Estate Tax Computation and Payment in the Philippines
(All you need to know, post-TRAIN and up to May 2025)
This material is a scholarly overview. It is not legal advice; consult a Philippine tax professional for specific situations.
1. Statutory Framework
| Instrument | Key Points | Date in Force |
|---|---|---|
| National Internal Revenue Code (NIRC) of 1997, as last amended by RA 10963 (“TRAIN Law”) | Re-wrote §84–97 on estate tax; since 1 Jan 2018 rate is flat 6 % of the net estate | 1 Jan 2018 |
| Revenue Regulations (RR) 12-2018 & 13-2021 | Implement TRAIN changes on valuation, deductions, filing and electronic payment | 2018–21 |
| Estate Tax Amnesty Act (RA 11213), amended by RA 11569 and RA 11956 | Grants amnesty at 6 % ( ≤ ₱5 000 minimum) for estates of decedents who died on or before 31 Dec 2021; amnesty period now runs 15 June 2019 – 14 June 2025 | Latest extension: 23 Aug 2023 |
| BIR RMC 24-2022, RMC 32-2023 et al. | Documentary requirements, eONETT (One-Time Transactions) portal, payment channels | 2022-2024 |
2. Who is Liable?
- The estate itself is the taxpayer (§84, NIRC).
- Liability attaches at the moment of death; all Philippine-situated properties are automatically encumbered with a tax lien until clearance.
- Executors, administrators, or heirs in possession are personally accountable if they distribute without first paying the tax (§95).
3. What Constitutes the Gross Estate? (§85, TRAIN version)
- Resident or citizen decedent – global assets:
- Real and personal, tangible and intangible property wherever situated.
- Non-resident alien decedent – property with a Philippine situs only:
- Immovables located here, tangible personal property physically here, bank deposits, shares issued by Philippine corporations, etc.
- Includible transfers (whether resident or not)
- Transfer in contemplation of death
- Property passing under revocable transfers or general power of appointment
- Proceeds of life insurance “revocably designated” to the estate, executor or administrator
Tip: Life-insurance proceeds with an “irrevocable” beneficiary designation bypass the gross estate.
4. Allowable Deductions (§86) — The Road to the Net Estate
| Deduction | TRAIN Rule | Cap / Condition |
|---|---|---|
| Standard deduction | Automatic | ₱5 000 000 (no substantiation) |
| Family home | FMV to the extent of | max ₱10 000 000 |
| Claims against the estate | Valid & enforceable debts personally incurred by decedent | Must be duly notarised if > ₱250 000; if loan within 3 years of death, additional bank certification |
| Claims of the estate against insolvent persons | Full amount | |
| Unpaid mortgages & taxes | Amount paid by estate | |
| Transfer for public use | Full amount actually donated | |
| Vanishing deduction | For property acquired by decedent within 5 yrs previously taxed by donor’s or estate tax | 20 %-100 % sliding scale |
| Share of the surviving spouse | Conjugal/ACP only: ½ of conjugal net property excluded from decedent’s estate | |
| Funeral expenses & medical expenses | Deleted by TRAIN (now merged into standard deduction) | |
| Foreign estate tax credit (§86(E)) | Resident citizen only; limited by proportionate formula |
Quick formula
Net estate = (Gross estate – Exclusions) – (Total allowable deductions)
5. Tax Rate and Basic Computation
Since 1 Jan 2018:
Estate tax = 6 % × Net estate
Minimum: none (unless amnesty minimum ₱5 000)
Rounded to the nearest peso; payable per heir is determined only upon full distribution.
Example (Resident Married Decedent, May 2025)
| Item | Amount (₱) |
|---|---|
| House & lot (FMV) | 16 000 000 |
| Bank deposits | 3 000 000 |
| Shares of PH Corp | 1 500 000 |
| Gross Estate | 20 500 000 |
| Less: Standard deduction | (5 000 000) |
| Less: Family home | (10 000 000) |
| Less: Mortgage on house | (2 000 000) |
| Net Estate | 3 500 000 |
| Estate tax (6 %) | 210 000 |
| Add: surcharge/interest if late | variable |
6. Filing & Payment Procedure
- Deadline – Within one (1) year from date of death (§90).
- BIR Commissioner may grant a written extension up to 30 months for filing and/or for payment, for meritorious reasons (serious financial difficulty, etc.).
- Form – BIR Form 1801 (Estate Tax Return).
- Where – Revenue District Office (RDO) where decedent resided, or RDO 39 (South Quezon City) for non-resident alien.
- Modes of payment
- Over-the-counter at AABs (Authorized Agent Banks) or Revenue Collection Officers.
- eFPS / eBIRForms with G-Cash, Maya, LANDBANK, DBP etc. (RR 13-2021).
- Installment (§91)
- If the estate cannot pay without undue hardship, up to two-year installment plan is possible (quarterly), secured by a surety bond or collateral approved by the BIR.
- Interest of 12 % p.a. on unpaid balance.
- Attachments (typical)
- Certified copy of Death Certificate
- TIN of estate & heirs
- Affidavit of Self-Adjudication or Deed of Extrajudicial Settlement, or court-issued Letters of Administration / Testamentary
- Certificate of valuation: BIR zonal values / assessor’s schedule for real property
- Certificate of deposit balance, shareholdings, life-insurance policy, etc.
- Notarised debts & proof of payments for deductions
- CPA-certified Statement of Assets & Liabilities if gross > ₱5 Million
- Electronic ONETT – Since 2023, most Metro Manila RDOs require scheduling and submission via the eONETT portal; original documents presented only for stamping.
7. Clearance and Release of Properties
- Electronic Certificate Authorizing Registration (eCAR) — issued per property once tax is paid; mandatory for the Register of Deeds, LTO, corporate secretaries and banks before transfer of title, shares, or release of deposits.
- BIR has 5 days to issue the eCAR upon complete submission (RR 12-2018), though practice varies.
8. Estate Tax Amnesty (2019-2025)
| Feature | Original RA 11213 | Current status (RA 11956) |
|---|---|---|
| Coverage | Estates of decedents who died on or before 31 Dec 2017 | Extended to deaths on or before 31 Dec 2021 |
| Rate | 6 % of net estate or ₱5 000 whichever is higher, per estate (not per heir) | |
| Period to avail | 15 June 2019 – 14 June 2021 | Now until 14 June 2025 |
| Returns | BIR Form 2118-E + minimal attachments (any proof of death; at least one doc showing property) | |
| Effect | Immunity from all penalties, surcharges, interests; withdrawal of criminal cases; issuance of eCAR |
Practical note: All unpaid estate taxes prior to 2022 can now be settled cheaply; after 14 June 2025, regular tax plus 25 % surcharge and 12 % p.a. interest will revive.
9. Special Situations
- Non-Resident Alien Estates
- Intangible property (shares, bank accounts) is taxable only if the foreign country does not grant reciprocity.
- Reciprocity is automatic for countries like the U.S., Japan, Germany, etc.
- File at RDO 39; secure BIR Ruling to apply reciprocity.
- Overseas Filipino Worker (OFW) family home abroad – Not deductible; only Philippine family home qualifies.
- Foreign-situs real properties – Included for residents, but any foreign estate tax paid is creditable (§86(E)).
- Trusts – Assets in an irrevocable, complete trust settled during the decedent’s lifetime are excluded; revocable or incomplete trusts are includible.
- Property Regime Changes – If spouses executed a post-nuptial change (e.g., to separation of property), BIR will require recorded deed/RTC order to respect it.
10. Penalties & Enforcement
| Infraction | Civil Penalty | Criminal Liability (§255–§257) |
|---|---|---|
| Late filing/payment | 25 % surcharge + 12 % annual interest (compounded) | Fine ₱10 000–₱100 000 + 1–10 yrs imprisonment |
| Substantial under-declaration (> 30 %) | Additional 50 % fraud surcharge | Same as above plus proof of intent |
| Failure to register property transfer | No title transfer; registries barred | n/a |
| Distribution without clearance | Heirs/executor personally liable for unpaid tax | Possible prosecution for evasion |
BIR may issue Notice of Tax Lien and Warrant of Distraint/Levy against estate assets or heirs’ personal assets if already distributed.
11. Practical Checklist for Executors / Heirs
- Within 30 days of death
- Secure TIN for the estate; open “Estate of the Late ___” bank account.
- Within 6 months
- Gather asset documents; have real properties appraised (fair market vs zonal value).
- Decide on judicial vs extrajudicial settlement.
- Before the 1-year deadline
- Finalise deductions, especially debts (have them notarised).
- File BIR 1801 and start paying or apply for amnesty (if eligible).
- After eCAR issuance
- Transfer titles, update corporate stock & transfer books, close bank accounts.
- File DST, CGT or donor’s tax, if secondary transfers occur.
- Final step
- Prepare Accounting for Distribution to show that estate tax was settled before partition (for court-supervised estates).
12. Common Pitfalls — and How to Avoid Them
| Pitfall | Prevention |
|---|---|
| Using assessed value instead of higher of FMV or zonal value | Always compare assessor’s FMV with BIR Zonal Valuation (latest schedule). |
| Claiming medical expenses post-TRAIN | These are no longer deductible; rely on the ₱5 M standard deduction. |
| Forgetting to deduct the conjugal share | Compute conjugal net first; only decedent’s half enters the gross estate. |
| No proof of indebtedness | Notarise debts; if loan obtained < 3 yrs before death, secure bank certification of original loan & use. |
| Missing the 1-year deadline | File “provisional return” with estimated liabilities, pay at least a portion; amend later. |
| Paying bank/franchise taxes before eCAR | Banks require BIR clearance; secure it first to unlock accounts. |
13. Looking Ahead
- As of May 2025, Congress is studying a further digitalisation of one-time tax filings, with BIR pilot-testing full online eCAR release.
- Legislative proposals exist to permanently raise the standard deduction to ₱10 M and index it to inflation, but none has yet passed.
- The 14 June 2025 amnesty sunset is final under RA 11956; any extension would require a new law. Keep watch, but do not count on it.
Key Take-Aways
- Flat 6 % now makes Philippine estate tax simple—but only if you organise documents early.
- Amnesty is a once-in-a-lifetime bargain for deaths up to 2021; settle before 14 June 2025.
- Filing on time avoids the brutal 25 % surcharge + 12 % interest.
- Remember the standard deduction (₱5 M) and family home (₱10 M)—these alone can wipe out tax for many middle-class estates.
- Transfer of any property—real, personal or intangible—cannot proceed without the BIR’s eCAR.
Manage these points, and an estate can be settled swiftly, sparing heirs both tax exposure and family friction.