Frequently Asked Questions

1. What are included in gross estate?

A. For resident alien decedents/citizens:

 Real or immovable property, wherever located
 Tangible personal property, wherever located
 Intangible personal property, wherever located

B. For non-resident decedent/non-citizens:

 Real or immovable property located in the Philippines
 Tangible personal property located in the Philippines
 Intangible personal property - with a situs in the Philippines such as:
 Franchise which must be exercised in the Philippines
 Shares, obligations or bonds issued by corporations organized or constituted in the Philippines
 Shares, obligations or bonds issued by a foreign corporation 85% of the business of which is
located in the Philippines
 Shares, obligations or bonds issued by a foreign corporation if such shares, obligations or bonds
have acquired a business situs in the Philippines (i.e. they are used in the furtherance of its
business in the Philippines)
 Shares, rights in any partnership, business or industry established in the Philippines

2. What are excluded from gross estate?

 GSIS proceeds/ benefits
 Accruals from SSS
 Proceeds of life insurance where the beneficiary is irrevocably appointed
 Proceeds of life insurance under a group insurance taken by employer (not taken out upon his
life)
 War damage payments
 Transfer by way of bona fide sales
 Transfer of property to the National Government or to any of its political subdivisions
 Separate property of the surviving spouse
 Merger of usufruct in the owner of the naked title
 Properties held in trust by the decedent
 Acquisition and/or transfer expressly declared as not taxable

3. What will be used as basis in the valuation of property?

The properties comprising the gross estate shall be valued based on their fair market value as of the time
of decedent’s death.

If the property is a real property, the appraised value thereof as of the time of death shall be, whichever is
the higher of –
1. The fair market value as determined by the Commissioner, or
2. The fair market value as shown in the schedule of values fixed by the provincial and city
assessors.

In the case of shares of stocks, the fair market value shall depend on whether the shares are listed or
unlisted in the stock exchanges. Unlisted common shares are valued based on their book value while
unlisted preferred shares are valued at par value. In determining the book value of common shares,
appraisal surplus shall not be considered as well as the value assigned to preferred shares, if there are any.
On this note, the valuation of unlisted shares shall be exempt from the provisions of RR No. 6-2013, as
amended.

For shares which are listed in the stock exchanges, the fair market value shall be the arithmetic mean
between the highest and lowest quotation at a date nearest the date of death, if none is available on the
date of death itself.

The fair market value of units of participation in any association, recreation or amusement club (such as
golf, polo, or similar clubs), shall be the bid price nearest the date of death published in any newspaper or
publication of general circulation.

To determine the value of the right to usufruct, use or habitation, as well as that of annuity, there shall be
taken into account the probable life of the beneficiary in accordance with the latest basic standard
mortality table, to be approved by the Secretary of Finance, upon recommendation of the Insurance
Commissioner.(Sec. 5, RR No. 12-2018)

4. What are the allowable deductions for Estate Tax Purposes?

(Please note that the allowable deductions will vary depending on the law applicable at the time of the
decedent’s death)

 For dates of deaths occurring January 1, 2018 to present (RA No. 10963/TRAIN Law)

A. For a citizen or resident alien:

1. Standard Deduction — An amount equivalent to Five million pesos (₱5,000,000.00)
2. Claims against the estate -

Requisites for Deductibility of Claims against the Estate –

 The liability represents a personal obligation of the deceased existing at the time of death;
 The liability was contracted in good faith and for adequate and full consideration in money’s
worth;
 The claim must be a debt or claim which is valid in law and enforceable in court; and
 The indebtedness must not have been condoned by the creditor or the action to collect from the
decedent must not have prescribed.

3. Claims of the deceased against insolvent persons where the value of the decedent’s interest therein is
included in the value of the gross estate

4. Unpaid mortgages, taxes and casualty losses

5. Property previously taxed - An amount equal to the value specified below of any property forming
part of the gross estate situated in the Philippines of any person who died within five (5) years prior to the
death of the decedent, or transferred to the decedent by gift within five (5) years prior to his death, where
such property can be identified as having been received by the decedent from the donor by gift, or from
such prior decedent by gift, bequest, devise or inheritance, or which can be identified as having been
acquired in exchange for property so received:
“One hundred percent (100%) of the value, if the prior decedent died within one (1) year prior to the
death of the decedent, or if the property was transferred to him by gift, within the same period prior to his
death;

“Eighty percent (80%) of the value, if the prior decedent died more than one (1) year but not more than
two (2) years prior to the death of the decedent, or if the property was transferred to him by gift within the
same period prior to his death;

“Sixty percent (60%) of the value, if the prior decedent died more than two (2) years but not more than
three (3) years prior to the death of the decedent, or if the property was transferred to him by gift within
the same period prior to his death;

“Forty percent (40%) of the value, if the prior decedent died more than three (3) years but not more than
four (4) years prior to the death of the decedent, or if the property was transferred to him by gift within
the same period prior to his death; and

“Twenty percent (20%) of the value, if the prior decedent died more than four (4) years but not more than
five (5) years prior to the death of the decedent, or if the property was transferred to him by gift within the
same period prior to his death.

“These deductions shall be allowed only where a donor’s tax, or estate tax imposed under Title III of
NIRC was finally determined and paid by or on behalf of such donor, or the estate of such prior decedent,
as the case may be, and only in the amount finally determined as the value of such property in
determining the value of the gift, or the gross estate of such prior decedent, and only to the extent that the
value of such property is included in the decedent’s gross estate, and only if in determining the value of
the estate of the prior decedent, no deduction was allowable under this item in respect of the property or
properties given in exchange therefor. Where a deduction was allowed of any mortgage or other lien in
determining the donor’s tax, or the estate tax of the prior decedent, which was paid in whole or in part
prior to the decedent’s death, then the deduction allowable this item shall be reduced by the amount so
paid. Such deduction allowable shall be reduced by an amount which bears the same ratio to the amounts
allowed as deductions under items (2), (3), (4), and (6) of this Subsection as the amount otherwise
deductible under this item bears to the value of the decedent’s estate. Where the property referred to
consists of two or more items, the aggregate value of such items shall be used for the purpose of
computing the deduction.

6. Transfers for Public Use

7. The Family Home - An amount equivalent to the current fair market value of the decedent’s family
home: Provided, however, that if the said current fair market value exceeds Ten million pesos
(₱10,000,000.00), the excess shall be subject to estate tax

If the family home is conjugal property and does not exceed (₱10,000,000.00), the allowable deduction is
one-half (1/2) of the amount only.

8. Amount Received by Heirs Under Republic Act No. 4917

Any amount received by the heirs from the decedent’s employer as a consequence of the death of the
decedent-employee in accordance with Republic Act No. 4917: Provided, that such amount is included in
the gross estate of the decedent.
9. Net share of the surviving spouse in the conjugal partnership or community property

B. For a non-resident alien:

1. Standard Deduction – An amount equivalent to Five hundred thousand pesos (₱500,000)

2. Losses and indebtedness -

2.1. Claims against the estate

2.2. Claims of the deceased against insolvent persons where the value of the decedent’s interest therein is
included in the value of the gross estate
2.3. Unpaid mortgages, taxes and casualty losses

3. Property previously taxed

4. Transfers for Public Use

5. Net share of the surviving spouse in the conjugal partnership or community property

 For deaths occurring January 1, 1998 to December 31, 2017 (RA No. 8424/NIRC of 1997)

A. For a citizen or resident alien:

1. Expenses, Losses, Indebtedness, and Taxes:

1. Actual funeral expenses (whether paid or unpaid) up to the time of interment, or an amount equal
to five percent (5%) of the gross estate, whichever is lower, but in no case to exceed P200,000.
2. Judicial expenses of the testamentary or intestate proceedings.
3. Claims against the estate.
4. Claims of the deceased against insolvent persons where the value of the decedent’s interest
therein is included in the value of the gross estate; and,
5. Unpaid mortgages, taxes and casualty losses

2. Property previously taxed (Vanishing Deduction) (Section 86 (2) of the NIRC as amended by RA No.
8424) - An amount equal to the value specified below of any property forming a part of the gross estate
situated in the Philippines of any person who died within five (5) years prior to the death of the decedent,
or transferred to the decedent by gift within five (5) years prior to his death, where such property can be
identified as having been received by the decedent from the donor by gift, or from such prior decedent by
gift, bequest, devise or inheritance, or which can be identified as having been acquired in exchange for
property so received:

One hundred percent (100%) of the value, if the prior decedent died within one (1) year prior to the death
of the decedent, or if the property was transferred to him by gift within the same period prior to his death;

Eighty percent (80%) of the value, if the prior decedent died more than one (1) year but not more than
two (2) years prior to the death of the decedent, or if the property was transferred to him by gift within the
same period prior to his death;
Sixty percent (60%) of the value, if the prior decedent died more than two (2) years but not more than
three (3) years prior to the death of the decedent, or if the property was transferred to him by gift within
the same period prior to his death;

Forty percent (40%) of the value, if the prior decedent died more than three (3) years but not more than
four (4) years prior to the death of the decedent, or if the property was transferred to him by gift within
the same period prior to his death; and

Twenty percent (20%) of the value, if the prior decedent died more than four (4) years but not more than
five (5) years prior to the death of the decedent, or if the property was transferred to him by gift within the
same period prior to his death;

These deductions shall be allowed only where a donor’s tax or estate tax imposed was finally determined
and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be, and only
in the amount finally determined as the value of such property in determining the value of the gift, or the
gross estate of such prior decedent, and only to the extent that the value of such property is included in the
decedent’s gross estate, and only if in determining the value of the estate of the prior decedent, no
Property Previously Taxed or Vanishing Deduction was allowable in respect of the property or properties
given in exchange therefor. (Section 6 & 7 of RR No. 2-2003)

3. Transfers for public use

4. The family home - fair market value but not to exceed P1,000,000.00

The family home refers to the dwelling house, including the land on which it is situated, where the
husband and wife, or a head of the family, and members of their family reside, as certified to by the
Barangay Captain of the locality. The family home is deemed constituted on the house and lot from the
time it is actually occupied as a family residence and is considered as such for as long as any of its
beneficiaries actually resides therein. (Arts. 152 and 153, Family Code)

5. Standard deduction – A deduction in the amount of One Million Pesos (P1,000,000.00) shall be
allowed as an additional deduction without need of substantiation.

6. Medical expenses – All medical expenses (cost of medicines, hospital bills, doctor’s fees, etc.) incurred
(whether paid or unpaid) within one (1) year before the death of the decedent shall be allowed as a
deduction provided that the same are duly substantiated with official receipts. For services rendered by
the decedent’s attending physicians, invoices, statements of account duly certified by the hospital, and
such other documents in support thereof and provided, further, that the total amount thereof, whether paid
or unpaid, does not exceed Five Hundred Thousand Pesos (P500,000).

7. Amount received by heirs under RA No. 4917 - Any amount received by the heirs from the decedent’s
employer as a consequence of the death of the decedent-employee in accordance with Republic Act No.
4917 is allowed as a deduction provided that the amount of the separation benefit is included as part of
the gross estate of the decedent.

8. Net share of the surviving spouse in the conjugal partnership or community property

B. For a non-resident alien:

1. Expenses, losses, indebtedness and taxes
2. Property previously taxed
3. Transfers for public use
4. Net share of the surviving spouse in the conjugal partnership or community property

No deduction shall be allowed in the case of a non-resident decedent not a citizen of the Philippines,
unless the executor, administrator, or anyone of the heirs, as the case may be, includes in the return
required to be filed in the Section 90 of the Code the value at the time of the decedent’s death of that part
of his gross estate not situated in the Philippines.

5. What does the term "Funeral Expenses" include?

The term "FUNERAL EXPENSES" is not confined to its ordinary or usual meaning. They include:
1. The mourning apparel of the surviving spouse and unmarried minor children of the deceased
bought and used on the occasion of the burial;
2. Expenses for the deceased’s wake, including food and drinks;
3. Publication charges for death notices;
4. Telecommunication expenses incurred in informing relatives of the deceased;
5. Cost of burial plot, tombstones, monument or mausoleum but not their upkeep. In case the
deceased owns a family estate or several burial lots, only the value corresponding to the plot
where he is buried is deductible;
6. Interment and/or cremation fees and charges; and
7. All other expenses incurred for the performance of the rites and ceremonies incident to interment.

Expenses incurred after the interment, such as for prayers, masses, entertainment, or the like are not
deductible. Any portion of the funeral and burial expenses borne or defrayed by relatives and friends of
the deceased are not deductible. Actual funeral expenses shall mean those which are actually incurred in
connection with the interment or burial of the deceased. The expenses must be duly supported by official
receipts or invoices or other evidence to show that they were actually incurred. (Sec 6 (A)(1) of RR 2-
2003)

6. What does the term "Judicial Expenses" include?

Expenses allowed as deduction under this category are those incurred in the inventory-taking of assets
comprising the gross estate, their administration, the payment of debts of the estate, as well as the
distribution of the estate among the heirs. In short, these deductible items are expenses incurred during the
settlement of the estate but not beyond the last day prescribed by law, or the extension thereof, for the
filing of the estate tax return. Judicial expenses may include:

1. Fees of executor or administrator;

2. Attorney’s fees;
3. Court fees;
4. Accountant’s fees;
5. Appraiser’s fees;
6. Clerk hire;
7. Costs of preserving and distributing the estate;
8. Costs of storing or maintaining property of the estate; and
9. Brokerage fees for selling property of the estate.
Any unpaid amount for the aforementioned cost and expenses claimed under “Judicial Expenses” should
be supported by a sworn statement of account issued and signed by the creditor. (Sec 6 (A)(2) of RR 2-
2003)