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ESTATE TAX
Estate tax is a tax levied upon the transfer of the net estate of a decedent to his heirs.
A. Inter vivos transfers which are subject to estate tax
1. Revocable transfers. – The decedent reserves for himself the power to alter, amend, revoke or even terminate such
transfer.
2. Transfers with retention or reservation of certain rights. – The decedent retains for himself the economic
benefits of the property or the power to designate the persons who may exercise such rights.
3. Transfers in contemplation of death. – The decedent was motivated by the thought of death to transfer the
property.
4. Transfers under general power of appointment. – The decedent was given the authority to hold property during
his lifetime and to name the beneficiaries thereof when he dies.
B. Absolute Community of Property Regime
In the absence of a marriage settlement, or when the regime agreed upon is void, the system of absolute
community of property shall govern, unless the marriage was celebrated prior to August 3, 1988 because those
celebrated before the effectivity of the Family Code, which had no prior agreement on the system of property
relationship were governed by the conjugal partnership of gains.
Unless otherwise provided, the community property shall consist of:
1. All the property owned by the spouses at the time of the celebration of the marriage; or
2. Those acquired during the marriage.
The following shall be excluded from the community property:
1. Property acquired during the marriage by gratuitous title 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
community property;
2. Property for personal or exclusive use of either spouse. However, jewelry shall form part of the community
property.
3. Property acquired before the marriage by either spouse who has legitimate descendants by a former marriage,
and the fruits as well as the income, if any, of such property.
C. Conjugal partnership of gains
All property acquired during the marriage, whether the acquisition 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 not conjugal because they 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 acquires during the marriage by gratuitous title;
3. That which is acquired by right of redemption, 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.
D. EXCLUSIONS from gross estate (not taxable)
1. Proceeds of life insurance policy.
Requisites for exemption from estate tax:
a. The life insurance policy was not taken out by the decedent upon his own life.
b. The beneficiary designated in the policy is irrevocable.
c. The designated beneficiary is not the estate of the deceased, his executor or administrator.
2. Insurance proceeds or other benefits from SSS and GSIS.
3. Exemption of certain acquisitions and transmissions
a. Merger of usufruct in the owner of naked title.
b. The transmission or delivery of inheritance or legacy of the fiduciary heir or legatee to the fideicommissary.
c. The transmission from the first heir, legatee or donee in favor of another beneficiary in accordance with the
desire of the predecessor.
d. All bequests legacies or transfers to social welfare, cultural and charitable institutions, no part of the net income
of which inures to the benefit of any individual. Provided, however, that not more than 30% shall be used for
administration purposes.
4. The exclusive property of the surviving spouse.
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DEDUCTIONS from gross estate

A. ORDINARY DEDUCTIONS
1. Claims against the estate, Unpaid mortgages. Claims against insolvent, Unpaid taxes and Losses (CUCUL) -
a. Claims against the estate. – This represents personal obligation of the deceased existing at the time of his
death except unpaid funeral expenses and unpaid medical expenses. The claims may arise out of contract, tort
or operation of law. The requisites for deductibility are the following:
1. Must have been contracted in good faith and for an adequate and full consideration in money or money’s
worth;
2. The debt instrument must be duly notarized except loans granted by financial institutions where
notarization is not part of the business practice/policy of the financial institution-lender;
3. It must not have been condoned by the creditor; and
4. The action to collect from the decedent must not have prescribed.
b. Unpaid mortgages upon the property left by the decedent. The requisites for deductibility are the following:
1. The mortgage indebtedness was contracted in good faith and for an adequate and full consideration in
money or money’s worth; and
2. The fair market value of the property mortgaged without deducting the mortgage indebtedness has been
included in the gross estate.
c. Claims against insolvent persons (bad debts). – Receivable of the decedent which are uncollectible due to
insolvency of the debtor.
Its requisites for deductibility are as follows:
1. The value of the decedent’s interest therein must be included in the gross estate.
2. The debtor’s insolvency/incapacity is proven and not merely alleged.
d. Unpaid income and property taxes which have accrued as of the death of the decedent which were unpaid as
of the time of death.
e. Losses - Requisites:
1. The loss must arise during the settlement of the estate but not beyond the deadline for the payment of the
estate tax.
2. It must arise from fires, storms, shipwreck, or other casualties, or from robbery, theft or embezzlement.
3. Such losses have not been claimed as deduction for income tax purposes.
4. Must not be compensated by insurance or otherwise.
2. Transfers for public purpose. The amount of all bequests, legacies, devisees or transfers to or for the use of the
Government of the Philippines, or any political subdivision thereof, for exclusively public purposes.
3. Vanishing deductions
Requisites for deductibility:
a. The property is situated in the Philippines;
b. The property must have been acquired thru inheritance or donation within five (5) years before the death
of present decedent;
c. Such property can be identified as the one received from prior decedent, or donor or which can be
identified as having acquired in exchange for property so received.
d. Prior gift tax or estate tax has been paid.
e. The property is included in the gross estate or gross gift of prior decedent/donor.
Vanishing rates:
More than Not More than Percentages
1 year 100 %
1 year 2 years 80 %
2 years 3 years 60 %
3 years 4 years 40 %
4 years 5 years 20 %
5 years x x 0%
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B. SPECIAL DEDUCTIONS
1. Amounts received by heirs from employer under RA 4917. – Amounts received by the heirs from the decedent’s
employer as a consequence of the death of the decedent-employee. Provided, that such amount is included in the
gross estate of the decedent.
2. Family home. - 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 certified by the Punong Barangay of the locality. The
deductible amount is the higher between the assessor’s value and FMV or zonal value, but not exceeding
P10,000,000. Provided, however, that the total value must be included as part of the gross estate of the decedent.
Provided further, that the family home is situated in the Philippines.
3. Standard deduction of P5,000,000.
C. DEDUCTIONS from GROSS ESTATE of NONRESIDENT ALIEN
1. Claims against the estate
2. Unpaid mortgages
3. Claims against insolvent persons
4. Unpaid taxes
5. Losses
6. Property previously taxed (vanishing deduction)
7. Standard deduction – P500,000
8. Transfers for public use. 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 political subdivision thereof, for exclusively public purpose.
The deductions allowed in (1), (2), (3), (4) and (5) shall be apportioned by applying the following formula:
Phil gross estate x Deductions (CUCUL)
Total gross estate

TAX RATE and TAX BASE: 6% of net taxable estate

ESTATE TAX RETURNS.
Requirements. – (1) In all cases of transfers subject to the estate tax, or (2) regardless of the gross value of the
estate, where the said 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 Bureau of Internal Revenue is required as a condition
precedent for the transfer of ownership thereof in the name of the transferee, the executor, or the administrator, or any of
the legal heirs, as the case may be, shall file a return under oath in duplicate, setting forth:
(1) The value of the gross estate of the decedent at the time of his death, or in case of a nonresident, not a citizen of the
Philippines, of that part of his gross estate situated in the Philippines;
(2) The deductions allowed from gross estate in determining the taxable estate; and
(3) Such part of such information as may at the time be ascertainable and such supplemental data as may be necessary to
establish the correct taxes.
Estate tax returns showing a gross value exceeding Five million pesos (P5,000,000) shall be supported with a statement
duly certified to by a Certified Public Accountant containing the following:
(a) Itemized assets of the decedent with their corresponding gross value at the time of his death, or in the case of a
nonresident, not a citizen of the Philippines, of that part of his gross estate situated in the Philippines;
(b) Itemized deductions from gross estate allowed in Section 86; and
(c) The amount of tax due whether paid or still due and outstanding.
Time for Filing. For the purpose of determining the estate tax, the estate tax return shall be filed within one (1)
year from the decedent's death.
A certified copy of the schedule of partition and the order of the court approving the same shall be furnished the
Commissioner within thirty (30) days after the promulgation of such order.
Extension of Time. - The Commissioner shall have authority to grant, in meritorious cases, a reasonable extension not
exceeding thirty (30) days for filing the return.
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Place of Filing. - Except in cases where the Commissioner otherwise permits, the return shall be filed, either
electronically or manually, with any authorized agent bank, Revenue District Office through Revenue Collection Officer or
authorized tax software provider.
PAYMENT OF TAX
Time of Payment. - The estate tax shall be paid, either electronically or manually, at the time the return is filed by the
executor, administrator or the heirs.
Extension of Time. - When the Commissioner finds that the payment on the due date of the estate tax or of any part
thereof would impose undue hardship upon the estate or any of the heirs, he may extend the time for payment of such tax
or any part thereof not to exceed
(1) five (5) years, in case the estate is settled through the courts, or
(2) two (2) years in case the estate is settled extrajudicially.
In such case, the amount in respect of which the extension is granted shall be paid on or before the date of the expiration
of the period of the extension, and the running of the Statute of Limitations for assessment shall be suspended for the
period of any such extension.
Where the taxes are assessed by reason of negligence, intentional disregard of rules and regulations, or fraud on the part
of the taxpayer, no extension will be granted by the Commissioner.
If an extension is granted, the Commissioner may require the executor, or administrator, or beneficiary, as the case may
be, to furnish a bond in such amount, not exceeding double the amount of the tax and with such sureties as the
Commissioner deems necessary, conditioned upon the payment of the said tax in accordance with the terms of the
extension.
Payment by Installment. – In case the available cash of the estate is insufficient to pay the total estate tax due,
payment by installments shall be allowed within two (2) years from the statutory date for its payment without civil
penalty and interest.
Liability for Payment - The estate tax shall be paid, either electronically or manually, by the executor or administrator
before delivery to any beneficiary of his distributive share of the estate. Such beneficiary shall to the extent of his
distributive share of the estate, be subsidiarily liable for the payment of such portion of the estate tax as his distributive
share bears to the value of the total net estate.
The term 'executor' or 'administrator' means the executor or administrator of the decedent, or if there is no executor or
administrator appointed, qualified, and acting within the Philippines, then any person in actual or constructive
possession of any property of the decedent.
Discharge of Executor or Administrator from Personal Liability. - If the executor or administrator makes a
written application to the Commissioner for determination of the amount of the estate tax and discharge from personal
liability therefore, the Commissioner (as soon as possible, and in any event within one (1) year after the making of such
application, or if the application is made before the return is filed, then within one (1) year after the return is filed, but not
after the expiration of the period prescribed for the assessment of the tax in shall not notify the executor or administrator
of the amount of the tax.
The executor or administrator, upon payment of the amount of which he is notified, shall be discharged from personal
liability for any deficiency in the tax thereafter found to be due and shall be entitled to a receipt or writing showing such
discharge.
Payment before Delivery by Executor or Administrator. - No judge shall authorize the executor or judicial
administrator to deliver a distributive share to any party interested in the estate unless a certification from the
Commissioner that the estate tax has been paid is shown.
Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights. There shall not be transferred to any
new owner in the books of any corporation, sociedad anonima, partnership, business, or industry organized or
established in the Philippines any share, obligation, bond or right by way of gift inter vivos or mortis causa, legacy or
inheritance, unless a certification from the Commissioner that the taxes due thereon have been paid is shown.
If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or jointly with another, it
shall allow any withdrawal from the said deposit account, subject to a final withholding tax of six percent (6%)
For this purpose, all withdrawal slips shall contain a statement to the effect that all of the joint depositors are still living at
the time of withdrawal by any one of the joint depositors and such statement shall be under oath by the said depositors.
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