁𝑒𝑡 𝐶𝑜𝑚𝑚𝑢𝑛𝑎𝑙 𝐸𝑠𝑡𝑎𝑡𝑒
𝑁𝑒𝑡 𝐶𝑜𝑚𝑚𝑢𝑛𝑎𝑙 𝐸𝑠𝑡𝑎𝑡𝑒 ÷ 2 = 𝑁𝑒𝑡 𝑆ℎ𝑎𝑟𝑒 𝑜𝑓 𝑡ℎ𝑒 𝑆𝑢𝑟𝑣𝑖𝑣𝑖𝑛𝑔 𝑆𝑝𝑜𝑢𝑠𝑒

Chapter 9
Tax Credit for Foreign Estate Tax
Tax credit refers to the taxpayer’s right to deduct from the tax due the amount of tax ha has
paid to a foreign country subject to limita:ons. In estate taxa;on, tax credit is allowed to lessen
the harshness of interna:onal double taxa:on where the same estate is being subject to both
the foreign estate (or death) tax and the Philippine estate tax.

In general, the estate tax imposed by the Tax Code shall be credited with the amounts of any
estate tax imposed by the authority of a foreign country.

Tax Deduc:on VS Tax Credit

Tax deduc:on is a deduc:on from gross estate. While, Tax credit is a deduc:on from Philippine
estate tax.

While there are numerous taxes that may be deducted from gross estate, there is only this
foreign estate tax that may be claimed against Philippine estate tax.

Estate En:tled to Tax Credit

1. Resident Ci;zens
2. Non-resident Ci;zens
3. Resident Alien

Philippine Estate Tax Due

The estate tax payable is computed first based on the net taxable estate before tax credit may be
deducted.

Proforma:
Estate Tax Due (Taxable Estate x 6%)
Less: Tax Credit for Foreign Estate Taxes Paid
 Philippines Estate Tax Due

For purposes of determining the tax credit that may be allowed and estate, foreign estate taxes
shall mean taxes proper only. Interest, surcharge or penalty rela:ve to tax delinquency shall
not be credited.

Limita:ons on Credit for Foreign Estate Taxes

The amount of tax credit shall be subject to the following limita;ons:
1. For Estate Taxes Paid to One Foreign Country. The amount of the credit shall not exceed
the same propor:on of the tax against which such credit is taken, which the decedent’s
net estate within such country taxable under the Tax Code bears to the en;re net estate.
𝑁𝑒𝑡 𝐸𝑠𝑡𝑎𝑡𝑒 (𝑝𝑒𝑟 𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝐶𝑜𝑢𝑛𝑡𝑟𝑦)
𝑥 𝑃ℎ𝑖𝑙𝑖𝑝𝑝𝑖𝑛𝑒 𝐸𝑠𝑡𝑎𝑡𝑒 𝑇𝑎𝑥 = 𝑇𝑎𝑥 𝐶𝑟𝑒𝑑𝑖𝑡
𝐸𝑛𝑡𝑖𝑟𝑒 𝑁𝑒𝑡 𝐸𝑠𝑡𝑎𝑡𝑒

The allowable tax credit shall be the lower amount between the tax credit limit and the
tax paid to the foreign country.

If the decedent were a non-resident alien, no tax credit shall be allowed. Consequently,
the estate tax due aUer considering net estate in the Philippines shall be: Net Estate within
Philippines x 6%.

2. For Estate Taxes Paid to 2 or More Foreign Countries. The total amount of the credit shall
not exceed the same propor;on of the tax against which such credit is taken, which the
decedent’s net estate situated outside the Philippines taxable under the Tax Code bears
to the en;re net estate.
𝑁𝑒𝑡 𝐸𝑠𝑡𝑎𝑡𝑒 (𝐴𝑙𝑙 𝐹𝑜𝑟𝑒𝑖𝑔𝑛 𝐶𝑜𝑢𝑛𝑡𝑟𝑖𝑒𝑠)
𝑥 𝑃ℎ𝑖𝑙𝑖𝑝𝑝𝑖𝑛𝑒 𝐸𝑠𝑡𝑎𝑡𝑒 𝑇𝑎𝑥 = 𝑇𝑎𝑥 𝐶𝑟𝑒𝑑𝑖𝑡
𝐸𝑛𝑡𝑖𝑟𝑒 𝑁𝑒𝑡 𝐸𝑠𝑡𝑎𝑡𝑒

Chapter 10
Estate Tax Returns
An estate tax return must be filed by the executor, administrator or any of the legal heirs on the
following cases:
1. In all cases of transfers subject to estate tax
2. Transfers regardless of gross value, where the estate consists of registered or registrable
property such as real property, motor vehicle, shares of stock or other similar property
for which a clearance from the BIR is required as a condi:on precedent for the transfer
of ownership thereof in the name of the transferee (TRAIN Law).

Normally, the return shall contain the following:

1. Value of the gross estate of the decedent at the :me of death
2. Deduc:ons allowed
3. Other informa:on as may be necessary to establish the correct taxes.

If the return shows that the gross value of the estate exceeds 5M, a statement duly cer:fied by
a CPA containing the following informa:on is required:
1. Itemized assets of the decedent with their corresponding gross value at the ;me of his
death
2. Itemized deduc:ons from gross estate allowed
3. Amount of tax due whether paid or s:ll due and outstanding (TRAIN Law).

Time for Filing Estate Tax Return

For purposes of determining the estate tax, the estate tax return shall be filled within 1 year
from the decedent’s death (TRAIN Law). The court approving the project of par::on shall
furnish the Commissioner with a cer:fied copy thereof and its order within 30 days aUer
promulga:on of such order.

Place of Filing the Return and Payment of the Tax

 1. Resident Decedent
The heirs/authorized representa;ve/administrator/executor shall register the estate of
the decedent and secure a new TIN therefor from the RDO where the decedent was
domiciled at the :me of his death and shall file the estate tax return and pay the
corresponding estate tax with the:
a. Accredited Agent Bank (AAB)
b. Revenue Collec;on Officer (RCO), or
c. Duly authorized Treasurer of the city or municipality in the RDO having
jurisdic;on over the place of domicile of the decedent at the ;me of his death.
2. Non-Resident Decedent
In case of a non-resident decedent with an executor or administrator in the Philippines,
the estate tax return shall be filed with the ABB of the RDO where such executor or
administrator is registered or is domiciled, if not yet registered with the BIR.

For those without executor or administrator in the Philippines, the estate tax return
shall be filed with the AAB under the jurisdic:on of RDO 39-South Quezon City.

The heir/authorized representa:ve/administrator/executor shall submit all the applicable

documentary requirements as prescribed in Annexes A-6 and A-6.1 of Revenue Memorandum
Order (RMO) 15-2003 and proof of payment to the RDO which has jurisdic:on over the place of
residence of the decedent, or to the RDO where the executor or administrator is registered, or
to RDO 39-South Quezon City, whichever is applicable.

Electronic Bureau of Internal Revenue Forms (eBIRForms)

Revenue Regula:ons 6-2014, issued on September 8, 2014 and published on September 9,
2014, prescribes the mandatory use of Electronic Bureau of Internal Revenue Forms in the
prepara;on and filing of all tax returns by non-electronic filing and payment system (non-eFPS)
filers star:ng on September 24, 2014.

The non-eFPS filers are the following:

1. Accredited tax agents/prac;;oners and all its client taxpayer
2. Accredited printers of principal and supplementary receipts/invoices
3. One-;me transac;on (ONETT) taxpayers
4. Those who shall file “no payment” return
5. GOCCs
6. LGUs except barangays
7. Coopera;ves registered with the Na;onal Electrifica;on Administra;on and Local Water
U;li;es Administra;on

These non-eFPS filers may opt to submit their tax returns manually using the eBIRForms offline
package at their respec;ve Revenue District Office (RDO) or electronically through the use of the
online eBIRForms System.

The accredited tax agents who are preparing and filing tax returns in behalf of their clients are
likewise mandated to use the eBIRForms.

For estate tax purposes, the form affected is BIR Form 1801 (version July 2003).

Time for Payment of the Estate Tax

As a general rule, the estate tax imposed under the Code shall be paid at the :me the return is
filed by the executor, administrator or their heirs.

Request for Extension of Time to File, Installment Payment, and Par:al Disposi:on of Estate
The Commissioner or any Revenue Officer authorized by him pursuant to the Code shall have
authority to grant, in meritorious cases, a reasonable extension, not exceeding 30 days for filing
the return.
The request for extension of ;me to file the return, extension of ;me to pay estate tax and
payment by installment shall be filed with the RDO where the estate is required to secure its TIN
and file the estate tax return. This request shall be approved by the Commissioner or his duly
authorized representa:ve.

Extension of Time to Pay Estate Tax

When the Commissioner finds that the payment of the estate tax or of any party thereof would
impose undue hardship upon the estate or any of the heirs, he may extend the :me for payment
of such tax or any part thereof not to exceed 5 years in case the estate is seNled through the
courts, or 2 years in case the estate is seNled extrajudicially.

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

Where the request for extension is by reason of negligence, inten:onal disregard of rules and
regula:ons, or fraud on the part of the taxpayer, no extension will be granted by the
Commissioner.

Payment of Estate Tax by Installment

In case the available cash of the estate is insufficient to pay the total estate tax due, payment by
installment shall be allowed within 2 years from the date of filing of the estate tax return
without civil penalty and interest.

A clearance shall be released only with respect to the property the corresponding/computed
tax on which has been paid. The computa:on of the estate tax, however, shall always be on the
cumula:ve amount of the next taxable estate.

Any amount aUer the statutory due date of the tax shall be imposed the corresponding
applicable penalty. However, if approved by the Commissioner or his duly authorized
representa:ve the imposable penalty shall only be the interest.

Liability for Payment

The estate tax shall be paid by the executor or administrator before the delivery of the
distribu:ve share in the inheritance to any heir or beneficiary. The estate tax clearance issued
by the Commissioner or the RDO, will serve as the authority to distribute the
remaining/distributable proper:es/share in the inheritance to the heir or beneficiary.

The executor or administrator of an estate has the primary obliga:on to pay the estate tax but
the heir of beneficiary has subsidiary liability for the payment of that por:on of the estate
which his distribu;ve share bears to the value of the total net estate. The extent of his liability
shall in no case exceed the value of his share in the inheritance.

Responsibili:es of the RDO and Document Processing Division (DPD)

RDO shall process the estate tax return in accordance with the procedure indicated in RMO 15-
2003. Exempt estate tax returns which have to be filed directly with the RDO, and estate tax
returns with payment, which shall be received by the RCO, shall not be received by the
RDO/RCO if not properly accomplished.

The RDO or DPD shall scru:nize the entries in the returns and determine any
missing/incomplete informa:on. Within 5 days from discovery, the DPD head shall transmit a
list of estate tax returns with missing/incomplete informa;on.

Within 5 days from receipt of the list, the RDO shall view and print the returns and shall no:fy
in wri:ng the heir/authorized representa:ve/administrator/executor of the estate of such fact
and require the amendment of the return within 5 days from receipt of the wriJen no;ce.

The RDO shall impose the comprise penalty for viola:on of the Tax Code. In case of late filing,
the applicable penal;es under the Tax Code shall be imposed.
Estate Tax Amnesty under RA 11213 and Revenue Regula:ons 8-2019
The Estate Tax Amnesty Program provides the taxpayers a one-:me opportunity to seNle estate
tax obliga:ons that will give reasonable tax relief to estates with outstanding estate tax
liabili;es. The program shall cover the estate of decedent’s who died on or before December
31, 2017, subject to excep:ons.

An estate tax amnesty rate of 6% shall be imposed on each decedent’s total net taxable estate
at the :me of death without penal:es at every stage of transfer of property of the decedent.
Provided that the minimum estate amnesty tax for the transfer of the estate of each decedent
shall be 5K.

The Estate Tax Amnesty Return (ETAR) shall be filed by the executor or administrator, legal heirs,
transferees or beneficiaries who wish to avail of the ETA not later than June 14, 2023.

Estates covered by ETA, which have fully complied with all the condi:ons set forth, including
the payment of estate tax amnesty shall be immune from the payment of all estate taxes as well
as any increments and addi:ons thereto, arising from the failure to pay any and all estate taxes
for taxable year 2017 and prior years, and from all appurtenant civil, criminal and administra;ve
cases, and penal;es under the 1997 Tax Code.