Estate tax in the Philippines is a transfer tax imposed on the privilege of transmitting property from a decedent to his or her heirs upon death. It is governed primarily by Sections 84 to 97 of the National Internal Revenue Code of 1997, as amended by Republic Act No. 10963 (Tax Reform for Acceleration and Inclusion or TRAIN Law), which took effect on January 1, 2018. The TRAIN Law simplified the estate tax regime by imposing a flat rate of six percent (6%) on the net taxable estate and introducing standardized deductions to replace most itemized deductions previously allowed.

This guide is specifically tailored for overseas Filipinos—Filipino citizens residing or domiciled abroad at the time of death—who must settle estate tax obligations with the Bureau of Internal Revenue (BIR). It covers the full scope of legal requirements, procedures, documentation, computations, special rules for non-resident citizens, and practical considerations arising from the decedent’s location outside the Philippines.

I. Applicability to Overseas Filipinos (Non-Resident Citizens)

Filipino citizens, regardless of whether they are residents or non-residents of the Philippines at the time of death, are subject to estate tax on their worldwide estate. This is explicitly provided under Section 85 of the NIRC: the gross estate of a citizen includes all property, real or personal, tangible or intangible, wherever situated. Only non-resident aliens (foreign nationals) are taxed solely on properties situated in the Philippines.

Overseas Filipinos who retain Philippine citizenship—whether as Overseas Filipino Workers (OFWs), permanent residents abroad, dual citizens, or retirees—are therefore taxed on global assets. Properties located abroad (real estate, bank accounts, investments, vehicles, personal effects) must be included in the Philippine estate tax return. Properties in the Philippines (real property, shares in Philippine corporations, bank deposits, receivables from Philippine debtors) are likewise included.

If the decedent had renounced Philippine citizenship and become a foreign national without retaining dual status, the estate would be treated as that of a non-resident alien, limiting taxation to Philippine-situs assets. For the vast majority of overseas Filipinos who remain citizens, worldwide inclusion applies.

The estate, through the executor, administrator, or heirs, is solidarily liable for the tax. Heirs cannot receive full distribution of assets or clear titles to Philippine properties without BIR clearance.

II. Determination of the Gross Estate

The gross estate is valued at fair market value (FMV) as of the date of death.

Philippine Real Properties

Higher of: (a) zonal value fixed by the BIR, or (b) FMV as determined by the provincial or city assessor, or (c) actual selling price if recently sold (but generally date-of-death value).
Improvements are valued separately.

Foreign Real Properties

FMV at date of death, supported by appraisal reports from licensed foreign appraisers, tax declarations, or official statements from the foreign jurisdiction, converted to Philippine pesos using the Bangko Sentral ng Pilipinas (BSP) exchange rate prevailing at the time of death.

Personal Properties

Bank deposits (Philippine and foreign): Balance at date of death, including accrued interest. Foreign currency deposits in Philippine banks are generally included.
Stocks and securities:
– Listed shares: Closing price on the last trading day before death.
– Unlisted shares: Book value or appraised value.
– Shares in foreign corporations: FMV at death.
Vehicles, jewelry, artworks, furniture: Appraised value at death.
Receivables and other intangibles: Face value less allowance for uncollectibility, if proven.
Life insurance proceeds: Included if the beneficiary is the estate or if the decedent retained incidents of ownership; otherwise, generally excluded unless payable to the estate.

All assets must be declared in the estate tax return even if located abroad. Failure to declare foreign assets constitutes underdeclaration, exposing the estate to substantial understatement penalties.

III. Allowable Deductions for Citizen Decedents

Because the decedent is a Filipino citizen, the estate qualifies for the full set of deductions available to resident decedents under the TRAIN Law, regardless of the decedent’s actual residence abroad.

Major Deductions

Standard Deduction – ₱5,000,000 (fixed amount; no substantiation required). This replaced most prior itemized deductions such as funeral and judicial expenses.
Family Home – Up to ₱10,000,000 for the decedent’s family home in the Philippines (or abroad if it qualifies), provided it is the actual residence of the decedent and/or heirs, duly declared as such, and supported by title, tax declaration, and proof of occupancy. Only one family home is allowed.
Net Share of the Surviving Spouse – The surviving spouse’s conjugal or community property share is deducted from the gross estate before computing the net taxable estate.
Vanishing Deduction (Properties Previously Taxed) – For properties inherited within the last five years, a percentage deduction applies (100% if within 1 year, tapering to 20% if within 5 years).
Transfers for Public Use – Donations to the government or accredited institutions for public purposes.
Medical Expenses – No longer separately deductible after TRAIN Law; absorbed into the standard deduction.
Claims Against the Estate, Unpaid Mortgages, and Casualty Losses – Allowed if substantiated and actually paid or enforceable, but largely covered by the standard deduction for simplicity.

For non-resident aliens (not applicable here), deductions are strictly limited and prorated to Philippine assets only. Overseas Filipino estates enjoy the full ₱5 million standard deduction plus family home benefit when qualifications are met.

IV. Computation of Estate Tax

Formula
Net Taxable Estate = Gross Estate (worldwide) − Allowable Deductions
Estate Tax Due = 6% × Net Taxable Estate

Tax Credit for Foreign Estate Taxes Paid
Under Section 86(E) of the NIRC, the estate may claim a tax credit for estate or inheritance taxes actually paid to a foreign country on properties situated there. The credit is limited to the lower of:
(a) the foreign tax actually paid, or
(b) the Philippine estate tax attributable to the foreign property (computed as [foreign property / total gross estate] × Philippine estate tax).

This prevents or mitigates double taxation. Proper documentation from the foreign tax authority is required.

Example (simplified)
Gross estate (PH + abroad): ₱30,000,000
Deductions (standard ₱5M + family home ₱10M + spouse share ₱5M): ₱20,000,000
Net taxable estate: ₱10,000,000
Estate tax: ₱600,000 (6%)

If ₱200,000 foreign estate tax was paid on foreign assets, a credit may be claimed, reducing the net Philippine tax payable.

V. Filing and Payment Procedures

Deadline
The estate tax return (BIR Form 1801) must be filed, and the tax paid, within one (1) year from the date of death. This is a fixed statutory period with no automatic extension for filing, though the Commissioner may grant reasonable extensions in meritorious cases.

Venue
For a non-resident citizen decedent:

Revenue District Office (RDO) where the decedent’s last known Philippine address was located, or
RDO having jurisdiction over the location of the principal property in the Philippines, or
RDO where the largest asset is situated (in the absence of Philippine real property).

In practice, most overseas estates file with the RDO covering the Philippine real property to be transferred.

Payment
Tax is due upon filing. Payment may be made in cash, check, or through Authorized Agent Banks (AABs). For large liabilities, the Commissioner may authorize installment payments not exceeding two (2) years from the statutory due date if the estate lacks sufficient liquidity or remains unsettled. A bond or security may be required for installment arrangements, especially to secure issuance of the Certificate Authorizing Registration (CAR).

Certificate Authorizing Registration (CAR)
After full payment (or approved installment), the BIR issues a CAR for each real property or share of stock. This CAR is required by the Register of Deeds to transfer title and by other agencies (e.g., Land Transportation Office, banks) to release or transfer assets. Multiple CARs may be issued if there are several properties.

Electronic Filing
BIR Form 1801 may be filed electronically through the eFPS or eBIRForms system where available, though many overseas estates still file manually through an authorized representative due to document authentication requirements.

VI. Required Documents and Authentication for Overseas Estates

The following are typically required:

Certified true copy of the Death Certificate (issued by the foreign civil registry if death occurred abroad). It must be authenticated by the Philippine Embassy/Consulate or apostilled (if the country is a party to the Apostille Convention) and then registered with the Philippine Statistics Authority (PSA).
Birth certificates or marriage contract of heirs and surviving spouse (PSA-issued).
Inventory of assets with supporting documents (titles, bank statements, stock certificates, appraisal reports). Foreign documents must be authenticated/apostilled.
Proof of deductions (e.g., family home documents, marriage contract for spouse share).
Taxpayer Identification Numbers (TIN) of the decedent and all heirs. If the decedent had no TIN, the executor/heirs must apply for one.
Special Power of Attorney (SPA) executed by all heirs appointing a Philippine representative (lawyer, accountant, or trusted relative) to file and pay on their behalf. The SPA must be notarized, authenticated by the Philippine Embassy/Consulate or apostilled, and registered if necessary.
Sworn declaration of all properties.
For vanishing deduction or tax credits: foreign tax receipts and computations.

All foreign documents require authentication to be accepted by the BIR.

VII. Special Considerations for Overseas Filipinos

Death Abroad: Immediate steps include consular notification, authentication of death certificate, and PSA registration. This process can take weeks to months.
No Philippine Residence: The estate is still fully taxable on worldwide assets. Practical enforcement by the BIR focuses on Philippine-situs assets (real property, Philippine bank accounts, shares in Philippine corporations). Foreign assets may be harder to reach, but underdeclaration can lead to audits, liens, or future problems when heirs deal with Philippine assets.
Bank Accounts and Freeze Orders: Philippine banks often freeze accounts upon notice of death. Release requires BIR CAR or clearance.
Joint Accounts: Proceeds attributable to the decedent’s contribution are included in the gross estate.
Small Estates: There is no statutory exemption threshold. Even modest estates may owe tax after the ₱5 million standard deduction. If the net taxable estate is zero, no tax is due but a return must still be filed.
Unsettled Estates: The one-year filing deadline still applies. Heirs may file a return based on best available information and amend later.
Double Taxation Relief: Avail of tax credits where applicable. The Philippines has limited estate tax treaties; most relief is unilateral via the tax credit provision.
Penalties:
– Late filing: 25% surcharge on the tax due.
– Late payment: 12% interest per annum (or current legal rate) from due date.
– Substantial understatement (50% or more): additional 50% surcharge.
– Willful failure to file: criminal penalties including fines and imprisonment.

Compromise settlement of penalties may be requested from the BIR under certain conditions.

VIII. Estate Settlement and Distribution

Estate tax payment is a prerequisite to lawful distribution. In the Philippines, extra-judicial settlement (for estates without debts and with agreement of all heirs) or judicial settlement (for contested or complex estates) may be used. The Deed of Extra-Judicial Settlement must be published and submitted to the BIR together with the tax return.

Overseas heirs frequently execute a notarized and authenticated SPA to allow a Philippine-based representative to handle registration of the settlement document, payment of taxes, and transfer of titles.

IX. Practical Challenges and Best Practices

Overseas families often face delays due to document authentication, time zone differences, and coordination among heirs scattered globally. Early engagement of a Philippine lawyer specializing in estate and tax matters, together with a certified public accountant, is essential. The representative can secure the TIN, prepare the inventory, compute the tax, file the return, and obtain the CAR.

Heirs should gather financial statements, property documents, and insurance policies as soon as possible after death. Maintaining clear records of contributions to joint assets helps reduce includible amounts.

For estates with significant foreign assets, parallel estate proceedings in the foreign jurisdiction may be necessary, with careful coordination to maximize tax credits and avoid conflicts of law.

The Bureau of Internal Revenue continues to strengthen enforcement on estates of overseas Filipinos through information exchange agreements and scrutiny of Philippine asset transfers. Full and accurate disclosure remains the safest and most compliant approach.

This comprehensive framework ensures that overseas Filipinos and their heirs fulfill their legal obligations under Philippine tax law while facilitating orderly transfer of assets across borders. Compliance protects the estate from penalties and enables clean transmission of inheritance to the next generation.