1) What “Estate Tax” Means in Philippine Law

Estate tax is a national tax imposed on the transfer of a decedent’s property to heirs upon death. The tax is imposed on the right to transfer (the estate), not on the heirs’ receipt. The Philippine system does not have a separate “inheritance tax” on heirs; the primary tax at death is the estate tax.

Governing law (general): The National Internal Revenue Code (NIRC), as amended (notably by the TRAIN Law), plus BIR regulations and issuances implementing valuation, documentation, and procedure.

Practical point: Even when the tax due is zero, estates often still need to file and secure BIR clearance/eCAR to transfer titles, bank deposits, shares of stock, and similar assets.

2) Who Is Required to File and Pay

A. Estates of citizens and resident aliens

If the decedent was a Filipino citizen or resident alien at death, the estate tax generally applies to all properties, wherever located (worldwide), subject to allowable deductions.

B. Estates of non-resident aliens (NRA)

If the decedent was a non-resident alien, the estate tax generally applies only to properties situated in the Philippines. Special “situs” and reciprocity rules can affect whether certain intangible properties are taxed.

C. Who files

The executor/administrator files, or if none, any heir or authorized representative. In practice, the “estate” is treated as the taxpayer for filing purposes.

3) The Estate Tax Rate (Philippines)

Under the simplified regime introduced by the TRAIN Law, the estate tax is generally:

6% of the Net Estate

No graduated brackets; the computation is primarily about arriving at the net estate correctly.

4) The Big Picture: The Computation Formula

Estate Tax Due = 6% × Net Estate

Where:

Net Estate = Gross Estate – Allowable Deductions

So you compute in two major phases:

Determine the Gross Estate (what is included and how valued), then
Subtract Deductions (what the law allows), then
Apply the 6% rate.

5) Step 1 — Determine the Gross Estate (What’s Included)

A. General inclusions

The gross estate generally includes the value at death of all property interests of the decedent, such as:

Real property (land, house, condominium, improvements)
Personal property (vehicles, jewelry, art, equipment, receivables)
Bank deposits and cash
Shares of stock and other securities
Business interests (sole proprietorship assets; partnership interest; etc.)
Certain transfers made in connection with death (depending on facts and legal characterization)
Certain life insurance proceeds (see below)

B. Marital property matters (crucial in PH practice)

If the decedent was married under absolute community or conjugal partnership, not everything in the marriage is automatically taxable as the decedent’s estate.

A common approach is:

Identify community/conjugal assets,
Subtract community/conjugal obligations,
Arrive at net community/conjugal property, and
Include only the decedent’s share (often one-half) in the gross estate, plus the decedent’s exclusive properties.

This step alone can materially change the tax base and is a frequent source of BIR queries.

C. Life insurance proceeds (general rule)

Life insurance proceeds are typically included in the gross estate if:

The proceeds are payable to the estate, executor, or administrator, or
The beneficiary designation is revocable (i.e., the decedent retained power to change the beneficiary).

When the beneficiary is irrevocable and not the estate/executor/administrator, proceeds are commonly treated as excluded from the gross estate under the usual rule.

D. Situs rules (especially for non-resident estates)

For non-resident alien decedents, only Philippines-situated properties are generally included. Intangibles (like shares, receivables) can be tricky: the Tax Code has situs rules, and reciprocity may exempt certain intangibles if the decedent’s country grants similar exemption to Filipinos.

6) Step 2 — Value Each Asset Correctly

A. Real property valuation (Philippine practice)

Real property is commonly valued using fair market value (FMV) standards recognized by the BIR. In practice, the taxable FMV is often the higher of:

The BIR zonal value, and
The assessor’s value (as shown in the tax declaration)

Rules can vary by circumstance and BIR issuance, but this “higher-of” approach is a standard working method in estate tax processing.

B. Shares of stock

Listed shares: commonly valued using market price around the date of death (e.g., closing price).
Unlisted shares: often valued using book value or other BIR-accepted valuation approach based on financial statements.

C. Bank deposits

Use the balance as of date of death, supported by a bank certification.

D. Vehicles and personal property

Use reasonable FMV supported by documents (OR/CR for vehicles, appraisals where appropriate, invoices, etc.).

Tip: Incomplete valuation support is one of the fastest ways to delay eCAR issuance.

7) Step 3 — Subtract Allowable Deductions

Philippine estate tax is heavily driven by deductions. Key deductions commonly encountered include:

A. Standard deduction

A fixed standard deduction is allowed (widely applied in practice under the TRAIN-amended system).

B. Family home deduction

A deduction for the family home, subject to a statutory cap and conditions (e.g., the property qualifies as the family home, ownership and valuation requirements, etc.).

C. Claims against the estate and related deductions

Commonly deductible, if properly substantiated:

Claims against the estate (valid debts of the decedent)
Claims against insolvent persons
Unpaid mortgages and indebtedness on property included in the gross estate
Taxes due and unpaid that meet deductibility requirements

D. Losses (where applicable)

Certain casualty losses or losses allowed by the Tax Code may be deductible subject to conditions and proof.

E. Transfers for public use

Bequests/transfers to the Philippine government or qualifying entities for public purposes may be deductible subject to legal requirements.

F. Property previously taxed (the “vanishing deduction” concept)

The Tax Code historically provides relief for property received by the decedent that was recently subjected to donor’s/estate tax within a specified period and then included again in the decedent’s estate—subject to conditions.

Documentation matters: Deductions are where most estate tax returns succeed or fail in BIR review. Expect the BIR to request promissory notes, loan ledgers, notarized debt instruments, proofs of consideration, bank trail, and similar evidence for debt deductions.

8) Worked Example: Simple Estate Tax Computation

Scenario: Decedent is a Filipino citizen.

Real property (FMV): ₱12,000,000
Bank deposits: ₱3,000,000
Vehicle and personal property: ₱1,000,000 Gross Estate: ₱16,000,000

Deductions (illustrative):

Standard deduction: ₱5,000,000
Family home deduction: ₱10,000,000 (assume qualified and within cap)
Valid debts supported by documents: ₱500,000 Total Deductions: ₱15,500,000

Net Estate: ₱16,000,000 – ₱15,500,000 = ₱500,000 Estate Tax Due: 6% × ₱500,000 = ₱30,000

If deductions exceeded the gross estate, the net estate could be zero, and the tax due would be ₱0—but filing and clearance may still be necessary to transfer assets.

9) Filing Deadline and Where to File

A. Deadline (general rule)

Estate tax returns are generally filed within one (1) year from the date of death.

B. Extensions

The Tax Code framework allows the BIR (through the Commissioner or authorized officials) to grant certain extensions—often:

A limited extension to file, and/or
A longer extension to pay in meritorious cases, commonly with different ceilings depending on whether settlement is judicial or extrajudicial.

C. Where to file

Commonly with the BIR Revenue District Office (RDO) that has jurisdiction over:

The decedent’s domicile/residence at death, or
A designated RDO under BIR rules for certain non-resident cases.

Because RDO practice can be strict, estates usually confirm jurisdiction early to avoid re-filing delays.

10) The Forms and Core Documents You’ll Need

A. Primary form

BIR Form 1801 (Estate Tax Return)

B. Common documentary requirements (typical checklist)

Exact lists vary by case, but commonly include:

Death and civil status

Death certificate
Marriage certificate (if married)
Birth certificates of heirs (often requested)
Judicial documents (if settlement is judicial) or extrajudicial settlement document (if extrajudicial)

Taxpayer identification

Decedent’s TIN (and estate TIN where required/used in practice)
IDs of heirs/representative
Special power of attorney / authority to transact, if applicable

Asset proof and valuation

Real property titles (TCT/CCT), tax declarations, and location maps as required
BIR zonal valuation references (as applicable)
Bank certifications of balances as of date of death
Stock certificates, secretary’s certificate, latest audited FS for unlisted shares (common)
Vehicle OR/CR
Appraisals for high-value personal property where needed

Deductions support

Loan documents, promissory notes, bank trails, official receipts, billing statements
Proof of family home qualification and value
Proof for other claimed deductions

Expect the BIR to require originals for verification and to keep certified true copies in the docket.

11) Payment and Clearance: The Practical End-to-End Process

In many estates, the goal is not only “pay the tax,” but also to obtain BIR authority to transfer properties.

Step-by-step workflow (typical)

Prepare the inventory of assets and determine which are exclusive vs. community/conjugal.
Compute gross estate and net estate, prepare the estate tax return and schedules.
File BIR Form 1801 with the proper RDO.
Pay the estate tax (and any penalties/interest if late), through authorized banks/payment channels per BIR procedure.
Submit complete documentary requirements for audit/verification.
After evaluation, secure the eCAR (electronic Certificate Authorizing Registration) for each registrable property (real property, shares of stock, etc.).
Use the eCAR to:
- Transfer land titles with the Registry of Deeds
- Update records with corporations/transfer agents for shares
- Release/transfer bank deposits and other assets, as required by institutions

Reality check: Many delays come from incomplete valuation documents and unsupported debt deductions.

12) Late Filing: Surcharges, Interest, and Compromise

If you file/pay late, you may face:

Surcharge (commonly 25%, higher in more serious cases such as willful neglect or fraudulent returns)
Interest (computed per annum on unpaid tax; the statutory rate has been standardized in recent years under the TRAIN amendments)
Compromise penalty (in certain cases, depending on BIR rules and the nature of the violation)

Because penalties can quickly become large, estates often prioritize meeting the one-year deadline even if some assets still need valuation follow-up—while coordinating with the RDO on acceptable documentation.

13) Common Pitfalls (and How to Avoid Them)

Ignoring the marital property split (taxing 100% of community property instead of the decedent’s share)
Using the wrong real property value basis (not reconciling zonal vs. assessed FMV practices)
Claiming debts without documentary proof (no proof of consideration, no bank trail, not properly notarized)
Not accounting for shares correctly (especially unlisted shares needing FS-based valuation support)
Delaying eCAR processing by submitting incomplete requirements
Assuming “no tax due” means “no filing needed” (often wrong when assets must be transferred)

14) Special Note: Estate Tax Amnesty (Historical Context)

The Philippines previously implemented an estate tax amnesty program (with eligibility rules and deadlines). If you are dealing with a long-unsettled estate, it’s important to verify whether any amnesty window applies as of today, because these programs are time-bound and may lapse or be replaced by new measures.

15) Practical Mini-Checklist You Can Use

Before filing

Identify heirs and settlement route (judicial vs extrajudicial)
Inventory assets and classify (exclusive vs community/conjugal)
Get valuations as of date of death (real property, banks, shares)
Collect deduction support documents
Draft schedules and compute net estate

Filing and clearance

File BIR Form 1801 within 1 year from death
Pay tax (and penalties if any)
Submit complete docket to RDO
Secure eCAR(s)
Transfer titles/shares/release bank deposits

16) A Short “Computation Template” (Reusable)

Gross Estate
- Exclusive properties of decedent: ₱____
- Decedent’s share in community/conjugal net property: ₱____
- Other inclusions (life insurance includible, etc.): ₱____ Total Gross Estate: ₱____
Less: Deductions
- Standard deduction: ₱____
- Family home deduction: ₱____
- Debts/claims/mortgages (supported): ₱____
- Other allowable deductions: ₱____ Total Deductions: ₱____
Net Estate = Gross Estate – Deductions = ₱____
Estate Tax Due = 6% × Net Estate = ₱____

17) Legal Disclaimer (Philippine Context)

This article is for general legal information and practical guidance only. Estate tax outcomes can change materially based on property classification, valuation evidence, residency/situs issues, and BIR procedural requirements. For high-value or complex estates (multiple properties, businesses, foreign assets, disputed debts, non-resident decedents), consult a Philippine tax professional or lawyer and coordinate early with the proper BIR RDO.