How to Calculate Estate Tax in the Philippines (Comprehensive Legal Guide, 2025 Edition)
1. Legal Framework
Source of law | Key provisions |
---|---|
National Internal Revenue Code (NIRC) of 1997, as last amended by RA 10963 (TRAIN Law, 2018) | • Title III governs estate tax. • Imposes a single 6 % rate on the net estate of every decedent, whether resident or non-resident, citizen or alien. |
Revenue Regulations & Memoranda | RR 12-2018, RR 17-2021, RR 2-2023, RMC series (implements valuation tables, procedural updates, eCAR). |
Estate Tax Amnesty Acts | RA 11213 (2019) → original amnesty until 2021. RA 11569 (2021) → extended to 14 June 2023. RA 11956 (2023) → final extension to 14 June 2025 (now lapsed). |
Effect as of 3 July 2025: Regular 6 % estate tax regime applies; the amnesty window closed on 14 June 2025.
2. What Is Taxed?
Decedent category | Tax base |
---|---|
Resident citizen or alien | Global gross estate (world-wide property). |
Non-resident alien | Philippine-situs property only (real, tangible, certain intangible personal property). |
2.1 Items INCLUDED in the Gross Estate
- Real property – FMV is higher of: BIR zonal value or Provincial/city assessor’s FMV.
- Personal & intangible property – cash, deposits, shares, bonds, insurance proceeds (to the extent of revocable transfers or retained interest), retirement benefits w/o designated irrevocable beneficiary, etc.
- Transfers in contemplation of death, revocable transfers, property passing under general power of appointment.
- Community/Conjugal share of the decedent (for married estates under community or conjugal partnership regimes).
2.2 Items EXCLUDED or EXEMPT
- GSIS, SSS, Pag-IBIG, and other government-mandated benefits.
- War damage payments.
- Intangible personal property of a non-resident alien if reciprocity exists (i.e., the foreign country exempts Filipino estates).
- Separate property of the surviving spouse.
3. Valuation Rules (snapshot date: Date of Death)
Asset type | Valuation method |
---|---|
Real property | Higher of zonal value vs assessor’s FMV; for condominiums, consider BIR condominium unit value schedules. |
Listed shares | Closing price on the date of death. |
Unlisted common shares | Book value per audited FS nearest to date of death. |
Unlisted preferred shares | Par value. |
Government/Retail treasury bonds | Quoted selling price. |
Bank deposits/foreign currency | Peso equivalent using BSP reference rate on date of death. |
4. Allowable Deductions (TRAIN-era)
Deduction | Cap / Rule |
---|---|
Standard deduction | ₱ 5,000,000 (no substantiation needed). |
Family home deduction | Up to ₱ 10,000,000 of FMV. Excess forms part of gross estate. |
Claims against the estate (debts) | Valid, enforceable, incurred ‘in good faith’ and supported by notarised debt instrument at least 3 years before death or with proof of use of loan proceeds (anti-avoidance). |
Unpaid mortgages, taxes, casualty losses | Actual unpaid amounts; losses must occur within 1 year from death and not compensated by insurance. |
Vanishing deduction | Graduated % (5 %–100 %) for property received within 5 years that has already suffered donor’s or estate tax. |
Transfers for public use | Donations to the Government or accredited NGOs. |
Share of surviving spouse | One-half of conjugal/community net assets (deducted after other deductions). |
Foreign estate tax credit (resident decedents only) | Lesser of foreign estate tax actually paid or Philippine proportionate amount. |
Abolished by TRAIN: funeral expenses, medical expenses, judicial expenses (implicitly covered by standard deduction), marital deduction.
5. Step-by-Step Computation
- List and value all includible assets → Gross Estate.
- Subtract deductions in Section 4 → Net Estate.
- Subtract surviving spouse’s share (if conjugal/community) → Taxable Net Estate.
- Apply flat rate of 6 %.
- Deduct foreign estate tax credit (if any) → Estate Tax Due.
- Add penalties & interest if past due.
Illustrative Example
- Gross estate (resident decedent): ₱ 35 M
- Deductions: • Standard ₱ 5 M • Family home (FMV ₱ 12 M ⇒ deduct ₱ 10 M) • Valid debts ₱ 3 M • Vanishing deduction ₱ 2 M
- Net estate = 35 M – (5 + 10 + 3 + 2) M = ₱ 15 M
- Conjugal share of spouse (½ of conjugal assets valued at ₱ 8 M) = ₱ 4 M
- Taxable net estate = 15 M – 4 M = ₱ 11 M
- Estate tax = 6 % × 11 M = ₱ 660,000
6. Filing & Payment Procedures
Item | Details (2025) |
---|---|
Return | BIR Form 1801 (Estate Tax Return). |
Deadline | Within 1 year from date of death. Commissioner may grant extension: • Filing – max 30 days; • Payment – in meritorious cases, up to 5 years (settled) or 10 years (contested) in installments. |
Where to file | RDO where decedent was domiciled; if non-resident, RDO No. 39 (South Quezon City). |
Modes of payment | Cash, manager’s check, electronic channels; installment plan must be secured by bond/acceptable securities for amounts > ₱ 2 M. |
Electronic Certificate Authorizing Registration (eCAR) | Released after full payment; required for transfer/registration of titles, shares, vehicles, bank withdrawals, etc. |
Documentary requirements | Death certificate; TIN of estate; judicial/extrajudicial settlement (if any); list of assets & liabilities; appraisals; proof of deductions; latest property tax declarations; bank certification; FS for corporations; etc. |
7. Penalties for Non-Compliance
Violation | Civil penalty |
---|---|
Late filing or payment | 25 % surcharge of tax due plus 12 % interest per annum (or the rate set under the Tax Code, currently 6 % interest per annum per RR 21-2018, but computed daily). |
Willful neglect / fraudulent return | 50 % surcharge + interest; possible criminal prosecution (fine ₱ 10 k-100 k & imprisonment 2-4 years). |
Failure to secure eCAR before property transfer | Nullity of transfer, no title registration, penalties upon registry officers, and parties may be solidarily liable. |
8. Special Situations & Planning Pointers
Scenario | Tax treatment / tip |
---|---|
Multiple citizenship / dual residence | Philippine citizens taxed on worldwide estate. Plan for foreign tax credits and tax treaty relief. |
Life insurance proceeds | Exempt if beneficiary is an irrevocable designee; otherwise, included. |
Family corporations / closely-held shares | Use Buy-Sell Agreements or cross-ownership insurance to fund taxes; valuation disputes common—prepare appraisal & CPA certification. |
Living trusts | Irrevocable transfers during lifetime remove assets, but anti-avoidance rules (retained interest, revocability) may pull property back into estate. |
Estate not exceeding ₱ 5 M & only personal property | May settle extrajudicially by notarised affidavit under Sec. 1, Rule 74, Rules of Court; still need Form 1801 and eCAR for bank withdrawals. |
Overseas Filipino Worker (OFW) assets abroad | Still includible (resident citizen). Coordinate with foreign counsel on local probate and potential double taxation. |
Trust under guardianship of minors/heirs | Executor/administrator must withhold estate tax before distribution; minors’ shares kept in trust until majority. |
9. Estate Tax Amnesty (Historical Reference)
Parameter (RA 11956, now expired) | Description |
---|---|
Coverage | Estates of those who died on or before 31 May 2022 with unpaid/undeclared estate taxes. |
Rate | 6 % of net taxable estate at time of death, OR minimum ₱ 5,000 if solely personal property ≤ ₱ 5 M. |
Deadline | 14 June 2025 (no further extensions granted). |
Immunities | From payment of surcharge, interest, penalties; immunity from civil, criminal, and administrative cases relative to estate tax. |
Documentary simplifications | Self-executed Estate Amnesty Tax Return (BIR Form 2118-EA); minimal asset appraisal requirements. |
Since the window has lapsed, estates left unpaid must now follow regular rules and will incur surcharges and interest.
10. Frequently Asked Questions (FAQs)
Q1: If the estate’s only asset is a condominium valued at ₱ 3 M and bank deposits of ₱ 1 M, do we still file?
Yes. File Form 1801. Net estate after the ₱ 5 M standard deduction is zero; no tax due, but eCAR is still required to transfer the condo title and withdraw deposits.
Q2: Can heirs use the decedent’s bank account to pay the tax?
No. Banks release deposits only upon presentation of eCAR or BIR Certification of availing tax-free withdrawal under Sec. 97 NIRC (up to ₱ 20 k) or special escrow arrangements.
Q3: How is property co-owned with a surviving spouse valued?
Include only the decedent’s share in gross estate; the surviving spouse’s share is deducted after computing other gross-estate deductions.
Q4: What if we miss the 1-year deadline because of pending court settlement?
File a request for extension of payment citing meritorious grounds; file the return on time (even if partially) to avoid the 25 % surcharge.
Q5: Do we need to re-file if BIR valuation rises after audit?
The BIR will issue a Notice of Deficiency; additional 6 % applies on the adjusted net estate plus penalties from original due date.
11. Practical Checklist for Executors/Heirs
- Secure TIN for the estate.
- Compile titles, tax declarations, bank statements, stock certificates.
- Engage accredited appraisers & CPA (especially for unlisted shares, real estate).
- Draft Settlement (extrajudicial or court proceedings).
- Prepare Form 1801, attachments, and notarised declaration of estate.
- Pay estate tax (or first installment) at AAB/LandBank/BIR ePAY.
- Claim eCAR from BIR RDO.
- Transfer Titles (Registry of Deeds), stock transfers (SEC), vehicle CR/LTO, etc.
- File capital gains / DST if property is subsequently sold by heirs.
12. Key Take-Aways
- Flat 6 % rate since 2018 simplifies planning, but valuation and deductions remain technical.
- Deadlines matter: 1-year filing, surcharges mount quickly.
- Document every deduction; unsupported claims are disallowed.
- Amnesty is over; no expectation of further extensions.
- Early estate planning (living trusts, irrevocable life insurance, family corporations) is the most effective way to minimize liquidity issues and avoid forced asset sales.
This article is current as of 3 July 2025 and reflects the latest Philippine statutes, regulations, and administrative issuances on estate taxation. Always verify if new BIR regulations have been issued after this date for precise compliance.