How to Calculate Estate Tax in the Philippines

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

  1. Real property – FMV is higher of: BIR zonal value or Provincial/city assessor’s FMV.
  2. 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.
  3. Transfers in contemplation of death, revocable transfers, property passing under general power of appointment.
  4. 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

  1. List and value all includible assets → Gross Estate.
  2. Subtract deductions in Section 4 → Net Estate.
  3. Subtract surviving spouse’s share (if conjugal/community) → Taxable Net Estate.
  4. Apply flat rate of 6 %.
  5. Deduct foreign estate tax credit (if any) → Estate Tax Due.
  6. 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

  1. Secure TIN for the estate.
  2. Compile titles, tax declarations, bank statements, stock certificates.
  3. Engage accredited appraisers & CPA (especially for unlisted shares, real estate).
  4. Draft Settlement (extrajudicial or court proceedings).
  5. Prepare Form 1801, attachments, and notarised declaration of estate.
  6. Pay estate tax (or first installment) at AAB/LandBank/BIR ePAY.
  7. Claim eCAR from BIR RDO.
  8. Transfer Titles (Registry of Deeds), stock transfers (SEC), vehicle CR/LTO, etc.
  9. 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.

Disclaimer: This content is not legal advice and may involve AI assistance. Information may be inaccurate.