Paying Estate Tax Without an Extrajudicial Settlement in the Philippines
A comprehensive legal primer (updated 17 July 2025)
1. Why this issue even arises
When a Filipino dies, two independent processes are triggered:
| Process | Purpose | Governing law |
|---|---|---|
| Settlement of the estate | Determines who owns the decedent’s assets and how creditors are paid. | Rule 74 (extrajudicial), Rule 73 ff. (probate/judicial) of the Rules of Court; Civil Code Art. 777 ff. |
| Payment of estate tax | Satisfies the State’s tax lien on the net estate (assets – allowable deductions) as of date of death. | National Internal Revenue Code (NIRC) §§ 84‑97, as last amended by RA 10963 (TRAIN, effective 1 Jan 2018) |
These tracks often run together, but they are not legally inseparable. Heirs, an executor, an administrator—or even a buyer of estate property—may pay estate tax without waiting for an Extrajudicial Settlement of Estate (EJS).
2. Core statutory rules you must know
| Topic | Pre‑TRAIN (old rules) | Current rule (TRAIN, 1 Jan 2018 →) |
|---|---|---|
| Estate‑tax rate | Graduated up to 20 % | Flat 6 % on the net estate |
| Basic filing deadline | 6 months from death (extendible) | 1 year from death (extendible) |
| Standard deduction | ₱1 million | ₱5 million + up to ₱10 million family‑home deduction |
| Installments | Allowed if > ₱2 million, with BIR‑accepted surety | Still allowed (NIRC § 91) |
| CAR issuance | Deeds + tax payment required | Same; BIR may issue “conditional CAR” if settlement documents are pending |
3. How the BIR views payment before settlement
BIR rulings, Revenue Regulations 12‑2018, and long‑standing field practice allow any interested person to file BIR Form 1801 and pay even if:
- the heirs are still quarrelling;
- administration or probate is ongoing; or
- documentary requirements (EJS, court order, Affidavit of Self‑Adjudication, etc.) are incomplete.
Why the BIR accepts it: Estate tax is a self‑assessing and time‑bound obligation. Interest (20 % p.a.) and surcharges (25 % – 50 %) run regardless of internal disputes. Allowing early payment stops the clock and secures the government’s priority lien.
Resulting output:
- Official Receipt(s) for the tax.
- Acknowledged—but provisional—Estate Tax Return.
- Often, a Conditional Certificate Authorizing Registration (CAR) stamped “subject to submission of settlement documents.”
Key reminder: A conditional CAR will not be honored by a Registry of Deeds, LTO, bank, or stock transfer agent for change‑of‑title. It merely proves the tax has been paid and freezes penalties.
4. Required documents in lieu of an EJS
Submit as many of the following as you can; field revenue offices have discretion to accept partial sets to facilitate payment:
Death Certificate (PSA‑issued).
TIN of the Estate. (Secure a new TIN if none exists.)
Certified List of Legal Heirs (usually an attorney‑notarized sworn declaration).
List of Estate Assets and Liabilities with values as of date of death:
- Real property: zonal/market values from LGU or BIR.
- Personal property: bank balances, vehicle appraisals, share certificates, etc.
Proof of deductions you wish to claim (funeral receipts, debts notarized before death, etc.).
Valid government IDs and TINs of the declarant(s).
Tip: Bring two sets—one for filing, one for the BIR examiner. A third set may be required if you intend to use the Estate Tax Amnesty (see § 8).
5. Valuation and computation basics
The net estate = gross estate – allowable deductions.
- Gross estate is valued “as of the date of death.”
- Real‑property valuation rule: Use the higher of (a) BIR zonal value or (b) LGU fair market value on that date.
- Shares of stock: book value (closely‑held) or closing price (listed) on date of death.
- Deductions require substantiation; principal ones post‑TRAIN are:
| Deduction | Cap / rule |
|---|---|
| Standard deduction | ₱5 million (no substantiation) |
| Family home | Up to ₱10 million (must be family residence) |
| Judicial expenses | Actual, reasonable, incurred in settlement |
| Debts of the decedent | Valid, enforceable, duly notarized if > ₱250 k |
| Claims against insolvent persons | Provable |
The 6 % tax applies to what remains. Estates ≤ ₱5 million and with a family‑home value ≤ ₱10 million have a zero estate‑tax liability, but filing an Estate Tax Return is still required to obtain a CAR.
6. Estate Tax Amnesty as an alternative (RA 11213, extended by RA 11956 until 14 June 2025)
If the decedent died on or before 31 Dec 2021, heirs may:
File BIR Form 2118‑E (Estate Tax Amnesty Return);
Pay 6 % of the net undeclared estate or the undeclared portion;
Submit only:
- PSA Death Certificate;
- Self‑Executed Estate Declaration (lists heirs, assets, liabilities);
- Proof of payment.
No settlement document is required upfront, and the BIR issues an eCAR deemed sufficient for title transfer—subject to annotation that it was under amnesty. Heirs must, however, eventually register a deed of distribution (EJS or court order) with the Registry of Deeds to update ownership records.
7. Installment payment and withdrawal of bank deposits
- Installment: Allowed if tax due > ₱2 million and BIR approves a “Bond & Installment Agreement.” Tax lien remains on every estate asset until fully paid.
- Bank withdrawals: Under NIRC § 97, banks must require a BIR Release Certificate (or CAR) before releasing funds. If you have paid but lack an EJS, many banks will accept the conditional CAR plus a joint affidavit of heirs.
8. Judicial settlement as a substitute for an EJS
If heirs cannot agree, or there is a minor/heir under guardianship, anyone may file Special Proceedings for settlement (Rule 73). The administrator or executor appointed by the court:
- Obtains TIN for the Estate of X, represented by Y;
- Files and pays estate tax;
- Receives a CAR referencing the probate case number;
- Transfers assets under authority of subsequent Partition Order or Project of Partition approved by the court.
9. Asset‑specific compliance snapshot
| Asset | Without EJS, you can… | But transfer of title ultimately needs… |
|---|---|---|
| Land / Condo title | Secure conditional CAR | Annotated EJS or court order registered with the ROD |
| Bank deposits | Withdraw using CAR + bank’s own indemnity forms | Same set once heirs agree |
| Motor vehicles | LTO accepts CAR + SPA from heirs | Deed of distribution for color‑coded OR/CR |
| Shares of stock | Corporation may record as “heirs of…” upon CAR | Board resolution + deed of assignment per heir |
10. Penalties for late or non‑payment
| Violation | Surcharge | Interest | Compromise |
|---|---|---|---|
| Late filing/payment | 25 % of basic tax | 20 % p.a. until paid | Possible under BIR table |
| Willful neglect | 50 % surcharge | 20 % p.a. | Criminal prosecution possible |
Paying early—even with incomplete documents—locks the surcharge at 0 and caps further interest from accruing.
11. Frequently‑asked questions (quick answers)
Can one heir pay without the others? Yes. The paying heir may later recover the proportional shares from co‑heirs (Civil Code Art. 1318, quasi‑contract “solutio indebiti”).
What if the estate still has debts? Payment of estate tax does not prejudice creditors. The estate tax lien is superior (NIRC § 95). Settlement later determines how creditors are paid.
Does BIR audit valuations filed without an EJS? Yes. The examiner can investigate within 3 years of filing (longer if fraud). Keep appraisal reports and supporting documents.
Is a CAR valid forever? A CAR has no statutory expiry, but registries usually act on it within 1 year to avoid re‑validation hassles.
Does the estate pay capital‑gains tax on real property? No. Transfer from decedent to heirs is covered by estate tax, not CGT. CGT applies only on subsequent sale by heirs.
12. Practical timeline
| Day 0 | Death of decedent |
|---|---|
| Day 1 – Month 3 | Gather documents, secure TIN, compute tentative tax |
| Month 4 – Month 12 | Pay estate tax to stop penalties (even if no settlement yet) |
| Within 1 year | File estate tax return (deadline may be extended by BIR upon written request) |
| When heirs agree / court decides | Execute EJS or secure Partition Order |
| After settlement | Exchange conditional CAR for final eCAR (often just a notation change) and transfer titles |
13. Checklist before you go to the RDO
- PSA Death Certificate (original + 2 photocopies)
- New TIN of the Estate (BIR Form 1904)
- Sworn Declaration of Heirship / List of Heirs
- Asset‑valuation attachments (zonal certificates, bank statements, car appraisals, etc.)
- Deduction proofs (funeral, debts, medical bills)
- Duly‑accomplished BIR Form 1801 or 2118‑E (amnesty)
- Payment (cash, manager’s check, or e‑payment confirmation)
- Two folders labeled “Estate of ___”, with tabs
14. Bottom‑line take‑aways
- You do not need an Extrajudicial Settlement to pay estate tax. Payment can—and often should—be made first to avoid punitive surcharges and interest.
- What you cannot do without settlement is transfer legal title of real and certain personal property. For that, an EJS or court order remains indispensable.
- Estate Tax Amnesty (until 14 June 2025) offers a streamlined, lower‑document path—but final title transfer still requires a subsequent deed of distribution.
- Keep every receipt, affidavit, and valuation report; BIR’s audit window remains open for three years.
- Because nuances vary (e.g., estates with foreign assets, pending creditor claims, or minors), consult a tax lawyer or accountant before filing.
This article is for informational purposes only and does not constitute legal advice. Always verify current BIR issuances and consult qualified counsel for your specific situation.