Resolving Property Improvement Records for Estate Tax Payment in the Philippines
Everything heirs, executors, estate administrators, and practitioners need to understand—legal bases, common pitfalls, and step‑by‑step solutions.
1. Why “improvements” matter in estate taxation
When a Filipino decedent leaves real property, the net estate must be declared and the 6 % estate tax (Sec. 84 & 86, National Internal Revenue Code or NIRC, as amended by the TRAIN Law / RA 10963) is computed on the property’s fair market value (FMV) “at the time of death.”
- Land value → higher of (a) BIR zonal value or (b) FMV on the City/Provincial Assessor’s schedule.
- Improvement value (house, building, warehouse, permanent structures and their fixtures) → likewise the higher of BIR valuation guides or assessor’s schedule.
If the assessor or BIR records are outdated—or worse, no improvement is officially recorded—the return can be denied, the estate taxed deficiently, or the transfer of title refused by the Register of Deeds.
2. Statutory and regulatory framework
| Source | Key provisions relevant to improvements |
|---|---|
| NIRC (Secs. 85‑90) | Valuation rules; filing of BIR Form 1801 (Estate Tax Return); due date (within one year from death, extendible). |
| RR 12‑2018 | Documentary requirements; clarifies that both land and improvement tax declarations (TDs) must be attached. |
| RR 2‑2003 & Zonal Valuations | Standard BIR FMV tables for buildings/improvements. |
| RA 7160 Local Government Code (LGC), Secs. 199 & 202‑208 | Definition of “improvement”; owner’s duty to file a sworn statement of true value; power of assessor to revise TDs. |
| PD 1096 (National Building Code) | Building/occupancy permits used to prove existence and classification of structures. |
| Estate‑Tax Amnesty Act (RA 11213, extended by RA 11956 to 14 Jun 2025) | Allows payment based on separate, lower amnesty computation—but still requires TDs or a Sworn Declaration where records are missing. |
3. Where improvement records originate
- Real Property Tax Declaration (TD) – held by the City/Municipal Assessor; indicates classification, area/floor area, construction materials, economic life, and market values.
- Building & Occupancy Permits – issued by the Office of the Building Official (OBO) under the Building Code; attach plans/blueprints.
- Zonal Valuation Tables – published by BIR Revenue District Offices (RDOs) for both land and common building types.
- Actual on‑site appraisal reports – prepared by the Assessor or BIR examiners when documentation is incomplete.
- Photographs, utility bills, fire insurance policies – secondary evidence to corroborate existence and age of improvements.
4. Typical record‑keeping issues
| Scenario | Consequence | Remedy |
|---|---|---|
| Structure built but never declared with the Assessor. | No TD → BIR treats improvement as “undeclared”; may impose estimated FMV plus 25 % surcharge & 12 % interest p.a. on deficiency. | File Petition to Declare Improvement with photos, permits, SSV; request back‑year declaration as of date of construction. |
| Renovation/expansion after original TD; assessor still shows old floor area. | Under‑valuation; potential deficiency assessment. | Submit Amended TD; attach building permit & cost breakdown. |
| Co‑ownership: Some heirs improved property after decedent’s death. | BIR assesses only improvements existing at death; later additions belong to heirs individually (no estate tax). | Provide joint affidavit & receipts proving date of construction. |
| No building permit (common in rural areas). | LGU may refuse TD update; BIR may insist on on‑site appraisal at higher “as‑is” rate. | Secure Barangay certification of occupation date & photos; request special appraisal. |
| Lost/illegible TDs for pre‑1980 structures. | Estate tax return cannot be accepted without proof of FMV. | Obtain certified transcription from Assessor’s archive or re‑create record via Reconstitution Petition (LRA/LGU). |
5. Step‑by‑step guide to regularize improvement records before filing Form 1801
Inventory & gap analysis
- Gather titles, old TDs, permits, photos.
- Compare physical inspection with listed floor area and building class.
Update the assessor’s records
- File a Sworn Statement of True Value (SSV) or Petition for Revision of Assessment citing Sec. 202‑204, LGC.
- Attach: ₍a₎ building/occupancy permits or alternative proof; ₍b₎ notarized photos; ₍c₎ estate’s proof of ownership (title, death certificate).
- Pay any back real‑property tax (RPT) differentials; secure RPT Clearance.
Secure certified true copies (CTCs)
- CTC of updated TD for land and improvement.
- Certificate of FMV signed by the Assessor.
Obtain BIR valuation & clearance
- Visit RDO; ask for current zonal values and, if needed, a BIR appraisal for atypical structures.
Prepare BIR Form 1801
List land and improvement separately in Schedule A (Real Properties).
Attach:
- TCT/CCT or OCT (owner’s duplicate)
- Updated TDs (land & building) and FMV certificate
- Certified zonal value sheet or BIR appraisal report
- Extrajudicial settlement / court order / self‑adjudication
- Sworn declaration on improvements if special circumstances (e.g., post‑death construction)
Pay estate tax (or amnesty tax under RA 11213 if qualified) at any Authorized Agent Bank or eFPS.
BIR Electronic Certificate Authorizing Registration (eCAR)
- Once issued, present eCAR plus original title & documents to the Register of Deeds for issuance of a new title in heirs’ names.
6. Special situations and doctrines
6.1 Improvements erected after the decedent’s death
- Only the land and structures existing at the exact moment of death form part of the gross estate (Sec. 88, NIRC).
- Post‑death construction is capital investment by heirs; not subject to estate tax but triggers documentary stamp tax (DST) on building permit cost.
- Provide receipts & affidavits to segregate values.
6.2 Estate‑tax amnesty (until 14 June 2025)
Fixed tax = 6 % of net estate or ₱5,000 minimum, whichever is higher, regardless of improvements.
BIR still requires at least one of the following for improvements:
- Existing TD, or
- Sworn Declaration of No Improvement, or
- Sworn Statement of Improvement with estimated FMV.
6.3 Agricultural & economic life adjustments
- For farm houses/barns, BIR allows depreciation schedules (usually 40‑yr economic life).
- Present Department of Agriculture certification for special classifications (e.g., poultry buildings).
6.4 Condominium & mixed‑use buildings
- Improvements declared in the CCT “unit” TD; common areas pro‑rated.
- Estate declaration must list unit floor area and allocated common interest (%).
7. Penalties for erroneous or missing improvement records
| Violation | Governing rule | Penalty |
|---|---|---|
| Failure to include improvement value | Sec. 248(A), NIRC | 25 % surcharge plus interest (12 % p.a.) on deficiency estate tax. |
| False declaration of FMV | Sec. 255, NIRC | Criminal liability: fine ₱10,000‑100,000 and/or imprisonment 1‑10 yrs. |
| Failure to file RPT TD | Sec. 212, LGC | Assessor’s default assessment + surcharges up to 25 % of tax due. |
| Transferring title without eCAR | Sec. 258, NIRC | Register of Deeds liable; title voidable; fines up to ₱50,000. |
8. Practical tips and best practices
- Start with the Assessor, not the BIR. Most delays stem from missing TDs—LGU processing can take 2‑4 weeks.
- Maintain a “property dossier.” Keep permits, photos, insurance, receipts together; scan copies.
- Use sworn declarations strategically. The BIR accepts them only when government records are truly unavailable—back them with photos or third‑party affidavits.
- Coordinate site inspections early. Request a joint inspection if BIR doubts TD data.
- Leverage the amnesty window. If valuation records are irretrievable and the decedent died on or before 31 May 2022, paying the amnesty tax (flat 6 % of declared net estate) can shortcut disputes.
- Mind RPT arrears. The Register of Deeds will not register transfers unless the LGU issues a Tax Clearance showing zero arrears including penalties on improvements.
9. Handy heir’s checklist
- Latest certified TDs (land and buildings)
- FMV certificate from Assessor (dated as of death)
- BIR zonal valuation print‑out or appraisal report
- Building & occupancy permits / sworn alternative proof
- Photos of exterior & interior highlighting improvements
- Receipts & affidavits for post‑death constructions (if any)
- BIR Form 1801 duly filled & signed
- Proof of payment (estate tax or amnesty)
- eCAR issued by RDO
10. Conclusion
Resolving improvement records is often the single most time‑consuming hurdle in Philippine estate settlement. By understanding the interplay between LGU tax declarations, BIR valuation rules, and documentary requirements—and by acting quickly to reconstruct or update missing data—heirs can avoid deficiency assessments, penalties, and costly title delays.
Early coordination with the Assessor, the BIR’s RDO, and a competent surveyor or appraiser ensures that the estate tax return reflects the true—and legally defensible—value of both land and improvements, paving the way for a smooth transfer of ownership to the next generation.