I. Introduction

Inheritance in the Philippines is governed primarily by the Civil Code (succession rules) and the National Internal Revenue Code or NIRC (estate tax rules), both as amended by various laws such as the TRAIN Law (RA 10963).

“Inheritance by representation” is a Civil Code concept that determines who steps into the place of a deceased, incapacitated, or disinherited heir and how the estate is divided per stirpes (by branch).

Estate tax, on the other hand, is a tax on the privilege of transmitting the estate of a decedent, not a tax on the individual inheritance of heirs. The intersection of these two concepts—representation and estate tax—often causes confusion:

Does a representative pay more tax than a direct heir?
Does representation create extra taxable transfers?
Who is actually liable to the BIR?

This article explains everything essential on estate tax liability where heirs inherit by representation under Philippine law.

II. Concept of Inheritance by Representation

A. Legal Basis and Nature

Inheritance by representation is governed by Articles 970–980 of the Civil Code of the Philippines.

In simple terms, representation is a right created by law by which the descendants (or, in some cases, nephews/nieces) step into the place of another heir who:

Predeceased the decedent (died earlier),
Is incapacitated to inherit, or
Has been disinherited (in certain contexts).

The representative is considered to occupy the same “place” and “degree” as the person represented, but only for purposes of succession and computation of shares, not for everything else in law.

B. Where Representation Is Allowed

Direct descending line
- Children of the decedent are compulsory heirs.
- If a child is already dead, incapacitated, or disinherited, his/her descendants (grandchildren, great-grandchildren) may represent him/her.
- This is the classic case: grandchildren inheriting from a grandparent because their parent already died.
Collateral line (brothers and sisters)
- Representation is allowed only in favor of the children of brothers and sisters of the decedent (i.e., nephews and nieces).
- This applies in intestate succession (no will) and when the law calls them.
It never takes place in the ascending line.
- Parents or grandparents do not represent their children/grandchildren.
In testate succession (with a will)
- Representation may operate if the testator’s dispositions are compatible with representation and the Civil Code allows such operation, particularly for legitime shares and intestate portions.

C. Representation and the Mode of Sharing: Per Stirpes

When representation occurs, the estate in that line is divided by branch (per stirpes), not per capita.

Example:

A dies, leaving three children: B, C, and D.
B is already dead but left two children: E and F.

Without representation, only C and D would inherit. With representation:

C: 1/3
D: 1/3
B’s branch: 1/3, shared between E and F → E: 1/6, F: 1/6

The tax consequences are tied to the shares actually received, but the tax itself is computed on the net estate as a whole, not per heir.

III. Estate Tax Framework in the Philippines

A. Nature of the Estate Tax

Estate tax is imposed on the net estate of the decedent, not on each heir’s inheritance.

Key points:

The taxpayer is the estate of the decedent (not the heirs individually), under the NIRC (Title III – Estate and Donor’s Taxes).
The tax arises at the moment of death.
The estate tax is a one-time tax on the transfer of the decedent’s estate to the heirs.

B. Current General Features (Post-TRAIN Law)

(Always check current BIR rules for exact figures and details, but conceptually:)

Flat rate
- Estate tax rate: typically 6% of the net estate.
Net estate
- Gross estate includes:
  - Real property (land, buildings)
  - Personal property (cash, bank deposits, vehicles, shares, etc.)
  - Transfers in contemplation of death, revocable transfers, etc.
- Less allowable deductions, which may include:
  - Standard deduction (fixed amount deducted from the gross estate)
  - Family home deduction (up to a prescribed cap)
  - Claims against the estate (valid debts)
  - Certain expenses (funeral, judicial, etc.), subject to limits
- Net estate = Gross estate – allowable deductions
- The 6% is applied on this net figure.
Estate tax vs. other taxes
- Estate tax is different from:
  - Donor’s tax (tax on inter vivos donations)
  - Capital gains tax (e.g., on sale of capital assets)
  - Documentary stamp tax (DST)

C. Filing and Payment

Estate Tax Return
- Must be filed with the BIR within the period prescribed by law (commonly one year from death, as amended by TRAIN, subject to possible extensions in meritorious cases).
- Filed by the executor/administrator, or if none, by the heirs themselves.
Estate Tax Clearance / Certificate Authorizing Registration (CAR)
- To transfer titles (e.g., land, condo, shares) to the heirs, the BIR typically issues a CAR after payment of estate tax and submission of requirements.
- Without CAR, the Registry of Deeds or corporate secretary usually cannot legally transfer titles or shares to heirs.

IV. Intersection: Representation and Estate Tax

A. Does Representation Create a Separate Taxable Event?

No.

Representation does not create an extra layer of taxation. The estate tax is levied on the decedent’s estate, not on the person being represented nor on the representative separately.

When a grandchild represents a predeceased parent, the estate of the grandparent is what is taxed—not the estate of the parent.
There is only one estate tax: that of the decedent whose property is being transmitted (e.g., the grandparent).

B. Impact on the Computation of the Net Estate

Representation does not change the computation of the net estate.

The steps remain:

Identify all properties composing the decedent’s gross estate.
Deduct allowable expenses and liabilities.
Arrive at net estate → compute estate tax (e.g., 6%).

Representation only matters at the last step: how the remaining estate is distributed to the heirs.

C. Impact on the Allocation of Tax Burden Among Heirs

While the legal incidence of the estate tax is on the estate, in practice, the heirs shoulder the tax as a condition for getting their shares.

In a representation scenario:

The branch represented (e.g., grandchildren of a predeceased child) will typically bear the portion of the estate tax corresponding to their share in the estate.
But this is largely a civil/contractual issue among heirs and the estate, not an issue of separate tax liability per representative under the NIRC.

Example (simplified):

Net estate: ₱12 million
Estate tax (6%): ₱720,000
Heirs:
- C: 1/3 (₱4M)
- D: 1/3 (₱4M)
- B’s branch: 1/3 (₱4M; E and F get ₱2M each)

The estate (funded by the heirs) must pay ₱720,000. Often, each branch may be expected to shoulder its pro-rata share of the tax:

C: 1/3 of ₱720K
D: 1/3 of ₱720K
B’s branch (E+F): 1/3 of ₱720K

The law doesn’t prescribe the internal sharing, but all heirs are interested parties because the estate cannot be distributed without settling the tax.

V. Legal Liability for Estate Tax

A. Primary Liability: The Estate / Executor / Administrator

Under the NIRC:

The estate is the taxpayer.
The executor or administrator is generally responsible for:
- Filing the estate tax return;
- Paying the estate tax before distributing the estate.

He is empowered to sell estate assets or use estate funds to pay the tax.

B. Subsidiary / Personal Liability of Heirs

If the estate is settled extrajudicially (no administrator, no formal probate) or if the estate is partially distributed before full payment of tax:

The BIR can hold the heirs personally liable for the estate tax, but only up to the value of what they actually received from the estate.
This principle applies equally to heirs who inherit by representation.

So, a grandchild who represents a predeceased child is not liable beyond the value of his/her inheritance, but can be pursued by the BIR for the proportionate estate tax corresponding to that share if the tax was not settled at the estate level.

C. Solidary vs. Pro Rata Liability

As far as the BIR is concerned:

It can enforce its lien against the estate properties and, under certain circumstances, against heirs who received property without the estate tax having been fully paid.
Among the heirs themselves, internal allocation may be agreed upon (e.g., each pays based on his/her share).

Representation does not give the BIR more rights; it simply identifies additional heirs.

VI. Practical Issues in Representation and Estate Tax

A. Documentation and Proof of Representation

Heirs who inherit by representation must establish:

Their filial or collateral relationship to the decedent;
That the person they are representing (e.g., their parent or uncle/aunt):
- Predeceased the decedent, or
- Was incapacitated to inherit, or
- Was disinherited (where representation is allowed).

Common documents:

Birth certificates (to prove lineage),
Death certificates,
Marriage certificates (to show legitimacy or relation),
Court or notarial documents (extrajudicial settlement, partition agreement, etc.).

The BIR usually requires such documents when:

Validating the list of heirs declared in the estate tax return;
Issuing the CAR and ensuring correct division of properties.

B. Effect on Compulsory Heirs and Legitimes

The Civil Code protects compulsory heirs by reserving a portion called the legitime.

When representation occurs:

The representative or representatives collectively receive the legitime of the person represented.
Therefore, the legitime of other compulsory heirs (e.g., surviving spouse, other children) must be recomputed considering the presence of representatives.

For estate tax purposes:

The size and number of legitimes do not change the net estate, but they affect who gets what, which is important when allocating the tax burden in practice.

VII. Renunciation, Waiver, and Donor’s Tax Issues

Representation can interact with renunciation of inheritance, which may trigger donor’s tax in some situations.

A. Simple (Pure) Renunciation

If an heir or representative purely and simply renounces his/her inheritance in favor of the co-heirs generally, and the share is redistributed according to law, this is usually treated as no donor’s tax event, and the transfer remains part of the original estate transmission.

Example:

E (grandchild by representation) waives his share without designating a specific person, allowing the law to redistribute it among other heirs.
This is generally seen as part of the original inheritance process, not a separate donation.

B. Renunciation in Favor of a Specific Heir

If the renunciation is in favor of specific persons (e.g., “I give my share to my sister F”), this can be treated as a donation by E to F, subject to donor’s tax, separate from the estate tax already due on the estate of the original decedent.

So, in a representation scenario:

A representative who assigns/waives his share in favor of another specific heir may trigger donor’s tax for that representative.

C. Representation and Multiple Tax Events

It’s important to distinguish:

Estate tax – on the estate of the original decedent (e.g., grandparent).
Donor’s tax – on a subsequent inter vivos transfer (e.g., if the representative donates or renounces in favor of a specific person).
Estate tax of the representative – if the representative later dies still owning inherited properties.

Representation does not, by itself, create multiple tax events, but the civil acts of heirs after receiving their shares can.

VIII. Examples

Example 1: Classic Grandchild by Representation

Lolo Juan dies in 2024, with a net estate of ₱10 million.
He had three children: Ana, Ben, and Carlo.
Ben died in 2020, leaving two children: Diana and Eric.

Step 1: Compute estate tax

Assuming 6% of ₱10M → ₱600,000 estate tax.

Step 2: Determine shares (intestate, no will; simple scenario):

Branches: Ana, Ben’s branch, Carlo → 1/3 each.
Ana: ₱3.33M
Carlo: ₱3.33M
Ben’s branch: ₱3.33M, divided between Diana and Eric → ₱1.665M each.

Tax liability

Estate tax of ₱600K is payable by Juan’s estate.
Ana, Carlo, Diana, and Eric may agree to shoulder tax in proportion to their shares.
Diana and Eric’s status as representatives does not change the estate tax rate or base—it only gives them the right to receive Ben’s branch share.

Example 2: Nephews and Nieces as Representatives

Maria dies single, no children, no parents, but with siblings:
- Brother Pedro (alive),
- Sister Laura (predeceased), leaving children Nino and Nina.

By representation in the collateral line:

Pedro: 1/2 of the estate
Laura’s branch: 1/2, split between Nino and Nina

Estate tax is still on Maria’s estate as a whole. Nino and Nina are liable along with Pedro only up to the value of what they receive if the tax is not paid at the estate level.

IX. Special Contexts: Estate Tax Amnesty and Representation

Laws granting estate tax amnesty (e.g., for estates of persons who died on or before certain dates) operate on the estate of the decedent, not on the mode of succession.

Heirs by representation are simply among those who can avail of the amnesty on behalf of the estate (if requirements are met).
Representation does not block or enlarge the amnesty; it merely identifies who may participate in the settlement.

X. Key Takeaways

Representation is a Civil Code concept, not a tax concept.
- It defines who inherits in place of another heir and how shares are divided per stirpes.
Estate tax is imposed on the estate of the decedent, not on each heir individually.
- Representation does not create a separate estate tax.
Heirs by representation have the same general tax position as other heirs:
- The estate is primarily liable;
- Heirs may be held liable up to the value of what they received if the estate tax is unpaid.
Internal sharing of tax among heirs is a matter of agreement and equity, not of tax law.
- Representation normally guides how this sharing is computed (by branch).
Renunciation and assignments of inherited shares can create donor’s tax issues.
- Pure renunciation in favor of the estate/co-heirs generally is usually not donor-taxable;
- Renunciation in favor of a specific person may be treated as a donation.
Procedural compliance is crucial:
- Correct listing of heirs (including representatives),
- Proper computation of shares for CAR issuance,
- Filing the estate tax return within the statutory period.

XI. Practical Advice

Always map out the family tree to see where representation applies.
Determine early whether there will be testate or intestate succession and who the compulsory heirs are.
For estates involving representation, draft a clear extrajudicial settlement or partition agreement, stating:
- Which heirs are representing whom,
- Their respective shares,
- How the estate tax and incidental expenses will be shared.
Consult a Philippine lawyer or tax professional to deal with:
- Complex family structures,
- Overlapping estates (multiple deaths in the same line),
- Use of estate tax amnesty (if applicable),
- Possible donor’s tax exposure in renunciations and transfers.

This framework should equip you with a comprehensive understanding of how estate tax liability interacts with inheritance by representation in Philippine law and practice.