Estate Tax Payment Process for a Deceased Relative (Philippine Legal Framework and Practical Guide)
1. Overview — Why Estate Tax Matters
When a Filipino (whether citizen or resident alien) dies, all property in the Philippines and all property abroad (if the decedent was a Philippine resident or citizen) temporarily forms one taxable entity: “the estate.” Before that property can lawfully pass to heirs or beneficiaries, the estate itself must file an estate-tax return and pay estate tax to the Bureau of Internal Revenue (BIR). No transfer—whether of land title, bank deposit, shares, or motor vehicle—can be registered without the BIR’s Certificate Authorizing Registration (CAR) or eCAR showing the tax has been settled.
2. Governing Law and Key Amendments
| Law / Regulation | Salient Points |
|---|---|
| National Internal Revenue Code (NIRC) of 1997, as amended | §§ 84–97 cover estate taxation. |
| TRAIN Law (RA 10963, 2018) | Replaced graduated rates with one flat 6 % on the net estate; introduced ₱ 5 M standard deduction and up to ₱ 10 M family-home deduction; lowered interest to double the legal interest rate (currently 12 % p.a.). |
| Estate Tax Amnesty Act (RA 11213, 2019) & Extension Act (RA 11956, 2023) | Gives estates of persons who died on or before May 31 2022 a chance to pay a 6 % tax on net undeclared estate (or minimum ₱5,000 per decedent) until 14 June 2025, with waiver of penalties and interest. |
| Revenue Regulations (RR) 12-2018 and subsequent RMCs | Implement electronic filing (eFPS/eBIRForms) and eCAR issuance. |
3. Chronological Checklist
| Timeline | Obligation | Notes |
|---|---|---|
| Within 2 months from death | Notice of Death (Sec. 89, NIRC) | File with the RDO where the decedent was domiciled; required if gross estate > ₱ 20 k (threshold still on the statute, though most estates today exceed it). |
| Within 1 year from death | Estate Tax Return (BIR Form 1801) & Payment | Extensions up to 30 days per BIR approval; for “undue hardship” an installment plan of ≤2 years is available. |
| After payment | Secure eCAR(s) | One eCAR is issued per real property (and per share certificate or vehicle) so that titles can be transferred. |
4. Settlement of the Estate
| Mode | When Allowed | Core Documentary Steps |
|---|---|---|
| Extra-Judicial Settlement (EJS) | • No will or a will already probated • No outstanding debts or all debts paid • All heirs are of legal age (or represented) and agree |
1. Deed of EJS (or Self-Adjudication if only one heir) notarised. 2. Publication in a newspaper of general circulation x 3 consecutive weeks (Rule 74, Rules of Court). |
| Judicial Settlement / Probate | • Will contests, minors’ interests, creditor claims, intra-heir disputes | Probate/intestate proceedings in Regional Trial Court; executor/administrator files estate return. |
5. Computing the Net Estate (Post-TRAIN)
Gross Estate – FMV at date of death of:
- Real property (use higher of zonal value or FMV in tax declaration)
- Tangible personal property (vehicles, jewelry, etc.)
- Intangible personal property (bank accounts, shares, insurance proceeds payable to estate)
- Worldwide assets if resident/citizen; Philippine assets only if non-resident alien (except reciprocity rule for intangible property).
Less: Allowable Deductions
Deduction Ceiling / Remarks Standard Deduction ₱ 5 million (automatic; no substantiation). Family Home Up to ₱ 10 million FMV; excess joins taxable estate. Claims Against Estate Valid, enforceable debts existing at death, duly supported. Unpaid Mortgages / Taxes Documentation required. Transfers for Public Use Charitable/bequest deductions. Vanishing Deduction Property received by decedent within 5 yrs that already paid donor/estate tax (sliding scale 100%→20%). Reciprocal Exemption (intangible) For non-resident decedents if foreign country grants similar exemption to Filipinos. Net Estate × 6 % = Estate Tax
If opting for amnesty: tax = 6 % × (net undeclared estate) or ₱ 5,000, whichever is higher.
6. Filing the Estate Tax Return (BIR Form 1801)
| Major Attachments (typical) |
|---|
| PSA-certified death certificate |
| Taxpayer Identification Number (TIN) of the Estate (via BIR Form 1904) |
| Notice of death (if separate) |
| Panorama spreadsheet of assets & liabilities with supporting docs: land titles (TCT/CCT), tax declarations, latest zonal valuations, bank certifications of balances at death, stock certificates, business interests |
| RDO-validated Deed of EJS / court letters testamentary or administration |
| Certification of Barangay Family Home status (if claiming deduction) |
| Affidavits for claims against the estate |
| Proof of prior donor/estate-tax payment (for vanishing deduction) |
| Sworn Declaration of no outstanding estate debts (if EJS) |
Filing channel: eBIRForms offline package with USB submission, or via eFPS if the estate/executor is already enrolled. Paper filers submit at the Revenue District Office (RDO) together with payment or proof of electronic payment.
7. Modes of Payment
| Method | Where/How |
|---|---|
| Over-the-Counter | Authorized Agent Banks (AABs) of the RDO; cash, manager’s check or debit memo. |
| ePayment Portals | LandBank Link.Biz, DBP PayTax Online, UnionBank, PESONet, GCash, Maya. |
| Installment | Execute a sworn request justifying inability to pay; BIR issues an Authority to Pay Installment; interest accrues but no surcharge if within approved schedule (≤ 2 yrs). |
| Partial Discharge / Release of Lien | Pay estate tax attributed to a specific property; BIR issues CAR limited to that asset so it can be sold and proceeds used to pay remaining tax. |
8. Withdrawal of Bank Deposits
Banks must freeze the decedent’s accounts upon notice of death. Release is allowed only upon submission of:
- BIR Clearance for Withdrawals (BIR Form 1904-Annex or ETWS slip); and
- Proof that estate tax has been paid or sufficient portion deposited to cover it.
Up to ₱ 20,000 may be withdrawn for funeral expenses without prior clearance, but bank must still report it to BIR.
9. Title Transfer & Issuance of eCAR
- Present duly paid Form 1801, eCAR, and Deed of Settlement to the Register of Deeds (for real property), LTO (for vehicles), SEC/stock transfer agent (for shares), or Cooperative.
- Pay local transfer taxes (2 % to LGU, plus registration fees).
- New certificates of title or ownership are issued in the heirs’ names.
Tip: Each real property needs its own eCAR. Compile a complete schedule early to avoid multiple trips to the RDO.
10. Penalties for Late or Erroneous Compliance
| Violation | Surcharge | Interest | Compromise |
|---|---|---|---|
| Late filing or payment | 25 % of tax (or 50 % if due to willful neglect/fraud) | 12 % per annum (may vary with Bangko Sentral rate) | BIR table (can reach ₱ 50 k +) |
| Failure to file Notice of Death | Up to ₱ 10 k compromise | ||
| Failure to preserve records | ₱ 1 k–₱ 10 k &/or imprisonment |
11. Estate Tax Amnesty (until 14 June 2025) — Key Takeaways
- Applies to estates of decedents who died on or before 31 May 2022 and whose estate taxes remain unpaid or undeclared.
- File BIR Form 2118-E plus a simpler Estate Amnesty Return.
- Pay 6 % of the net undeclared estate or ₱ 5,000, whichever is higher.
- Penalties and interest are forgiven.
- CAR issuance is expedited; no need to prove settled debts or publication of EJS.
12. Liability of Heirs and Executor/Administrator
- Estate tax is primarily a charge on the estate, but heirs become personally liable up to the value of property they actually received if tax remains unpaid (Sec. 91, NIRC).
- The executor/administrator is personally liable for negligent failure to pay.
- Prescription: BIR must assess within 3 years from the filing of the return (or from the statutory due date if none filed); assessment can be made within 10 years in case of fraud or failure to file. Collection prescribes in another 5 years after assessment becomes final.
13. Practical Tips & Common Pitfalls
- Start the inventory early. Banks, brokers, and LGUs can take weeks to issue certifications.
- Mind the valuation date. Values must be as of date of death—not appraisal date.
- Check zoning values on the BIR website or request from the RDO; higher of zonal or tax-declaration FMV applies.
- Combine payment and CAR processing in one trip by scheduling an RDO appointment; some RDOs now require online queue numbers.
- EJS vs. Amnesty: If the decedent died after May 31 2022, amnesty is not available—file regular estate return.
- Foreign assets: Include them for residents/citizens; claim tax-paid abroad as foreign tax credit (subject to ceiling).
- Family home documentation: Secure barangay certification and Ocular Inspection Report if RDO requires.
- Digital assets/crypto: Still part of gross estate; obtain wallet statements and convert to PHP at BSP reference rate on date of death.
- Clear small bank accounts quickly using the ₱ 20 k funeral withdrawal rule, but keep receipts as deductible expenses for judicial costs (if any).
14. Conclusion
Philippine estate-tax compliance is no longer the maze it once was, thanks to the flat 6 % rate, hefty standard deductions, and electronic CAR issuance. Still, deadlines are strict, documentation remains voluminous, and penalties accumulate quickly. Executors or heirs who plan early, document thoroughly, and file within one year (or avail of the amnesty where eligible) will find that transferring a loved one’s legacy need not be an ordeal—and can even unlock liquidity to preserve, rather than dissipate, family wealth.