ESTATE TAX

Estate Tax

-imposed on the privilege that a

person is given in controlling, to a
certain extent, the disposition of
his property to take effect upon
death.
Accrual

-upon death of decedent, not

withstanding the postponement of
actual possession of the
beneficiary
Filing
-TRAIN LAW: 1 year from date of
death
-Under meritorious cases, filing of
estate tax return may be extended
for a period of not more than 30
days
Taxpayer

-The “estate” of the decedent as a

juridical person
-Represented by administrator,
executor, or legal heirs
Types of Succession:

1. Testamentary
2. Legal or Intestate
3. Mixed
Types of Will:

1. Notarial/ Ordinary/ Attested

2. Holographic
3. Codicil
Elements of Succession:

1. Decedent
2. Heir
3. Estate
Decedent’s Estate:

1. Legitime
2. Free Portion
Kinds of heirs:
1. Compulsory heirs- they inherit
w/o a will
•Primary:
•Legitimate Children and descendants
•Illegitimate Children
•Widow/Widower
2. Voluntary- only w/ a will
Kinds of heirs:
3. Intestate- The compulsory heir are also heir in
intestate.
a. Legitimate Children
b. Legitimate parents
c. Illegitimate Children
d. Spouse
e. Brothers or sisters
f. Relatives by consanguinity up to 5th civil degree
g. State
Format of Computation:
Gross Estate Pxx
LESS:
Ordinary deductions (Pxx)
Special deductions (Pxx)
Net taxable Estate Pxx
Format of Computation:
Estate Tax Due Pxx
LESS: Tax credit (xx)
Estate Tax Payable Pxx
Format of Computation:
Estate Tax Due Pxx
LESS: Tax credit (xx)
Estate Tax Payable Pxx
Format of Computation:
Gross Estate Pxx
LESS:
Ordinary deductions (Pxx)
Special deductions (Pxx)
Net taxable Estate Pxx
Format of Computation:
Gross Estate Pxx
LESS:
Ordinary deductions (Pxx)
Special deductions (Pxx)
Net taxable Estate Pxx
Gross Estate
- Consists of all properties and
interests in properties of the decedent
at the time of his death as well as
properties transferred during lifetime
(only in form), but in substance was
only transferred at the time of death.
Components:
-Properties existing at the time of death such
as:
1. Real Properties and other tangible
personal property
2. Decedent’s interest and intangibles
3. Gratuitously transferred during lifetime
but in substance transferred upon
death
Components:
-Properties existing at the time of death such
as:
1. Real Properties and other tangible
personal property
2. Decedent’s interest and intangibles
3. Gratuitously transferred during lifetime
but in substance transferred upon
death
Decedent’s interest and intangibles
-Extent of equity or ownership
Intangibles located in PH:
-Franchise
-Shares/ bonds
-Shares/ bonds by any foreign corporation, at least
85% of business is located in PH or have acquired
business situs
-Shares or rights in partnership/business
established in PH
Components:
-Properties existing at the time of death such
as:
1. Real Properties and other tangible
personal property
2. Decedent’s interest and in tangibles
3. Gratuitously transferred during
lifetime but in substance transferred
upon death
Gratuitously transferred during lifetime but in substance
transferred upon death
1. Transfer in contemplation of death
2. Transfer with retention of certain right
3. Revocable Transfer
4. Property passing under GPA
5. Transfers for insufficient consideration
6. Proceeds from life insurance
1. Whether revocable or irrevocable when beneficiary is the
1. Estate of the deceased
2. Executor
3. Administrator
2. When beneficiary is a third person, only if REVOCABLE
Exemptions and Exclusions from
Gross Estate:
1. Under Sec. 85 and 86 of NIRC
2. Under Sec. 87
3. Under Special Laws
Exemptions and Exclusions from
Gross Estate:
1. Under Sec. 85 and 86 of NIRC
2. Under Sec. 87
3. Under Special Laws
1. Under Sec. 85 and 86 of NIRC
-Capital or Exclusive Property of the
surviving spouse
-Properties outside PH of NRA decedent
-Intangible Personal Properties in which
the Reciprocity Rule applies
2. Under Sec. 87

a) Merger of the usufruct in the owner of naked title

b) Transmission from the first heir, legatee or done
in favor of another beneficiary in accordance with
the will of the predecessor (SPA)
c) Transmission from fiduciary heir to the
fedeicomissary
d) All bequests, devices, legacies or transfers to
social welfare, cultural and charitable institution
3. Under Special Laws
a) Proceeds from GSIS
b) Proceeds from SSS by reason of death
c) Amounts received from PH and USA for war
damages
d) Amounts received from US Veterans Administration
e) Retirement benefits of officials/ employees of a
private firm
f) Personal Equity and Retirement Account assets of
the decedent-contributor
Composition
Decedent
of Estate Tax:
Gross Estate
Citizen/ Resident Alien 1.Property (Real or Personal)
wherever situated
2.Intangible personal property
wherever situated

Nonresident Alien 1.Real Property in PH

2.Tangible Personal Property in
PH
3.Intangible with situs in PH,
unless excluded due to
reciprocity
Valuation of Gross Estate:
-In General- FMV upon death
-Personal Properties- FMV
-Real Property- FV or ZV, higher
-Shares of Stock
-Traded in LSE- quotation at date of death or
average, if former in not available
-Not Traded
Common shares- Book Value
Preferred shares- Par Value
Property Relationship between
spouses:
1. Based on Agreement
1. Absolute Community of Property
(ACoP)
2. Conjugal Partnership of Gains (CPG)
3. Complete Separation
2. By Operations of Law
3. By Customs or Traditions
Absolute Community of Property (ACoP):
Rule: FFS
1. Community Properties
2. Exclusive Properties
• Acquired by spouse during marriage by
gratuitous title
•Property for personal and exclusive use of
either spouse (except jewelry)
•Property acquired before marriage who has
legitimate descendants by the former
marriage
Conjugal Partnership of Gains (CPG):
Rule: AFC
1. Exclusive Properties
1. Properties before marriage
2. During marriage- gratuitous
3. Purchased using exclusive money
2. Conjugal Properties
Format of Computation:
Gross Estate Pxx
LESS:
Ordinary deductions (Pxx)
Special deductions (Pxx)
Net taxable Estate Pxx
Allowable deductions
1. Items which the law on estate
allows, to be subtracted from the
value of gross estate
2. Presumed to be common
Ordinary Deductions: (For deaths occurring
January 1, 1998 to December 31, 2017 (RA No.
8424/NIRC of 1997))
1. Expenses, Losses, Indebtedness,
Taxes, etc. (ELITe)
2. Transfer for public use (TFPU)
3. Vanishing Deduction (Property
Previously Taxed)
1. FUNERAL EXPENSES
Requisites:
•Must be incurred prior to interment
•Shouldered by the estate
•Not to exceed the limit set by law
Amount deductible (lowest)
•Actual
•5% of Gross Estate
•200,000
1. FUNERAL EXPENSES
Components:
•Food and drinks during wake
•Publication charges for death notice
•Cost of burial lot (excluding upkeep)
•Interment/cremation fees
•Mourning apparel of surviving spouse
and unmarried minor children
Ordinary Deductions:
(For dates of deaths occurring January 1, 2018 to present
(RA No. 10963/TRAIN Law))
A. For a citizen or resident alien:
Claims against the estate
Requisites for Deductibility of Claims against the Estate:
• The liability represents a personal obligation of the
deceased existing at the time of death;
• The liability was contracted in good faith and for
adequate and full consideration in money’s worth;
• The claim must be a debt or claim which is valid in
law and enforceable in court; and
• The indebtedness must not have been condoned by
the creditor or the action to collect from the
decedent must not have prescribed.
1. Claims against insolvent persons
Requisites:
1. Value of the claims is included in the gross
estate
2. The insolvency of the debtor must be
established
Amount deductible: amount that cannot be
collected
2. Other indebtedness or claims against the
estate
3. Unpaid mortgage
Requisites:
a. The FV of the mortgaged property
undiminished by the mortgage
indebtedness should be included in the
gross estate
b. Contracted in good faith
c. For an adequate and full consideration
Amount deductible: unpaid mortgage
4. Unpaid Taxes
Requisite: must accrue before death
Amount deductible- unpaid taxes but not
including:
a. Any income tax upon income received
after death
b. Property taxes not accrued before
death
c. Estate tax from the transmission of his
estate
5. Transfer for public use (TFPU)
Requisites:
•Given to the government of PH
•Must be testamentary in character
•Exclusively for public use
Amount deductible: all bequests, legacies,
devises, or transfers to or for the use of PH
Gov’t, or any of its political subdivisions
5. Vanishing deduction (Property
previously taxed)
An amount equal to the value specified of
any property forming part of the gross
estate situated in the Philippines of any
person who died within five (5) years prior
to the death of the decedent, or
transferred to the decedent by gift within
five (5) years prior to his death
Rate of Vanishing Deduction:
Interval Rate

Within 1 year 100%

More than 1 year but not more than 2 80%

More than 2 year but not more than 3 60%

More than 3 year but not more than 4 40%

More than 4 year but not more than 5 20%

Amount Deductible:
Value to take: (lower FV @ death or donation) XX
Less: Mortage paid by present decedent (XX)
Initial Basis (IB) XX
Less: Proportional Deduction
(IB/GE)x(LITe+TFPU) (XX)
Final Basis XX
Rate X%
Vanishing Deduction XX
Special Deductions:
1. Standard Deduction- P5,000,000 R/C,
P500,000 NRA
2. Family Home Allowance
3. Amount Received by heirs

Share of the Surviving Spouse

Special Deductions:
1. Standard Deduction- P5,000,000 R/C,
P500,000 NRA
2. Family Home Allowance
3. Amount Received by heirs under RA 4917
-included in Gross Estate
-received from employer
Share of the Surviving Spouse
Special Deductions:
Family Home Allowance
Requisites:
1. Married or head of family
2. Actual residence, certified by Brgy. Captain
3. Located in PH
4. Value is included in Gross Estate
Limit: P10,000,000/ Actual Interest (Lower)
The estate of Pedro, resident citizen, married, who died on
April 2018 are as follows:

House and Lot (Family Home) P14,000,000

The lot was acquired at a cost of P3M before marriage while
the house was constructed on March 1, 2018, during marriage,
at a cost of P10M from partnership funds. The lot had a FMV of
P4M after construction of the house.
Other Properties acquired during marriage 6,000,000
Jewelry Inherited on Feb 14, 2017, during marriage, then with 2,500,000
a FMV of P1.3M
Property in US received as gift during marriage on Jan. 12 , 2,300,000
2017 (donor’s tax not paid)
Rental Income on the above property
1,200,000
Expenses/ Claims

Funeral Expenses 420,000

Judicial Expenses 800,000
Claims/ Losses incurred on December 10, 2018 600,000
Claims against the estate 1,600,000
Medical Expenses 1 year prior to death 4,000,000
 Exclusive Common Total
Family Home P14,000,000
Other Properties 6,000,000
Jewelry 2,500,000
Property in U.S. P2,300,000
Rental Income 1,200,000
Total Gross Estate 3,500,000 22,500,000 P26,000,000
Casualty Losses (600,000)
Claims against estate (1,600,000)
Vanishing Deduction (952,000) (3,152,000)
Net Estate before SD and SS 3,500,000 19,348,000 22,848,000
Standard Deduction (5,000,000)
Family Home (7,000,000)
Share of SS (9,674,000)
Taxable Net Estate 1,174,000
TAX CREDIT FOR ESTATE TAX PAID TO A
FOREIGN COUNTRY

Who can claim?

Only the resident / citizen decedents can claim

tax credits.
TAX CREDIT FOR ESTATE TAX PAID TO A
FOREIGN COUNTRY

Amount Deductible?

The LOWER between actual estate tax paid

abroad and the limit.
TAX CREDIT FOR ESTATE TAX PAID TO A
FOREIGN COUNTRY

Limit?

Depends on how many foreign country is

involved.
TAX CREDIT FOR ESTATE TAX PAID TO A
FOREIGN COUNTRY

One Foreign Country

Net Estate, foreign x PH estate tax

Net Estate, world
TAX CREDIT FOR ESTATE TAX PAID TO A
FOREIGN COUNTRY

More than One Foreign Country

Whichever is lower
Net Estate, per foreign x PH estate tax
Net Estate, world
Net Estate, all foreign countries x PH estate tax
Net Estate, world
A citizen decedent died in 2018 with the ff data:
PH USA
Gross estate P14.2M P4.4M
Allowable Deductions 6.4M 2.2M
(excluding SD)
Estate Tax paid - 150k

How much is the estate tax payable in PH?

Mr. Bombo, Filipino, died on April 2018.
Gross Estate Allowable De. ET paid
PH 1,875,000 1,575,000 -
China 300,000 150,000 3,750
Japan 450,000 525,000 -
USA 600,000 225,000 18,000
Compliance Requirements

Notice of Death- Repealed under Train LAW

Compliance Requirements

Estate Tax Return

When is it required?

•In all cases subject to estate tax

Compliance Requirements

Estate Tax Return

When is it required?

• Regardless of the amount of the gross estate,

where it consists of registered or registrable
property such as real property, motor vehicle,
shares of stock, etc., for which a “Certificate
Compliance Requirements

CPA CERTIFICATION
•Required if the gross estate exceeds P5M

•Incudes:
• Composition of GE
• Allowable Deductions claimed
• The estate tax due
Compliance Requirements

Who shall file the Estate Tax Return?

•Executor/Administrator or
•Any of the legal heirs
Compliance Requirements

Date of Filing

•Within 1 year after death

Compliance Requirements
Place of Filing
Resident Decedent:
• Authorized agent bank
• RDO
• Collection Officer
• Duly Authorized Treasurer of the city or municipality
Non- Resident Decedent:
• RDO where executor/administrator is registered
• RDO having jurisdiction over the executor/admin’s legal residence
• Office of BIR Commissioner (RDO No. 39 South QC)
Compliance Requirements
Payment
-Pay as you file
If Insufficient cash?
1. Cash Installment w/in 2 years
2. Partial disposition of estate and application
of its proceeds to the estate tax due
Mr. Pim, a resident decedent, married, died,
leaving the following properties:
Real and personal properties acquired during marriage P3,000,000
House and lot inherited from his father one year and 3 months 2,000,000
before he died (FMV when inherited, P1,500,000) used as the
decedent’s family home
Car purchased with cash received as gift from his mother during 500,000
the year he died
Cash (inclusive of P500,000 received as inheritance from the 1,500,000
father)
The following obligations and expenses were also available:
Claims against conjugal properties 600,000
Unpaid mortgage on inherited house and lot 100,000
(Original mortgage was 600k)