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)