1) What “Estate Tax” Is (and When It Applies)

Estate tax is a national internal revenue tax imposed on the transfer of a deceased person’s property (the “estate”) to heirs and other successors by reason of death. It attaches at the moment of death, even if the heirs receive the property later. The tax is computed on the net estate (gross estate less allowable deductions and exclusions), and is generally paid before assets can be transferred to heirs (e.g., before land titles are transferred, bank deposits released, or shares recorded in heirs’ names).

Estate tax is separate from:

Local taxes (e.g., real property tax under LGUs),
Transfer fees (Register of Deeds, LGU fees),
Income tax (e.g., income earned by the estate after death may be taxed to the estate),
Capital gains tax on sale (if heirs sell property later).

2) Governing Law and Tax Rate (Philippine Context)

Estate tax is governed by the National Internal Revenue Code (NIRC), as amended, and implemented through BIR regulations, revenue memorandum circulars, and BIR forms/procedures.

Current structure (general rule)

Flat estate tax rate: 6% of the net estate.

Practical impact: the key work in estate tax is usually (a) identifying what belongs to the estate, (b) valuing it correctly, and (c) substantiating deductions and exclusions with documents.

3) Who Must File and Pay

A. Decedent classification

Rules differ depending on whether the decedent was:

Citizen or resident alien (resident decedent)
- Estate tax generally applies to worldwide assets (inside and outside the Philippines).
Non-resident alien (NRA decedent)
- Estate tax generally applies only to assets situated in the Philippines (“situs in the Philippines”), subject to special rules (notably for intangibles, discussed below).

B. Who files

The executor/administrator (if appointed), or in many extra-judicial settlements, the heirs (often through an authorized representative) file the estate tax return and pay the tax.

4) What Property Is Included in the Gross Estate

The gross estate generally includes all property and interests of the decedent at death, including:

A. Real property

Land, buildings, condominium units, and improvements.

B. Personal property (tangible)

Vehicles, jewelry, furniture, art, equipment, etc.

C. Intangible property

Bank deposits, shares of stock, bonds, receivables, partnership interests, etc.

D. Certain transfers that are “pulled back” into the estate

Even if property isn’t titled in the decedent’s name at death, it may still be included if, for example:

The decedent retained enjoyment or control (e.g., transferred property but kept the right to use/income),
The transfer was in contemplation of death under applicable rules,
The decedent held powers over the property that cause inclusion under estate tax principles.

E. Life insurance (important rule)

Life insurance proceeds are generally included in the gross estate if:

The beneficiary is the estate, or
The beneficiary designation is revocable (i.e., the decedent retained the right to change the beneficiary).

If the beneficiary designation is irrevocable and not the estate, proceeds are generally excluded from the gross estate.

5) Property Excluded or Not Taxed as Part of the Estate (Common Situations)

A. Surviving spouse’s share (conjugal/community property)

Where the property regime is absolute community or conjugal partnership, only the decedent’s share forms part of the gross estate. The surviving spouse’s share is excluded.

Common pitfall: treating all community/conjugal assets as 100% estate property. The estate typically includes only 50% (subject to proof of the property regime and characterization of assets).

B. Some benefits by special laws/contracts

Certain retirement or social benefit proceeds may be excluded depending on the governing law and proper beneficiary designation. Documentation and the benefit’s legal basis matter.

6) Determining “Situs” (Especially for Non-Resident Aliens)

For non-resident alien decedents, only property situated in the Philippines is included. Situs rules can be technical, but common guideposts:

Real property: situs is where the property is located.
Tangible personal property: situs is generally where the property is physically located.
Shares of stock in a Philippine corporation: generally treated as having Philippine situs.
Intangibles (special rule for NRA): certain intangibles may be taxable unless the decedent’s country grants reciprocal exemption to Filipinos (reciprocity rule). This often comes up for shares, bank deposits, and other intangibles.

Practical point: If reciprocity is claimed, prepare to present legal support and documentation regarding the foreign jurisdiction’s tax treatment.

7) Valuation Rules (How the Estate Is Appraised for Tax)

Accurate valuation is one of the most common sources of delays.

A. Real property (land/buildings/condo)

Commonly valued at the higher of:

BIR zonal value, and
Fair market value per tax declaration (assessor’s value).

B. Shares of stock

Listed shares: generally valued using market quotations around date of death (based on exchange trading data).
Unlisted shares: commonly valued at book value based on the latest available financial statements (often audited), subject to BIR rules.

C. Vehicles

Often valued based on BIR-prescribed schedules or recognized valuation bases accepted by the BIR for transfer purposes.

D. Bank deposits / cash

Balance as of date of death (plus relevant accruals, depending on how documented/treated).

E. Receivables / claims

Face value adjusted for collectibility (but proof is crucial).

Practical tip: BIR examiners focus on consistency between declared values and supporting records (titles, tax decs, bank certificates, stock transfer records, financial statements).

8) Deductions Commonly Claimed (Net Estate Computation)

The estate tax is imposed on the net estate. Deductions reduce the taxable base, but they are document-heavy.

A. Standard deduction

A fixed standard deduction is allowed (commonly used because it requires less substantiation than itemized deductions).

B. Family home deduction

A deduction is allowed for the family home, subject to:

A statutory ceiling,
Proof that the property qualifies as the family home,
Proof of valuation and ownership (and that it formed part of the gross estate).

Common supporting documents include barangay certification (in some cases), tax declarations, utility bills, and other proof of actual use/occupancy—depending on BIR practice and the facts.

C. Claims against the estate (debts/obligations)

Unpaid loans, valid payables, and other enforceable obligations as of date of death.
Requires proof of the debt’s validity and outstanding balance (promissory notes, loan statements, contracts, receipts, etc.).

D. Unpaid mortgages and taxes

Mortgages on estate property (to the extent unpaid and properly supported).
Certain taxes due and unpaid at death may be deductible (properly documented).

E. Funeral expenses

Deductible subject to statutory limits and substantiation (official receipts, statements).

F. Medical expenses (if applicable under rules)

Typically subject to limits and timing rules (e.g., incurred within a prescribed period prior to death), plus substantiation.

G. Judicial expenses of settlement

Court fees, publication costs, professional fees, etc., to the extent recognized as deductible and properly supported.

H. Transfers for public use

Certain donations/transfers to the government or qualified entities may be deductible, subject to rules and documentation.

Common pitfall: claiming deductions without complete supporting documents. In practice, lack of documentation often results in disallowance or prolonged processing.

9) The Estate Tax Return, Where to File, and How to Pay

A. Return used

Estate tax is filed using the BIR Estate Tax Return (commonly BIR Form 1801, as updated).

B. Where to file

Typically filed with the BIR Revenue District Office (RDO) having jurisdiction over:

The decedent’s domicile at time of death (for residents), or
The location of property / other BIR rules for non-residents.

C. Payment channels

Payment is generally made through:

Authorized Agent Banks (AABs), or
Other BIR-authorized payment facilities, depending on the RDO and e-filing/payment arrangements.

D. Clearance required for transfer

For many transfers (especially real property, shares, and bank deposits), the BIR issues an electronic Certificate Authorizing Registration (eCAR) or equivalent clearance after compliance. This is typically required by:

Register of Deeds,
Banks,
Corporate secretaries/stock transfer agents,
Other institutions before recognizing transfers.

10) Deadlines (Critical)

A. Filing and payment deadline (general rule)

The estate tax return is generally required to be filed and the tax paid within one (1) year from the decedent’s death.

B. Extensions of time to pay (not automatic)

The Commissioner/BIR may grant an extension to pay in meritorious cases, but:

It is subject to conditions,
It does not generally eliminate interest,
Maximum periods can differ depending on whether settlement is judicial or extra-judicial under the NIRC framework.

Practical point: An extension to pay is different from an extension to file. Late filing/payment can trigger surcharges and interest.

C. Estate tax amnesty (historical program; verify if reopened)

The Philippines previously implemented an Estate Tax Amnesty under the Tax Amnesty Act (and subsequent extensions), covering certain estates (commonly those of decedents who died on or before a specified cut-off date) and requiring filing/payment within the amnesty period. As implemented and extended, the last widely publicized deadline ended in June 2023, unless later revived by new legislation or issuances.

11) Penalties for Late Filing/Payment

Failure to file and/or pay on time can result in:

Surcharge (commonly 25% for simple lateness; higher in cases such as willful neglect or fraud),
Interest (computed at a statutory rate—often expressed as double the legal interest rate per annum—subject to changes in applicable legal interest),
Compromise penalties in appropriate cases.

Penalties can significantly increase the amount due, and delays often compound administrative difficulties (e.g., heirs unable to transfer or sell property).

12) Common Documents for Estate Tax Filing (Philippines)

Exact requirements vary by RDO and by the estate’s asset mix, but these are commonly requested:

A. Core civil registry and identity documents

Death Certificate (PSA or local civil registry copy, depending on availability/acceptance).
TIN of the decedent (and often heirs).
Valid IDs of heirs/authorized representative.
Marriage Certificate (if married).
Birth Certificates of heirs (to prove relationship).
If there is a will: documents relating to probate or will custody.

B. Proof of settlement authority (depending on situation)

Extra-Judicial Settlement (EJS) document (notarized), if applicable.
Judicial settlement documents (court orders/letters of administration) if under court proceedings.
Publication proof for EJS (where required/undertaken).
Special Power of Attorney (SPA) if a representative files on behalf of heirs.

C. Real property documents

Transfer Certificate of Title (TCT)/Condominium Certificate of Title (CCT) (certified true copy often requested).
Tax Declaration (land and improvement) and latest assessed values.
BIR zonal value reference (often verified by the BIR).
Location map / lot plan (sometimes requested for clarity).
Certificate of No Improvement (if applicable).
Proof of family home qualification (if claiming the family home deduction): occupancy/use evidence as required.

D. Bank and cash assets

Bank certification of account balances as of date of death.
Statements for time deposits, trust accounts, investment accounts.

Banks commonly require BIR clearance/eCAR before release to heirs, subject to exceptions and internal compliance rules.

E. Shares of stock / business interests

Stock certificates (or proof of holdings).
Secretary’s Certificate / corporate certification of shares and any transfer restrictions.
Latest audited financial statements (for valuation of unlisted shares).
For partnership interests: partnership documents and financial statements.

F. Vehicles

OR/CR (Official Receipt/Certificate of Registration).
Valuation support as required.

G. Debts and deductions support

To claim deductible obligations/expenses:

Loan agreements, promissory notes, statements of account.
Official receipts for funeral/medical/judicial expenses.
Proof of payment and proof that the expense is chargeable to the estate and allowed by law.

H. Tax forms and procedural documents

Duly accomplished Estate Tax Return (with schedules/attachments).
Notice of Death (where required as a separate filing in practice).
eCAR application/processing documents (as required for transfer).

13) Typical Step-by-Step Process (Practical Roadmap)

Identify heirs and the property regime (absolute community, conjugal partnership, separation of property).
Inventory all assets and liabilities at date of death (worldwide if resident/citizen; Philippine-situs if NRA).
Gather documentary proof for each asset and each claimed deduction.
Determine valuations following BIR valuation rules (real property, shares, vehicles, etc.).
Compute gross estate → deductions → net estate → estate tax due (6%).
Prepare and file the estate tax return with required attachments.
Pay the estate tax (and any penalties if late).
Secure BIR eCAR/clearance for registrable assets.
Transfer titles/registrations (Register of Deeds, banks, corporations, etc.).
Complete settlement/distribution among heirs (partition, titles in heirs’ names, etc.).

14) Common Issues and How They Derail Estate Tax Compliance

A. Missing titles / inconsistent property records

Name mismatches, old titles, unupdated tax declarations, or missing documents can stall eCAR issuance.

B. Under- or mis-valuation

Real property values must follow the higher-of rule; share valuation requires proper financial statements.

C. Incorrect handling of conjugal/community property

Failing to segregate the surviving spouse’s share can overstate the gross estate.

D. Unsupported deductions

Deductions are frequently disallowed when receipts, contracts, or proof of obligation are incomplete.

E. Late filing and compounding penalties

Heirs often discover the estate tax requirement only when attempting to transfer/sell property, by which time penalties may be large.

F. Special rules for non-resident aliens and intangibles

Reciprocity claims require careful legal and documentary support; absent support, intangibles may be taxed.

15) Related Concepts People Confuse With Estate Tax

Donor’s tax: applies to transfers made during lifetime (also commonly a flat 6% of net gifts). A lifetime transfer may reduce what remains in the estate but can trigger donor’s tax.
Capital gains tax / withholding taxes: apply when heirs sell inherited property after transfer, depending on the transaction type.
Estate as a taxpayer: after death, an estate can earn income (e.g., rent). The estate may need to file income tax returns while under settlement.

16) Key Takeaways

Estate tax attaches at death and is generally 6% of the net estate.
The main compliance burdens are inventory, valuation, and documentation.
The standard deadline is typically one (1) year from death, with limited and conditional relief mechanisms.
Transfers of land, shares, and bank assets commonly require BIR clearance/eCAR, so estate tax compliance often becomes unavoidable in practice.