Estate Tax Payment for Deceased Owners in the Philippines A Comprehensive Legal Guide (updated to July 2025)
1. Legal Foundations
| Statute / Issuance | Key Points |
|---|---|
| National Internal Revenue Code (NIRC), 1997 as last amended by Republic Act 10963 (“TRAIN Law,” eff. 1 Jan 2018) | Unified estate-tax rate of 6 % of the net estate, removed the graduated bracket. |
| Revenue Regulations (RR) 12-2018 & RR 17-2018 | Implementing rules for the TRAIN amendments; updated BIR Form 1801 (“Estate Tax Return”). |
| Republic Act 11213 (Estate-Tax Amnesty Act, 2019) and its extension laws RA 11569 (2021) & RA 11956 (2023) plus RRs 6-2023 & 17-2023 | Gave heirs a one-time option to pay 6 % on the net undeclared estate of decedents who died on or before 31 Dec 2021 with deadline twice extended; final cut-off 14 June 2025. |
| Civil Code (Book III, Succession) | Delineates heirs’ rights, executors’ duties, extrajudicial vs. judicial settlement. |
| Land Registration Act 496 & PD 1529 | Require Bureau of Internal Revenue (BIR) Certificate Authorizing Registration (CAR) before Registry of Deeds (ROD) can transfer real-property titles. |
2. What Is the Estate Tax?
The estate tax is a transfer tax imposed on the right of a decedent to transmit property to heirs or beneficiaries, distinct from inheritance tax (on heirs) and donor’s tax (on inter vivos gifts). Liability arises at the moment of death, but filing/payment obligations rest on:
- Executor/Administrator (if estate is under probate); or
- Legal heirs (if settled extrajudicially).
3. Scope of Taxable Estate
| Decedent Status | Assets Included |
|---|---|
| Resident Citizen | Worldwide property (real, personal, tangible, intangible). |
| Non-resident Citizen / Resident Alien | All property within the Philippines + Philippine-situs intangibles (shares in PH corps, bank deposits, etc.). |
| Non-resident Alien | Only property situated in the Philippines minus “reciprocity-exempt” intangibles (e.g., bank deposits, shares) if the decedent’s country grants a similar exemption to Filipinos. |
4. Tax Rate & Basic Formula
Estate Tax Due = 6 % × (Net Estate)
Net Estate = Gross Estate – Allowable Deductions
5. Gross Estate Components (Typical)
- Real property: Land, buildings, condominium units.
- Personal property: Cash, bank deposits, investments, vehicles, jewelry, business interests.
- Transfer value of certain life-insurance proceeds (if beneficiary is estate or revocable).
- Accruals: Accrued income, unpaid dividends, claims receivable.
Note: Gross estate uses fair market value (FMV) as of date of death: • Real property – higher of zonal value or BIR-certified FMV; • Shares – book value (close corporation) or quoted price (listed).
6. Allowable Deductions (TRAIN-adjusted)
| Deduction | Ceiling / Notes |
|---|---|
| Standard Deduction | ₱ 5 million (automatic, no substantiation needed). |
| Family Home | Up to ₱ 10 million FMV, if previously declared as such and still family‐occupied. |
| Funeral Expenses | Actual up to the lesser of ₱ 200,000 or 5 % of gross estate. |
| Medical Expenses | Actual expenses incurred within one year prior to death, up to ₱ 500,000. |
| Claims Against Estate | Valid, enforceable debts of decedent, duly notarized and supported. |
| Losses | Casualty losses during settlement period, not compensated by insurance. |
| Transfers for Public Use | Donations mortis causa to government or accredited institutions. |
| Net Share of Surviving Spouse | For conjugal/ACP property: deduct 50 % of exclusive/common net estate attributable to surviving spouse. |
| Retirement Benefits/SSS/GSIS | Exempt under special laws. |
7. Compliance Timelines
| Obligation | Deadline (may extend on “valid cause”) |
|---|---|
| Notice of Death to Revenue District Office (RDO) | Within 2 months after death if gross estate > ₱ 5 million or composed of registrable property. |
| Estate Tax Return (BIR Form 1801) & Payment | Within 1 year from date of death (may apply once for up to 30-day extension to file and up to 5-year installment schedule for payment, subject to BIR approval). |
| Application for CAR/eCAR | After payment, include original tax receipt; CAR is prerequisite to transfer titles. |
8. Documentary Requirements (Core Set)
- BIR Form 1801 (3 copies).
- Certified True Copy of Death Certificate.
- TIN of decedent and each heir (secure “ETIN” for new taxpayers).
- Affidavit of Self-Adjudication / Extrajudicial Settlement or Letters Testamentary/Administration (if under probate).
- Certified True Copies of titles, tax declarations, OR–CR for vehicles, stock certificates, latest bank statements.
- Proof of Deductions: Official receipts for funeral/medical, bank certifications of debts, etc.
- “Certification of Barangay Captain” for family-home claim.
- Duly-computed Net-Estate Schedule with supporting appraisals.
- Official Receipt/BIR Form 0605 for documentary-stamp tax (DST) on extrajudicial deeds.
The RDO may require a Tax Clearance Certificate, eFPS acknowledgment, or additional forms (e.g., BIR Form 1904 for ETIN).
9. Step-by-Step Processing Flow
| Stage | Responsible Party | Key Actions |
|---|---|---|
| A. Preliminary | Heirs/Executor | Obtain death cert; list assets & liabilities; get TIN for decedent (via BIR eREG or RDO). |
| B. Asset Valuation | Licensed Appraiser / RDO Zonal Valuation Division | Secure FMV certifications for each property; get latest stock prices; audit bank balances. |
| C. Return Preparation | CPA/Tax Counsel | Prepare schedules of assets, deductions, surviving-spouse share, and Net Estate; fill Form 1801. |
| D. Filing & Payment | Executor/Heirs | File at decedent’s place of domicile RDO; pay via Authorized Agent Banks (AABs) or BIR eFPS/ePay (G-Cash/PayMaya). |
| E. Securing CAR | Executor/Heirs | Submit tax receipt + “One-Time Transaction” (ONETT) checklist; BIR issues CAR or eCAR (per asset) within 20 working days if complete. |
| F. Transfer of Titles | Heirs | Present CAR to Registry of Deeds, LTO (for vehicles), or corporate secretary (for shares); pay registration fees and annotate new owners. |
10. Payment Flexibilities
Cash or Manager’s Check in full.
Installment Plan:
- Allowed when BIR finds “undue hardship”; heirs execute promissory note & post bond equal to tax due.
- Maximum term 5 years (resident estate) or 2 years (non-resident estate); interest at 20 % p.a. on unpaid balance.
Partial disposition of estate (sale/partition) – BIR may issue “CAR on portion” provided proportionate tax is prepaid.
11. Penalties for Non-Compliance
| Violation | Add-ons |
|---|---|
| Late filing/payment | 25 % surcharge plus 20 % p.a. interest (or prevailing legal rate) on unpaid tax. |
| Willful neglect/fraud | 50 % surcharge + criminal prosecution. |
| Failure to file Notice of Death | Administrative fine up to ₱ 20,000. |
12. Estate-Tax Amnesty (Status as of July 2025)
- Coverage: Estates of persons who died on or before 31 Dec 2021 with unpaid or undeclared estate taxes.
- Rate: 6 % of net taxable estate or minimum ₱ 5,000 per estate.
- Filing venue: RDO where estate is settled; use BIR Form 2118-E.
- Deadline: 14 June 2025 (statutory deadline under RA 11956). No further extension currently legislated.
- Effect: Immunity from civil, criminal, and administrative penalties; BIR issues CAR-EA.
- Heirs must attach ETAM (Estate Tax Amnesty Return), proof of relationship, & sworn “Estate Declaration.”
13. Special Situations & Practical Tips
| Scenario | Key Guidance |
|---|---|
| Multiple RDOs (assets in different regions) | File in primary RDO (domicile) and request inter-office coordination; CARs can be routed internally. |
| Digital Assets / Cryptocurrency | Include wallet-based FMV in PHP using reputable exchange rate on date of death; treat as intangible personal property. |
| Agricultural & Heritage Properties | Secure DAR/LRA clearances; heritage assets may need National Museum valuation. |
| Pending Foreign Probate | Philippine executor may appoint local administrator; BIR accepts foreign letters testamentary plus Philippine consular authentication. |
| Trust-held Property | If trust is revocable or decedent retained control, corpus is includible in gross estate. |
| Debts to Heirs | Loans owing to an heir are deductible only if supported by notarized debt instrument and duly reported in the heir’s ITR/SFS. |
| Estate Liquidity Problems | Consider: bank-loan bridge finance; sale of personalty; petition for installment; or avail of amnesty (if qualified). |
14. Post-CAR Compliance
- Documentary-Stamp Tax (DST): Extra-judicial deeds = ₱ 15 per P 1,000 of par value for shares; ₱ 1.50 per P 200 for realty conveyances.
- Capital-Gains Tax (CGT): Sale by estate or heirs after transfer subject to CGT (or graduated income tax for dealer).
- Local Transfer Taxes: Cities/municipalities may impose 0.5 % – 0.75 % on FMV upon title transfer (must present CAR).
- Income Tax Returns of Estate: If settlement > 2 years, estate becomes a separate taxpayer (BIR Form 1701-A for calendar year).
15. Frequently Asked Questions
Can heirs divide property before paying estate tax?
They may execute a conditional extrajudicial settlement, but ROD will not register transfers until CAR is presented.
Does family-home deduction require TCT annotation?
No; actual use as family dwelling suffices, but a Barangay Certification is required.
Are bank deposits frozen?
Yes, under BIR RMO 61-2016; banks may release – up to ₱ 20,000 for funeral/medical – upon BIR clearance, or unfreeze fully after CAR is shown.
Is there VAT on estate transmission?
No. Estate settlement is a transfer by operation of law, exempt from VAT and percentage tax.
Can an heir renounce inheritance to avoid estate tax?
Renunciation in favor of co-heirs is treated as a donation and may trigger donor’s tax; renunciation in favor of outsiders is subject to both estate and donor’s taxes.
16. Practical Checklist for Heirs / Practitioners
- Within 2 months: File Notice of Death (Form 1801-Annex “Notification”).
- Inventory & Valuation: Get BIR zonal values, appraisals, bank certificates.
- Identify deductions with receipts/affidavits.
- Prepare and file Estate Tax Return (Form 1801) within 1 year; pay or secure installment approval.
- Obtain CAR/eCAR for every registrable asset.
- Transfer titles at ROD/LTO/SEC.
- File final return for estate if administration exceeds 2 years.
- Close estate via distribution receipts and court confirmation (if judicial).
17. Conclusion
Settling a Philippine estate tax-compliantly now revolves around a single 6 % net-estate levy, streamlined documentary proof, and digital payment channels. While the Estate-Tax Amnesty offered a powerful relief window (closing June 14, 2025), estates outside its coverage must still heed the one-year statutory filing deadline to avoid surcharges and interest. Careful asset inventory, timely filing, and diligent coordination with the BIR and registries ensure heirs can lawfully transfer ownership and preserve property values. Professional guidance—CPA appraisal, tax counsel, and where probate is needed, an estate lawyer—remains highly advisable, especially for estates with cross-border assets, liquidity constraints, or disputed succession.