Estate Tax Payment & Heirs Waiver in the Philippines
A comprehensive legal‑practice guide (2025 edition)
1. Overview
When a person dies owning property in the Philippines, two parallel legal tracks begin immediately:
| Track | Purpose | Key Government Office |
|---|---|---|
| Settlement of the estate (probate or extrajudicial) | Determines who ultimately owns the decedent’s assets | Court (if judicial) or the heirs themselves (if extrajudicial) |
| Estate‑tax administration | Collects the State’s share of the property left behind | Bureau of Internal Revenue (BIR) |
Both tracks interact when an heir waives or renounces his/her inheritance, because doing so may change the estate‑tax base and can itself trigger donor’s tax. Below is everything a practitioner—or an heir—needs to navigate the rules with confidence.
2. Statutory Framework
| Law / Regulation | What it Covers |
|---|---|
| National Internal Revenue Code (NIRC), as amended by the TRAIN Law (RA 10963, 2018) | Estate‑tax rate, deductions, filing deadlines, penalties |
| Civil Code (Arts. 774 – 1101) | Succession, acceptance and repudiation (waiver) of inheritance |
| RA 11213 (Estate‑Tax Amnesty Act, 2019) + extensions RA 11569 (2021) and RA 11956 (2023) | Optional 6 % amnesty on estates of decedents who died on or before 15 June 2021; final deadline 14 June 2025 |
| BIR Revenue Regulations (RR) No. 12‑18, 6‑2019, 17‑2021, 6‑2023, etc. | Implementing estate‑tax and amnesty procedures |
| Rule 74, Rules of Court | Extrajudicial settlement when there is no will and no minor/incapacitated heir |
| BIR Rulings & SEC Opinions | Interpret donor’s‑tax impact of waivers, bond requirements, eCAR issuance |
3. What Belongs to the “Gross Estate”
- Real property in the Philippines (always taxable, even if owner was non‑resident alien).
- Tangible personalty located in the Philippines (vehicles, jewelry).
- Intangible personalty (bank deposits, shares, receivables).
- Gifts made in contemplation of death (within 1 year before death).
- Transfers with retained interest (e.g., revocable trusts).
Tip: If the decedent was a non‑resident citizen or alien, only Philippine‑situs assets enter the gross estate; otherwise, worldwide assets are counted.
4. Net‑Estate Deductions (post‑TRAIN, deaths on or after 1 Jan 2018)
| Deduction | Statutory Cap |
|---|---|
| Standard deduction | ₱ 5 million (no substantiation) |
| Family‑home deduction | Lower of FMV or ₱ 10 million |
| Funeral expenses | Actual up to 5 % of gross estate, max ₱ 200 k |
| Medical expenses (within 1 year prior to death) | Actual up to ₱ 500 k |
| Claims against the estate | Valid, notarized liabilities outstanding at death |
| Share of surviving spouse | Conjugal/ACP net share deducted |
| Vanishing deduction | Property previously taxed by donor’s/estate tax (5‑100 %) |
5. Estate‑Tax Rate & Timing
| Date of Death | Applicable Rate | Return Due |
|---|---|---|
| On/after 1 Jan 2018 | Flat 6 % of the net estate | 1 year from death (may extend filing/payment for “hardship,” max 5 years payment, 2‑year filing extension) |
| Before 2018 | Graduated schedule (5 %–20 %) | Same one‑year rule but now mostly under amnesty option |
Penalties for late payment: 25 % surcharge (or 50 % for willful neglect), plus interest (6 % per annum, annually adjustable) on deficiency, plus compromise penalties.
6. Filing Mechanics
Secure an Estate TIN (one per estate).
BIR Form 1801 (Estate‑Tax Return) with attachments:
- Death certificate, certified list of heirs
- “Notice of Death” for gross estate > ₱ 5 million or if estate includes registered/registrable property
- Certified true copies of titles, tax declarations, CARs for prior transfers
- Registered Deed of Extrajudicial Settlement or court‑approved partition (if any)
- Affidavits for deductions (funeral, medical, debts)
Payment channels: Authorized Agent Banks, BIR Revenue Collection Officers, or electronic FPS (GCash, Maya) for ≤ ₱ 50 k.
Installment: Allowed if > ₱ 2 million and insufficient cash; bond or mortgage may be required.
BIR examination & appraisal → Issuance of eCAR (Certificate Authorizing Registration) per property class.
Transfer with Registries/Agencies:
- Registry of Deeds/LRA – real property
- Land Transportation Office – vehicles
- Stock Transfer Agent/SEC – shares
- Banks – release of deposits (with CAR and BIR clearance)
7. Estate‑Tax Amnesty (2019 – 2025 Window)
| Parameter | Requirement |
|---|---|
| Coverage | Estates of decedents who died on or before 15 June 2021 and with unpaid/deficient estate tax |
| Rate | 6 % of the net taxable estate or 6 % of FMV for each property if you cannot determine deductions/values |
| Minimum tax | None (even zero estate may pay ₱ 0; BIR still issues CAR) |
| Deadline | 14 June 2025 (hard cut‑off, no further extension anticipated) |
| Return | BIR Form ESTATE TAX AMNESTY RETURN (ETAR) + Sworn ETAR Oath |
| Effect | Immunity from civil, criminal, administrative liabilities and no audit of prior years’ returns |
| Non‑covered | Delinquent ― but already assessed/contested estates; property involved in pending cases for tax evasion, money‑laundering, etc. |
Amnesty does not waive donor’s or CGT arising from later transfers among heirs.
8. Extrajudicial Settlement (EJS) & Publication Steps
- Check prerequisites: No will (or already probated), no minor/incapacitated heir, heirs are in full agreement.
- Draft a “Deed of Extrajudicial Settlement of Estate with Waiver/Partition.”
- Bond: Optional except where personal property > ₱ 10,000 and there is no inventory; practice is to waive bond by unanimous agreement if registry accepts.
- Notarize the deed.
- Publish in a newspaper of general circulation once a week for 3 consecutive weeks (Rule 74 §1).
- File with the BIR together with estate‑tax return.
- Register with Registry of Deeds/SEC/LTO/Banks as applicable after eCAR issuance.
9. Heirs Waiver / Renunciation of Inheritance
| Mode of Waiver (Civil Code) | In Favor Of | Tax Consequence | BIR Documentary Requirements |
|---|---|---|---|
| Pure repudiation (Art. 1051) – heir simply says “I reject” without naming a beneficiary | Estate/Common Mass | No donor’s tax; inheritance is redistributed pro rata among remaining heirs as if waiving heir pre‑deceased | Written waiver or “Affidavit of Repudiation,” notarized; attach to EJS/probate pleadings |
| Renunciation in favor of a specific co‑heir | Named heir/s | Subject to donor’s tax (treated as donation inter vivos) within 30 days after execution; rates under TRAIN (6 % – 15 %) | BIR Form 1800 (donor’s tax return), FMV appraisal, Deed of Donation/Assignment, TIN of donor & donee |
| Assignment or sale to third party | Non‑heir | Capital‑gains tax (if real prop) or income tax/VAT (if ordinary asset) + DST on conveyance; donor’s tax does not apply because it is onerous | Deed of Sale/Assignment, CAR for CGT/DST, tax clearances |
| Post‑distribution swapping of shares (clarifies title after estate settled) | Co‑heirs | May be treated as exchange/partition (no donor’s tax) if values are equivalent; otherwise donor’s tax on net benefit | Deed of Partition/Exchange, appraisal |
Practice pointer: The BIR will look at “in favor of” language. Use “I hereby repudiate my share” rather than “I hereby waive in favor of my sister Ana” if you want to avoid donor’s tax.
Documentary‑stamp tax (DST): ₱ 15.00 for every ₱ 1,000 of FMV on deeds of donation/assignment; none on pure repudiation.
10. Timing interplay—Which should happen first?
| Sequence | Pros | Cons |
|---|---|---|
| Pay estate tax first, then execute waiver | Ensures net estate values are final before donation computation | The donor’s tax return becomes a separate filing (extra compliance cost) |
| Execute waiver before estate‑tax filing | Estate‑tax return uses already redistributed shares; may shrink donor’s‑tax base | If waiver is in favor of specific heir, donor’s tax becomes due before the estate tax (cash‑flow hit) |
Choose the sequence based on cash flow, number of assets, and whether heirs want to avoid donor’s‑tax exposure.
11. Step‑by‑Step Checklist (Death on or after 2018, with one heir waiving to another)
| No. | Action | Deadline (normal) | Form |
|---|---|---|---|
| 1 | Secure death certificate; meet heirs; decide on EJS & waiver wording | Immediately | PSA Form 102 |
| 2 | Apply for Estate TIN & “Notice of Death” if gross > ₱ 5 M | Within 2 months (BIR practice) | BIR TIN application |
| 3 | Draft & notarize Deed of EJS with Waiver | — | Notarial document |
| 4 | Publish EJS (3 weeks) | Start ASAP | Proof of publication |
| 5 | File donor’s tax return (if waiver in favor of Ana) | 30 days after deed | BIR Form 1800, pay tax |
| 6 | File estate‑tax return – BIR Form 1801 with attachments | 12 months from death | Pay or arrange installment |
| 7 | Secure eCAR per asset | Within 2‑8 weeks after tax payment | — |
| 8 | Register deeds with Registry of Deeds/SEC/LTO, update titles | Within 60 days of eCAR (ROD rule) | Transfer certificates |
| 9 | File amended tax returns if BIR issues deficiency assessment | Within 30 days of notice | — |
12. Penalties & Defenses
- Surcharge: 25 % for late filing/payment; 50 % for false return.
- Interest: 6 % p.a. (or the interest rate in force) on unpaid amount until fully paid.
- Compromise penalties: set by BIR table (₱ 10 k – ₱ 50 k).
- Criminal liability: up to ₱ 10 million fine + imprisonment for willful evasion (NIRC §255).
- Possible defenses: Force majeure, prolonged litigation, substantial‑compliance doctrine (e.g., wrong venue but timely filing), amnesty availment.
13. Frequently‑Asked Questions
Can I combine the estate‑tax amnesty with a waiver in favor of a sibling? Yes, but the waiver is still a donation subject to donor’s tax; the amnesty only covers the estate‑tax deficiency.
What if an heir is abroad and cannot sign the waiver? Execute a Special Power of Attorney (SPA) authenticated by the Philippine Consulate; attach to the deed.
Does a waiver need publication? Publication is for the EJS; the specific waiver contained therein is covered by the same notice.
Is the BIR eCAR transferrable? No. If property is sold after transfer to heirs, a new CAR for capital‑gains (or donor’s) tax is required.
What if the estate has no cash to pay the 6 %? Apply for installment plan (up to 5 years) or request BIR to authorize withdrawal of the decedent’s bank deposit solely for estate‑tax payment.
14. Practical Drafting Tips
- Use “renounce, repudiate and quitclaim without designating a favored heir” language to avoid donor’s tax.
- Itemize each asset’s FMV (zonal valuation or fair‑market value per latest tax declaration) in an Annex “A” to the EJS.
- For real property, secure updated Tax Declaration and Real‑Property Tax clearance before BIR filing to avoid processing delays.
- Keep certified copies of every notarized page—Registry of Deeds will not accept photocopies when transferring titles.
15. Conclusion
Paying estate tax in the Philippines is straightforward if you organize early: gather documents, decide on the mode of settlement, and understand how a waiver changes both ownership and tax liabilities. Remember these cardinal principles:
- Estate tax first, donor’s tax second—unless you structure the waiver as a pure repudiation.
- Amnesty is a limited‑time privilege: lock in the 6 % flat rate before 14 June 2025.
- Language matters. A single phrase “in favor of” can cost thousands in donor’s tax.
Handled properly, the estate passes cleanly, heirs avoid personal liability, and property titles reflect the true intent of the family—all while staying on the right side of the BIR.
Prepared July 17 2025 by ChatGPT (o3) for educational purposes only; consult a Philippine tax lawyer or CPA for case‑specific advice.