In the Philippines, an Extrajudicial Settlement of Estate (EJS) is a common legal mechanism used by heirs to distribute the properties of a decedent without undergoing a full-blown court proceeding. However, circumstances often change—new properties are discovered, a previously unknown heir emerges, or the heirs simply change their minds about the distribution.

Amending an existing EJS is legally permissible, but it carries significant tax implications, particularly regarding Donor’s Tax. Understanding these nuances is vital to avoid unexpected tax liabilities and penalties from the Bureau of Internal Revenue (BIR).

1. The General Rule: Disproportionate Sharing as a Donation

When heirs execute an EJS, they are expected to divide the estate according to their legal shares under the Civil Code of the Philippines (laws on succession).

If, during the original EJS or a subsequent amendment, an heir waives their share or accepts significantly less than what the law prescribes, the BIR views this as a taxable gift. Under Revenue Memorandum Circular (RMC) No. 94-2021, the "general renunciation" by an heir of their share in the inheritance is not subject to donor's tax. However, a "specific renunciation"—where an heir waives their share in favor of a specific person—is subject to donor's tax.

2. The Trigger for Donor's Tax in Amendments

If an amendment to an EJS results in a redistribution where one heir receives more than their original or legal entitlement at the expense of another, the "excess" is treated as a donation.

Scenario A (Equal to Unequal): If three heirs originally split a property 1/3 each, but an amendment changes it so one heir gets 100%, the 2/3 portion given up by the other two heirs is a donation.
Scenario B (Adding New Property): If an amendment adds a new property to the estate and it is not distributed according to legal succession (e.g., only one heir takes it all), the portion that should have gone to the other heirs but didn't is considered a gift.

3. Determining the Tax Base

The Donor’s Tax is not calculated on the entire value of the estate. Instead, it is based on the fair market value (FMV) of the specific portion being "waived" or transferred in the amendment.

According to the Tax Reform for Acceleration and Inclusion (TRAIN) Law, the donor’s tax rate is a flat 6% on the total gifts in excess of ₱250,000 made during the calendar year.

Note: The BIR uses the higher value between the Zonal Value (set by the BIR) and the Assessed Value (set by the City/Provincial Assessor) at the time of the donation/amendment.

4. Documentary Requirements for the Amendment

When filing for the Certificate Authorizing Registration (CAR) for an amended EJS, the BIR will typically require:

The Amended Deed of Extrajudicial Settlement: Must be notarized and specifically mention the previous EJS being modified.
Affidavit of Publication: Proof that the notice of the amendment was published in a newspaper of general circulation for three consecutive weeks.
Donor’s Tax Return (BIR Form 1800): If the amendment involves a redistribution that constitutes a gift.
Proof of Payment: Payment of the 6% Donor’s Tax and the corresponding Documentary Stamp Tax (DST) on the donation.

5. Double Taxation Risks: Estate Tax vs. Donor’s Tax

It is a common misconception that paying Estate Tax covers all transfers. They are distinct:

Estate Tax is imposed on the privilege of the decedent to transmit property at death.
Donor’s Tax is imposed on the privilege of the living heir to transfer their inherited right to another.

If an EJS is amended after the Estate Tax has been paid and the CAR issued, the BIR will treat the amendment as a separate transaction. You may end up paying Estate Tax (for the original transmission) and Donor's Tax (for the subsequent redistribution among heirs).

6. Common Pitfalls

Late Filing: Donor’s Tax returns must be filed within 30 days after the deed is notarized. Failure to do so results in surcharges (25% to 50%) and annual interest.
Ignoring DST: Deeds of Donation or waivers of rights in an EJS amendment are subject to Documentary Stamp Tax. For real property, this is generally 1.5% of the FMV or consideration.
Vague Language: Using phrases like "waiving all rights" without specifying the recipient can lead to confusion during BIR audit. Clearly stating the intent of the amendment is crucial for correct tax characterization.

Summary Table: Tax Impact of EJS Amendment

Action	Tax Implication
Simple Correction (Typo in Name/Address)	No additional tax; might require a minimal fee for a new CAR.
Adding Property (Distributed Legally)	Additional Estate Tax (if not yet fully settled).
Renouncing Share to a Specific Heir	Donor's Tax (6%) on the value of the renounced share + DST.
Change in Sharing Ratio	Donor's Tax (6%) on the excess value received by an heir over their legal share.