Below is a practitioner-style primer on Taxes Payable in the Judicial Settlement of Estates in the Philippines. It reflects statutes, regulations and jurisprudence in force as of 22 June 2025 (including the TRAIN Law and the 2023 extension of the Estate-Tax Amnesty). While comprehensive, it is not legal advice; always confirm facts and deadlines with the Bureau of Internal Revenue (BIR), the local treasurer, and the probate court.
1. Why taxation matters in a judicial estate
- Probate court cannot approve a project of partition unless all taxes are cleared.
- Executors/administrators are personally liable (to the extent of assets under their control) for unpaid estate taxes under Sec. 95, NIRC.
- Titles will not be transferred—the Registry of Deeds, corporate secretaries, LTO, etc. require a BIR electronic Certificate Authorizing Registration (eCAR) or equivalent tax clearance.
2. The tax landscape at a glance
| Tax or Fee | Governing Law / Rate | Trigger | Common Return / Instrument |
|---|---|---|---|
| Estate Tax | Secs. 84–97, NIRC (as amended by R.A. 10963) – 6 % of net estate | Transmission of property upon death | BIR Form 1801 + eCAR |
| Income Tax of Estate (fiduciary) | Secs. 55–65, 24(A), 34, NIRC – graduated rates or 8 %/sched. | Income earned by estate after death | BIR Form 1701-F/1701-A (Estate) |
| Capital Gains Tax (CGT) on real property | Sec. 24(D), NIRC – 6 % of higher of zonal FMV or gross price | Sale or barter by executor/heirs | BIR Form 1706 |
| Documentary Stamp Tax (DST) | Title VII, NIRC – e.g., ₱15/₱1,000 on conveyances | Deed of sale, extra-judicial settlement with sale, shares transfers | BIR Form 2000-OT / 2000 |
| Donor’s Tax | Secs. 98–104, NIRC – 6 % of net gifts | If heirs donate shares while estate open | BIR Form 1800 |
| Value-Added Tax / Percentage Tax | Secs. 105 ff., NIRC | Estate operates VATable business after death | BIR Form 2550Q / 2551Q |
| Local Transfer Tax | LGC 1991, prov/muni ordinances – ≤ 0.5 % | Transfer of real property | Treasurer’s certification |
| Real Property Tax (RPT) | LGC 1991 – basic 1–2 % + SEF | Annual ownership | Tax bill/Official receipt |
(Numbers rounded; exemptions/deductions discussed below.)
3. Estate Tax in depth
3.1 Tax base
- Gross estate includes all property, tangible or intangible, worldwide for resident citizens; Philippine-situs only for non-resident aliens.
- Valuation date: fair market value (FMV) at the moment of death—use the higher of zonal value and city/municipal assessor’s schedule, or book/market for shares.
- Accretions after death (rent, dividends, appreciation) belong to the fiduciary estate and are subject to income tax, not estate tax.
3.2 Standard deductions (Sec. 86)
- ₱5 million outright deduction (no substantiation).
- Medical expenses - ₱500,000 cap incurred within one year before death.
- Family home-₱10 million cap (unencumbered FMV).
- Claims against the estate (valid debts as of death, secured/unsecured).
- Accounts receivable previously included in the decedent’s income.
- Funeral expenses (actual, substantiated) up to ₱200,000.
- “Vanishing” deduction for property received by inheritance/donation within 5 years.
- Transfers for public use and certain charitable bequests.
3.3 Rate and deadlines
| Event | Timeline |
|---|---|
| Notice of death (if gross > ₱5 M or estate subject to estate tax) | Within 2 months of death (Sec. 89) |
| Filing & Payment – Estate Tax Return (ETR) | Within 1 year of death (may request an extension of filing up to 30 days and payment up to 5 years if hardship is shown; bond/collateral required) |
| Penalties | 25 % surcharge for late filing/payment + 12 % p.a. interest (rates float quarterly) |
3.4 Payment options
- Cash or manager’s check at AAB/LandBank.
- Real-property in kind under Sec. 92 (requires DOF approval).
- Installment: BIR may allow staged payments within 2–5 years; eCARs issued proportionally.
3.5 Estate-Tax Amnesty (R.A. 11213, 11569, 11956)
- Covers deaths on/before 31 May 2022 with returns not yet filed or taxes unpaid.
- Rate: either 6 % of net estate OR FMV of property each heir retains, whichever is higher.
- Deadline to file and pay: 14 June 2025 (per R.A. 11956).
- Benefits: Immunity from penalties and civil/criminal prosecution; withdrawal of tax liens.
- Not covered: Estate with final and executory criminal/tax fraud cases, garnished properties from Falsification etc.
4. Income taxation of the estate after death
- Separate taxpayer: Upon death a new juridical entity arises—“Estate of X”—which must register with the BIR (BIR Form 1901) and secure its own TIN.
- Income period: From date of death until final distribution order.
- Returns: Form 1701-F (or successor form for fiduciary returns) filed on or before 15 April following the taxable year. Quarterly payments via Form 1701Q.
- Allowed deductions: Same as for individual taxpayers but subject to trustee compensation ceiling.
- Withholding: Administrator must withhold creditable/expanded withholding on rentals, professional fees, etc.
5. Taxes on transfers, sales and management activities
5.1 Sale of real property by the estate
- CGT: 6 % of higher of zonal value or gross selling price.
- DST: 1.5 % (₱15 per ₱1,000) on the same base.
- VAT (12 %) may apply if the property is an ordinary asset of a VAT-registered estate business.
5.2 Disposition of shares & bonds
- DST: ₱1.50 per ₱200 par value on original/new shares; ₱0.75 per ₱200 on transfer of listed shares (if not through the exchange).
- Stock Transaction Tax (STT): 0.6 % on listed shares sold through the Philippine Stock Exchange.
- CGT: 15 % on net capital gains from sale of unlisted shares.
5.3 Rental and business income
- If estate continues a commercial enterprise, it must comply with VAT/percentage tax, bookkeeping, invoicing, and remit expanded withholding tax (EWT) on expenses.
5.4 Local taxes and fees
- Local Transfer Tax: Up to 0.5 % of FMV (province/city imposes). Payable before eCAR issuance.
- Real Property Tax: Continues annually; tax delinquencies attach to property.
- Motor Vehicle Transfer Fees: LTO requires BIR eCAR + DST proof.
6. Procedural roadmap in judicial estates
| Stage | Tax Actions & Documents |
|---|---|
| Petition for settlement | Secure TIN of the estate; file Notice of Death if required. |
| Inventory (Rule 89, ROC) | Gather BIR zonal values; appraise shares (SEC, PSE reports). |
| Publication & claims | Ascertain deductible debts; secure supporting documents. |
| Pre-distribution accounting | Prepare Estate Tax Return (Form 1801) + payment or amnesty filing. |
| Probate court approval | Submit BIR clearances/eCARs; court often requires BIR Certification of no tax liability. |
| Distribution/Partition | Deed of adjudication or project of partition registered with RD/LTO/Corporate Secretary; pay DST/local transfer taxes on instrument if partition involves conveyance. |
| Final discharge of executor | File last fiduciary income tax return; secure Tax Clearance for Executor/Administrator under Sec. 97, NIRC. |
7. Liability matrix
| Person | Exposure |
|---|---|
| Executor/Administrator | Solidary liability (up to assets held) for unpaid estate taxes + penalties (Sec. 95, NIRC) |
| Heirs/Beneficiaries | Subsidiary liability up to value of property received; may not plead ignorance once they accept inheritance |
| Buyers/Transferees | “Substituted taxpayer” for CGT/DST if they withhold or fail to ensure BIR clearance |
| Registrars/Corporate Secretaries | Administrative sanctions for registering transfers without eCAR |
8. Common pitfalls and practical tips
- Late Notice of Death has no surcharge but invites audit—file even if estate < ₱5 M to create a record.
- Merge amnesty and regular estate: Unpaid amnesty within the deadline reverts estate to regular 6 % plus penalties.
- Partial eCARs—get one per heir per parcel if splitting; simplifies later sale.
- Use installment wisely: Interest does not stop; estate with illiquid realties should consider in-kind payment.
- CPA certification for deductions over ₱1 million speeds up processing.
- Check municipal ordinances—some LGUs require two clearances: transfer tax and tax-assessment clearance.
- If heirs sell before eCAR, BIR treats it as simultaneous estate settlement and sale—double DST but single CGT.
- Keep books if estate operates business; disallowed expenses inflate taxable income.
9. Recent & upcoming developments (as of 2025)
- House Bill 4339 / Senate Bill 2020 propose making estate-tax rate progressive again (graduated 1 %–12 %), but still at committee level.
- Digital eCAR system (Revenue Memorandum Circular 5-2024) allows paperless eCAR validation via QR code.
- Estate-Tax Amnesty beyond 2025: DOF supports a permanent amnesty window limited to estates ≤ ₱3 M; watch for 19th-Congress action.
- Automation of LGU transfer-tax assessment under eGov PH Act (R.A. 11966) may synchronize BIR and LGU values in 2026.
10. Checklist for counsel & executors
- ☐ Get separate TIN for the estate.
- ☐ File Notice of Death (within 2 months).
- ☐ Secure zonal/assessor FMVs; compute gross vs. net estate.
- ☐ Gather documents for deductions (debts, medical, funeral, family home).
- ☐ Decide: regular estate tax vs. amnesty (if qualified).
- ☐ File and pay Estate Tax Return within 1 year (or amnesty by 14 Jun 2025).
- ☐ Obtain eCARs; pay LGU transfer tax.
- ☐ Record deeds; re-title assets.
- ☐ File annual fiduciary income tax until final distribution.
- ☐ Apply for executor’s tax clearance; seek court discharge.
Bottom line
A Philippine judicial estate is tax-interlaced at every stage—from probate petition to final partition. The executor’s prime directive is to (1) compute and pay the 6 % estate tax (or amnesty), (2) keep the estate’s post-death income tax-compliant, and (3) settle ancillary taxes on each transfer or sale. Diligence in these areas not only shields the personal liability of fiduciaries but also expedites the heirs’ enjoyment of their inheritance.