Estate Tax Computation Guide (Philippines) – 2025 Edition

This article consolidates the statutory rules in the National Internal Revenue Code of 1997 (NIRC), as amended—principally by Republic Act (RA) 10963 or the “TRAIN” Law—together with key revenue regulations, BIR issuances and recent amendments up to June 1 2025.

1. Concept and Legal Basis

Reference	Provision
NIRC Title III, Chapters I–II	Estate tax imposed on the transfer of a decedent’s estate (not on the property itself but on the privilege of transmitting it).
RA 10963 (TRAIN)	Rewrote estate-tax rates and deductions effective 1 Jan 2018.
RA 11213, 11569 & 11956	Estate-tax Amnesty laws covering estates of decedents who died on or before 31 Dec 2017 (amnesty period now ends 14 June 2025).

2. Who Is Liable

Executor/administrator settles the tax; if none, the heirs are jointly liable.
For non-resident estates, the authorized representative in the Philippines files and pays.

3. When and Where to File

Item	Rule
Return (BIR Form 1801)	Within one (1) year from the decedent’s date of death.
Venue	Revenue District Office (RDO) where the decedent was domiciled at death; if non-resident, RDO 39-South Quezon City.
Extension to file/pay	Up to 2 years (extrajudicial) or 5 years (judicial settlement) on meritorious showing.
Installments	Allowed if the BIR finds that full payment at once would unduly impair the estate or any heir; installments must be within 2 years of the statutory due date.

Late filing/payment triggers:

Surcharge: 25 % (simple late), 50 % (willful neglect or false return).
Interest: Double the legal interest rate (presently 12 % p.a.) computed from original due date.
Compromise penalties per BIR table.

4. Step-by-Step Computation

Determine Gross Estate (Sec. 85, NIRC)
- Resident or citizen decedent: All property—real, personal, tangible, intangible—wherever situated.
- Non-resident alien: Only property within the Philippines (with reciprocity rule for intangibles).
Inclusions
- Property in decedent’s name at death.
- Transfers in contemplation of death.
- Revocable transfers.
- Property passing under a general power of appointment.
- Proceeds of life insurance if payable to the estate or to heirs/beneficiaries with the estate as irrevocable beneficiary.

Less: Allowable Deductions (Sec. 86)

Deduction	Key Limits / Notes (TRAIN regime)
Standard deduction	₱ 5,000,000 (no substantiation required).
Family-home deduction	Lower of FMV or ₱ 10,000,000; excess over ₱10 M goes back to gross estate.
Funeral expenses	Actual but not > ₱200,000 or 5 % of gross estate, whichever is lower.
Medical expenses	Actual medical costs incurred within one year prior to death, up to ₱ 500,000.
Claims against estate	Valid, enforceable debts contracted in good faith and duly documented.
Claims against insolvent persons	Portion of debt already included in gross estate which is uncollectible.
Unpaid mortgages, taxes & casualty losses	Subject to documentary proof and timing restrictions.
Transfers for public use	Bequests, legacies, donations to the government.
Net share of surviving spouse	Conjugal/community share deducted after other deductions.

Arrive at Net Estate Net Estate = Gross Estate – Total Allowable Deductions
Compute Estate Tax Estate Tax = 6 % × Net Estate
Apply Tax Credits (if any) Foreign Estate-Tax Credit for taxes actually paid to a foreign country, subject to per-country and overall caps (Sec. 86 (C)).

5. Valuation Rules (Sec. 88)

Property Type	Valuation
Real property	Higher of (a) zonal value published by BIR or (b) FMV per latest provincial/city assessor schedule. If none, fair market price as of death.
Listed shares	Average of highest and lowest quotation on the date of death.
Unlisted common shares	Book value nearest the date of death, certified by an independent CPA.
Unlisted preferred shares	Par value.
Personal & other property	Fair market value at date of death.

Assets expressed in foreign currency are converted at the Bangko Sentral ng Pilipinas (BSP) closing rate on the date of death.

6. Documentary Requirements (core list)

BIR Form 1801 (Estate Tax Return).
PSA-issued death certificate.
Taxpayer Identification Number (TIN) of the estate and all heirs.
Affidavit of self-adjudication, deed of extrajudicial settlement, or court-issued letters testamentary/administration.
Certified list of legal heirs (if intestate) / notarized partition agreement.
“Due diligence” document set for each deduction (receipts, invoices, promissory notes, medical bills, etc.).
Latest tax declaration & certified true copy of title for real properties.
Proof of valuation for shares (stock certificate, appraisal, audited financial statements).
Proof of foreign tax payments, if claiming tax credit.
Special Power of Attorney, if filed by a representative.

After assessment and full/partial payment, the BIR issues an Electronic Certificate Authorizing Registration (eCAR) per asset, which must be presented to the Registry of Deeds, LTO, corporate secretary, bank, etc., to effect the change of ownership.

7. Sample Computation

Scenario Juan dela Cruz, resident citizen, died 1 February 2025. Gross estate (FMV): • House & lot (family home) – ₱ 12,000,000 • Bank deposits – ₱ 1,800,000 • Listed shares – ₱ 3,200,000 • Car – ₱ 600,000 • Life insurance proceeds payable to estate – ₱ 1,000,000 Total Gross Estate – ₱ 18,600,000

Outstanding mortgage on house – ₱ 2,000,000 Medical bills (last 4 months) – ₱ 650,000 Funeral expenses – ₱ 300,000

Gross Estate ……………………………………… ₱ 18,600,000
Less Deductions Standard ………………… ₱ 5,000,000 Family home (cap 10 M) … ₱ 10,000,000 Medical (cap 500 k) ……… ₱ 500,000 Funeral (lower of 200 k or 5 %) – 5 % of ₱18.6 M = ₱930 k → cap ₱200 k → ₱ 200,000 Mortgage ……………………… ₱ 2,000,000 Total Deductions ………………………………… ₱ 17,700,000
Net Estate (18,600,000 – 17,700,000) ……… ₱ 900,000
Estate Tax @ 6 % ………………………………… ₱ 54,000

If paid on or before 1 February 2026, no surcharge/interest applies. Otherwise, compute penalties from that date.

8. Special Topics & Recent Developments

Area	Highlights (as of 2025)
Estate-Tax Amnesty	RA 11956 extended availment until 14 June 2025 for estates of decedents who died on or before 31 Dec 2017. Flat rate of 6 % on net undeclared estate or minimum ₱ 5,000, with surcharge/interest waived and expanded deductions (incl. part of share of surviving spouse).
Digital filing & payment	BIR’s Electronic Estate Tax System (eETS) allows online eCAR processing in Metro Manila RDOs.
Proof-of-ownership for crypto & digital assets	BIR requires print-outs of wallet balances and notarized declarations; valuation pegged to BSP reference rate at death.
Non-resident estates	Revenue Memorandum Circular 42-2024 clarifies that reciprocity exemption for non-resident aliens applies on each intangible asset; documentary proof from foreign tax authority is mandatory.
Settling small estates (< ₱ 200 k)	Under Rule 74, Rules of Court, heirs may execute an Affidavit of Self-Adjudication without court approval; but estate tax return is still required if estate exceeds ₱ 5 M gross.
Penalties for willful evasion	Sec. 255 imposes fines up to ₱ 10 M and imprisonment of 6–10 years; BIR has heightened audit focus on undervaluation of real property vis-à-vis zonal values.

9. Compliance Checklist for Executors / Heirs

Secure TIN of Estate immediately after death.
Inventory assets & liabilities; secure certified valuations.
Compute tentative tax to gauge liquidity needs.
File BIR Form 1801 and pay within one year (apply for extension/installments early if needed).
Deposit estate funds in an “in-trust-for (ITF)” bank account; keep detailed ledger.
Settle debts & expenses using estate funds, not personal money (to preserve deductibility).
Obtain eCARs; annotate titles, transfer shares, re-register vehicles.
Distribute residue to heirs only after tax and debts are cleared.

10. Frequently Asked Questions

Are life-insurance proceeds always taxable? Only if payable to the estate or the beneficiary is the estate/heirs under an irrevocable designation. Proceeds to a named beneficiary under irrevocable designation are excluded.
Can I donate property to heirs instead? Yes, but donor’s tax (also flat 6 %) applies, plus you lose the ₱ 5 M standard deduction advantage of estate tax.
Is the family home exemption lost if heirs sell the property? No. The deduction is allowed at the time of death; any subsequent sale is subject to capital-gains tax/creditable withholding.
What if the estate is mostly land and there is no cash? You may request installment payment, submit Bond or Guaranty Agreement, or avail of “cash-in-kind” payment via transfer of property to government in lieu of cash under Sec. 94 (rarely used).

11. Key Takeaways

Since 2018, Philippine estate tax is a simple flat 6 % on net estate, but maximising deductions (₱5 M standard + ₱10 M family home + others) can often reduce or eliminate the tax.
Filing and payment must occur within one year; penalties are steep.
Proper documentation is non-negotiable; unsubstantiated deductions are disallowed.
The Estate-Tax Amnesty window closing 14 June 2025 is the last chance for pre-2018 estates to settle at minimal cost.
Always obtain the eCAR—it is the only proof that property can legally change hands and titles.

This guide is meant for general information only and does not substitute for professional tax or legal advice specific to your situation.