Extrajudicial settlement of estate

 Rule 74, Sec. 1. Extrajudicial settlement by agreement between heirs.

o If the decedent left no will and no debts and the heirs are all of
age, or the minors are represented by their judicial or legal
representatives duly authorized for the purpose, the parties may,
without securing letters of administration, divide the estate among
themselves as they see fit by means of a public instrument filed in
the office of the register of deeds, and should they disagree, they
may do so in an ordinary action of partition. If there is only one
heir, he may adjudicate to himself the entire estate by means of an
affidavit filed in the office of the register of deeds. The parties to an
extrajudicial settlement, whether by public instrument or by
stipulation in a pending action for partition, or the sole heir who
adjudicates the entire estate to himself by means of an affidavit
shall file, simultaneously with and as a condition precedent to the
filing of the public instrument, or stipulation in the action for
partition, or of the affidavit in the office of the register of deeds, a
bond with the said register of deeds, in an amount equivalent to the
value of the personal property involved as certified to under oath by
the parties concerned and conditioned upon the payment of any
just claim that may be filed under Section 4 of this rule. It shall be
presumed that the decedent left no debts if no creditor files a
petition for letters of administration within two (2) years after the
death of the decedent.
o The fact of the extrajudicial settlement or administration shall be
published in a newspaper of general circulation in the manner
provided in the next succeeding section (once a week for 3
consecutive weeks); but no extrajudicial settlement shall be binding
upon any person who has not participated therein or had no notice
thereof.
 An extrajudicial settlement of estate is done by executing an “Extrajudicial
Settlement Among Heirs”. This is a legal document specifying:
o 1. Compliance with the legal conditions for an extrajudicial
settlement
o 2. Description of the properties to be extrajudicially settled (title
number, value, location, lot size, technical description, etc.)
o 3. Nature of the property (if conjugal property)
o 4. Name of the heirs
o 5. How the properties shall be divided amongst the heirs.
o 6. Posting of a bond if there is personal property involved.
o 7. Undertaking that the Deed will be published in a newspaper of
general circulation once a week for 3 consecutive weeks.
  Before filing the Deed of Extrajudicial Settlement with the Register of
Deeds where the land is located, it is necessary that the estate taxes be
paid first.

IMPORTANT: The discussion below on the estate taxes, deduction and

procedure before the BIR is relevant only to those who died before 01 January
2018 since Republic Act No. 10963, otherwise known as the Tax Reform for
Acceleration and Inclusion Law (TRAIN Law), amended the Tax Code, including
the procedure, tax rates and deductions for estate taxes. The TRAIN Law became
effective on 01 January 2018.

 The Estate Tax Return must be filed within six (6) months from the
decedent’s death. The deadline may be extended by the Commissioner of
the BIR, in meritorious cases, not exceeding thirty (30) days. It must be
noted that the estate itself is assigned its own Tax Identification Number
(TIN). The Estate Tax Return is filed with Revenue District Office (RDO)
having jurisdiction over the place of residence of the decedent at the time
of his death. If the decedent has no legal residence in the Philippines, then
the return can be filed with:
o 1. The Office of the Revenue District Officer, Revenue District Office
No. 39, South Quezon City; or
o 2. The Philippine Embassy or Consulate in the country where
decedent is residing at the time of his death.
 The estate tax shall be paid at the time the return is filed. However, upon
request and if the Commissioner of the BIR finds that payment on the due
date of the Estate Tax or of any part thereof would impose undue hardship
upon the estate or any of the heirs, he may extend the time for payment of
such tax or any part thereof not to exceed five (5) years, in case the estate
is settled through the courts or two (2) years in case the estate is settled
extra-judicially. If an extension is granted, the BIR Commissioner may
require a bond in such amount, not exceeding double the amount of tax, as
it deems necessary.
 The estate tax is based on the value of the net estate as follows:
o 1. If not over P200,000, it is exempt
o 2. If over P200,000 but not over P500,000, then tax is 5% of the
excess over P200,000
o 3. If over P500,000 but not over P2,000,000, then tax is P15,000
PLUS 8% of the excess over P500,000
o 4. If over P2,000,000 but not over P5,000,000, then tax is
P135,000 PLUS 11% of the excess over P2,000,000
o 5. If over P5,000,000 but not over P10,000,000, then tax is
P465,000 PLUS 15% of the excess over P5,000,000
o 6. If over P10,000,000, then tax is P1,215,000 PLUS 20% of the
excess over P10,000,000
 The basis shall be the net estate. That means that there are allowable
deductions on the estate. These deductions include funeral expenses, share
of the surviving spouse, medical expenses incurred by the decedent within
1 year prior to his death, family home deduction of not more than
P1,000,000.00, standard deduction of P1,000,000.00, among others. It is
best to consult with an accountant on this matter to determine the
accurate estate tax.
 For extrajudicial settlement of estate, the following documents must be
submitted with the BIR:
o 1. Notice of Death
o 2. Certified true copy of the Death Certificate
o 3. Deed of Extra-Judicial Settlement of the Estate
o 4. Certified true copy of the land titles involved
o 5. Certified true copy of the latest Tax Declaration of real properties
at the time of death
o 6. Photo copy of Certificate of Registration of vehicles and other
proofs showing their correct value
o 7. Photo copy of certificate of stocks
o 8. Proof of valuation of shares of stocks at the time of death
 a. For listed stocks – newspaper clippings or certification
from the Stock Exchange
 b. For unlisted stocks – latest audited Financial Statement of
issuing corporation with computation of book value per
share
o 9. Proof of valuation of other types of personal property
o 10. CPA Statement on the itemized assets of the decedent, itemized
deductions from gross estate and the amount due if the gross value
of the estate exceeds two million pesos
o 11. Certification of Barangay Captain for claimed Family Home
o Other documents may also be requested by the BIR.
 After the estate taxes have been paid, the heirs may proceed to the Register
of Deeds where the land is situated. If the Register of Deeds would allow it,
the filing with the BIR and Register of Deeds may be simultaneous. The
proof of payment of the estate tax, Affidavit of Publication of the Deed, the
Deed of Extrajudicial Settlement of Estate are the basic requirements to be
submitted to the Register of Deeds. When all pertinent documents are
submitted, the Register of Deeds will correspondingly issue the Transfer of
Certificates of Title to the proper heirs.
Tax Amnesty Act (RA11213)

A. Estate Tax Amnesty

 The Estate Tax Amnesty covers the estate of decedents who died on or
before 31 December 2017, with or without assessments duly issued
therefore, whose estates have remained unpaid or have accrued as of 31
December 2017.
 The estate tax amnesty rate is 6% based on the decedent's total net estate
at the time of death. The net estate refers to the gross estate less allowable
deductions as provided in the Tax Code or the applicable state laws
prevailing at the time of death of the decedent. If an estate tax return was
previously filed with the BIR, the estate tax of 6% would be based on the
net undeclared estate.
 The estate tax amnesty may be filed by the Executor, Administrator, legal
heirs, transferees or beneficiaries of the Estate. Availment of the Estate
Tax Amnesty within two (2) years from the effectivity of the Implementing
Rules and Regulations (IRR) of the Tax Amnesty Act. It should be filed
with the Revenue District Office (RDO) having jurisdiction over decedent’s
last residence by filing a sworn Estate Tax Amnesty Return. For non-
resident decedents, the Estate Tax Amnesty Return should generally be
filed with RDO No. 39.
 Taxpayers who avail of the Estate Tax Amnesty will enjoy immunity from
the payment of estate taxes, civil, criminal, and administrative cases and
penalties.
 Please note that the Estate Tax Amnesty shall not extend to the following:
o 1.Estate tax cases which shall have become final and executory; and
o 2.Properties involved in cases pending in appropriate courts which:
 Fall under the jurisdiction of the Presidential Commission on
Good Government (PCGG);
 Involve unexplained or unlawfully acquired wealth under the
Anti-Graft and Corrupt Practices Act and Plunder Act;
 Involve violation of the Anti-Money Laundering Act;
 Involve tax evasion and other criminal offenses under
Chapter II of Title X of the Tax Code;
 Involve felonies of fraud, illegal exactions and transactions,
malversation of public funds and property.

B. Tax Amnesty on Delinquencies (TAD)

 The TAD covers all national internal revenue taxes such as, but not limited
to, income tax, withholding tax (including those withheld, but not
remitted), capital gains tax, donor’s tax, VAT, other percentage taxes,
excise tax and DST collected by the BIR, including VAT and excise taxes
collected by the Bureau of Customs (BOC) for taxable year 2017 and prior
years.
 Tax Amnesty Rate
Nature of Delinquency (on the basic tax
assessed)

Delinquencies and assessments which have

40%
become final and executory

Tax Cases subject of final and executory judgment

50%
by the courts

Pending criminal cases with criminal information

filed with the Department of Justice or the courts
for tax evasion and other criminal offenses under 60%
Chapter II, Title X and Section 275 of the Tax
Code

Withholding agents who withhold taxes but failed

100%
to remit the same to the BIR

 The TAD may be availed of by any person, natural or juridical, within one
(1) year from the effectivity of the IRR by filing with the RDO having
jurisdiction over the residence or principal place of business of the
taxpayer, a Sworn Tax Amnesty on Delinquencies Return accompanied by
a Certification of Delinquency. The payment of the amnesty tax shall be
made at the same time the return is filed.
 For taxpayers who avail of the TAD, the tax delinquency will be considered
settled. Moreover, the taxpayers who avail of the TAD will enjoy immunity
from payment of delinquency or assessment, investigations as well as
appurtenant civil, criminal and administrative cases and penalties under
the Tax Code and any pending cases which are all subject of the amnesty.
Further, availment of the TAD will result in the termination of criminal
cases with the DOJ or courts for tax evasion & other criminal offenses
under Chapter II, Title X & Sec. 275 of the Tax Code and corresponding
civil and administrative cases. Finally, any notices of levy, attachments,
and warrants of garnishment will be lifted.
RR 4-2019 (IRR, Tax Amnesty Act)

All persons, whether natural or juridical, with internal revenue tax liabilities
covering taxable year 2017 and prior years, may avail of the TAD within one (1)
year from the effectivity of the RR (beginning 24 April 2019), under any of the
following instances:

A. Delinquent Accounts as of the effectivity of RR 4-2019, including the

following:
 Delinquent Accounts with application for compromise settlement either
on the basis of (a) doubtful validity of the assessment or (b) financial
incapacity of the taxpayer, whether the same was denied by or still
pending with the Regional Evaluation Board ("REB") or the National
Evaluation Board (NEB), as the case may be, on or before the effectivity of
these Regulations;
 Delinquent Withholding Tax liabilities arising from non-withholding of
tax; and
 Delinquent Estate Tax liabilities.
Delinquent Accounts shall pertain to a tax due from a taxpayer arising from the
audit of the BIR which had been issued Assessment Notices that have become
final and executory due to the following instances:
 Failure to pay the tax due on the prescribed due date provided in the Final
Assessment Notice (FAN)lFormal Letter of Demand (FLD) and for which
no valid Protest, whether a request for reconsideration or reinvestigation,
has been filed within thirty (30) days from receipt thereof;
 Failure to file an appeal to the Court of Tax Appeal (CTA) or an
administrative appeal before the Commissioner of internal Revenue (CIR)
within thirty (30) days from receipt of the decision denying the request for
reinvestigation or reconsideration; or
 Failure to file an appeal to the CTA within thirty (30) days from receipt of
the Decision of the CIR denying the taxpayer's admninistrative appeal to
the Final Decision on Disputed Assessment (FDDA).

B. With pending criminal cases with the DOJ/Prosecutor's Office or the courts for
tax evasion and other criminal offenses under Chapter II of Title X and Section
275 of the Tax Code, as amended, with or without assessments duly issued;

C. With final and executory judgment by the courts on or before the effectivity of
these Regulations; and

D. Withholding tax liabilities of withholding agents arising from their failure to

remit withheld taxes.