Estate Tax Computation for a Decedent Five Years After Death (Philippine perspective)
Scenario: The decedent died five years ago (e.g., death on 10 June 2020; today is 3 July 2025). Effect: The one-year statutory filing/payment deadline has long lapsed, so the estate is now subject to basic estate tax plus surcharge and interest. It is not covered by the Estate-Tax Amnesty (which is limited to decedents who died on or before 31 December 2017).
1. Governing law, rates and deadlines
| Item | Legal basis | Key rule |
|---|---|---|
| Filing & payment deadline | § 90, National Internal Revenue Code (NIRC) of 1997 (as amended) | Return & tax within 1 year from death (BIR Form 1801) |
| Estate-tax rate (deaths on/after 1 Jan 2018) | TRAIN Law (RA 10963) ⇒ § 84 NIRC | Flat 6 % of the net estate |
| Late-payment surcharge | § 248 (A)(3), NIRC | 25 % of the basic tax (automatic) |
| Deficiency interest | § 249, NIRC (TRAIN) | “Double the legal interest rate”; BSP rate is 6 % ⇒ 12 % p.a. on the basic tax, computed from original due date until full payment |
| Compromise penalties | RMO No. 19-2007 (schedule) | Typically ₱ 15 000–₱ 30 000 depending on deficiency amount; imposed in the Assessment Notice |
No amnesty relief: RA 11213 & RA 11956 apply only to estates of decedents who died on or before 31 Dec 2017. No prescription: Estate tax is assessed on the estate, which does not benefit from the three-year prescriptive period that applies to income taxes of the decedent.
2. Step-by-step computation
Determine Gross Estate
Resident citizen – worldwide assets
Non-resident citizen / alien – Philippine-situated assets only
Valuation:
- Real property – the higher of BIR zonal value or local assessor’s fair-market value as of date of death
- Personal & intangible property – fair value as of death
- Accrued income (e.g., uncollected rents/interests) belongs to estate and is included.
Deduct Allowable Deductions (TRAIN‐era limits)
Deduction Cap / rule Standard deduction ₱ 5 000 000 (no substantiation) Family home Lower of FMV or ₱ 10 000 000 Funeral expenses Actual, but ≤ ₱ 200 000 Medical expenses in the year immediately prior to death Actual, but ≤ ₱ 500 000 Claims against the estate (debts) Valid, enforceable & duly proven Accrued unpaid taxes & Casualty losses Properly documented Retirement benefits under RA 4917 Fully deductible Transfers for public use Donations to gov’t Share of surviving spouse Conjugal/community-property ½ share is excluded before deductions Net Estate = Gross − Deductions
Basic Estate Tax = Net Estate × 6 %
Add Late-Payment Additions
Surcharge: 25 % × basic tax
Interest:
$$ \text{Interest} = \text{Basic Tax} × 12% × \frac{\text{Number of days overdue}}{365} $$
Count interest from the day after the original due date (one year from death) until actual payment or issuance of Assessment Notice (if BIR computes slightly differently, its figure prevails).
Compromise penalty – added when the BIR issues a Formal Letter of Demand (FLD); pay with the Assessment Notice.
3. Illustrative computation
Assume:
- Date of death: 10 June 2020
- Return should have been filed by 10 June 2021
- Payment date: 10 July 2025 ⇒ 4 years & 30 days late (≈ 1 , 491 days)
- Gross estate: ₱ 10 000 000
- Allowable deductions: ₱ 5 500 000 (incl. standard & family-home)
- Net estate: ₱ 4 500 000
| Component | Amount (₱) | Computation |
|---|---|---|
| Basic estate tax | 270 000 | 4 500 000 × 6 % |
| 25 % surcharge | 67 500 | 270 000 × 25 % |
| Interest (12 % p.a.) | 270 000 × 12 % × (1 , 491 / 365) ≈ | 132 300 |
| Total due on 10 Jul 2025 | 469 800 | basic + surcharge + interest |
| Plus compromise (if assessed) | 15 000 | (illustrative) |
| Grand total | 484 800 | payable to BIR |
4. Procedural checklist
Secure TIN of the Estate (if not yet).
Prepare BIR Form 1801 (Estate Tax Return) in five copies.
Attach documentary requirements:
- Certified death certificate
- “Notice of Death” (if estate > ₱ 5 000 000) filed with RDO within 60 days of death (late filing still required)
- Certified true copies of titles, tax declarations, stock certificates, bank certs, motor-vehicle OR/CR, etc.
- Sworn statements of assets & liabilities, deductions (e.g., debts, expenses)
- Proof of claimed deductions (receipts, invoices, promissory notes)
- Certification of Barangay Captain that the property is the decedent’s family home, if availing deduction
- Deed of Extrajudicial Settlement (EJS) or court-approved project of partition
Pay at the Authorized Agent Bank (AAB) of the RDO where the decedent was domiciled or file via eFPS/eBIRForms with electronic payment facility.
Request Certificate Authorizing Registration (CAR) per asset—to transfer titles.
Penalties mitigation: Heirs may file a “Request for Abatement or Cancellation of Penalties” under § 204 (B) NIRC citing hardship, provided 100 % of the basic tax is paid (BIR may reduce interest/compromise). No guarantee of approval, but worth pursuing.
5. Special considerations
| Issue | Practical note |
|---|---|
| Estate with insufficient cash | Heirs may elect to pay “by installment” (Sec. 91 NIRC) within 2 years of statutory due date (not of payment date) but interest still accrues; collateral or bond normally required. |
| Properties still in decedent’s name after five years | No title transfer (no CAR) until estate tax cleared; heirs cannot validly sell/encumber. |
| Bank deposits | Banks will freeze accounts; release only upon CAR or BIR Tax Clearance under RMC 62-2018. |
| Court-partition vs extrajudicial settlement | Extrajudicial allowed if (a) no will, (b) no minors/incapacitated parties or guardian appointed, and (c) all heirs agree; otherwise file estate settlement proceeding. |
| Foreign assets of Filipino decedent | Foreign-tax credit allowed (Sec. 86(C) NIRC) but limited to proportion of Philippine estate tax. |
| Subsequent discoveries | If undisclosed asset surfaces after CAR issuance, BIR may assess deficiency estate tax at any time (no prescription). |
| Income of the estate after death | Taxable under Estate TIN as a separate taxpayer (file BIR Form 1701A/1701). |
6. Common pitfalls and tips
- Late valuation: Always use FMV at date of death, not current FMV.
- Conjugal confusion: Deduct surviving spouse’s share before applying deductions; otherwise you overstate net estate.
- Over-deduction: Funeral & medical caps are absolute; excess portions are non-deductible.
- Interest mis-count: 12 % runs on the basic tax only—not on surcharge or interest.
- Estate mortgage/loan: Allowed only if debt was incurred in good faith, for full & adequate consideration, and duly notarized at least 3 months before death (Sec. 86(A)(3), RR 12-2018).
- Split payments: Paying initial amount does not stop interest; it keeps running on unpaid basic tax until settled.
- CAR application timing: File CAR request within 2 years of payment; otherwise you must justify delay.
- Seek professional help: BIR examinations on estates are document-heavy; counsel or tax adviser can shorten processing.
7. Conclusion
Five years of inaction does not bar the government from collecting estate tax; it merely enlarges the bill through statutory surcharge and interest. To regularize titles and avoid future disputes:
- Compute the basic estate tax accurately under the TRAIN flat-rate regime.
- Add mandatory additions (25 % surcharge + 12 % annual interest).
- File and pay promptly, then secure the CAR to unlock transfers.
- Explore penalty abatement where meritorious.
By understanding every component—valuation rules, allowable deductions, statutory additions, procedural steps—heirs can navigate late estate-tax compliance confidently and minimize avoidable costs.