MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY

COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY

DEPARTMENT OF ACCOUNTANCY

ACT184: Business Taxes

Estate Taxation (3)

ABSTRACTION

ALLOWABLE DEDUCTIONS
A. Expenses, losses, indebtedness, taxes, etc. CITIZENS OR NON-RESIDENT
(ELIT) RESIDENTS ALIEN:
Formula of Limit =
(Phil GE/World GE) x
WORLD ELIT
I. Claims against the estate (duly notarized exc Yes Yes
financial institution, contracted w/in 3 years before
death, exec/admin shall submit statement showing
disposition of the proceeds of the loan)
II. Claims against insolvent person (+gross estate, Yes Yes
portion uncollectible, incapacity proven)
III. Unpaid Mortgages (not reflected in the gross Yes Yes
estate)
IV. Taxes (accrued and unpaid, not to include
Yes Yes
income tax on income received after death,
property taxes not accrued before death, and
estate tax)
Yes Yes
V. Casualty losses (fire, storm, shipwreck, or other
casualty losses, robbery, theft and embezzlement,
not compensated by insurance, not claimed as
deduction in an ITR, occurring during the
settlement of the estate and before the last day of
payment of estate tax)
B. Transfer for public use (+gross estate, +will, in Yes Yes
favor of PH govt, exclusive for public purpose, to
take effect after death)
C. Vanishing deduction (see note) Yes Yes
D. Family home Yes No

E. Standard deduction Yes Yes

F. Amounts received under RA 4917 Yes No

G. Share of the surviving spouse Yes Yes

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

1. Deductions Allowed to the Estate of a Citizen or a Resident.

A. Standard Deduction - an amount equivalent to P5,000,000.
B. 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 P10,000,000, the
excess shall be subjected to estate tax.

C. Funeral expenses, judicial expenses and medical expenses are no longer allowed as
deductions.

2. Deductions Allowed to Nonresident Not a Citizen

A. Standard deduction - An amount equivalent to P500,000;
B. That proportion of the deduction known as claims against the estate; claims against insolvent
persons; unpaid mortgage, indebtedness and taxes, which value of such part bears to the value
of his gross estate wherever situated.
C. Property previously taxed (Vanishing deductions)
D. Transfer for Public Use

TAX ADMNISTRATION
1. Rate of the Estate Tax - there shall be levied, assessed and collected and paid upon the
transfer of the net estate of every decedent, whether resident or nonresident of the Philippines a
tax at the rate of six percent (6%) based on the value of such net estate.
2. Requirements - in all cases of transfers subject to the tax imposed herein, or regardless of
the gross value of the estate, where the said estate consists of registered or registrable
property, such as real property motor vehicle, shares of stock, or other similar property for which
a clearance from the BIR is required as a condition precedent for the transfer of ownership
thereof in the name if the transferee, the executor, or the administrator, or any of the legal heirs,
as the case may be, shall file a return under oath in duplicate.
The estate tax returns showing a gross value exceeding P5,000,000 shall be supported with a
statement duly certified by a Certified Public Accountant.

Notice of death is no longer required.

3. Time for filing - the estate tax return shall be filed within one year from the decedent’s death

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

4. Payment by Installment - in the case the available cash of the estate is insufficient to pay the
total estate tax due, payment by installment shall be allowed within two years from the statutory
date for its payment without civil penalty and interest.

If the bank has knowledge of the death of a person, who maintained a bank deposit alone, or
jointly with another, it shall allow any withdrawal from the said deposit account subject to a final
withholding tax of 6%. For this purpose, all withdrawal slips shall contain a statement to the
effect that all of the joint depositors are still living at the time of withdrawal by any one of the
joint depositors and such statement shall be under oath by the said depositors.

NET DISTRUBATABLE ESTATE VERSUS NET TAXABLE ESTATE

Net Distributable Estate - Gross Estate Less ACTUAL expenses or payments.
Net Taxable Estate - Gross Estate Less expenses prescribed by the Tax Code.
Summary:

NET TAXABLE NET DISTRIBUTABLE

ESTATE ESTATE
GROSS ESTATE
Real or Immovable INCLUDED INCLUDED
Tangible Personal Property INCLUDED INCLUDED
Intangible Personal Property INCLUDED INCLUDED
Transfer in Contemplation of INCLUDED NOT INCLUDED
Death
Revocable Transfer INCLUDED NOT INCLUDED
Transfer under GPA INCLUDED NOT INCLUDED
Proceeds of Life Insurance INCLUDED INCLUDED
Exclusion such as SSS, NOT INCLUDED INCLUDED
GSIS, etc.
ALLOWABLE
DEDUCTIONS:
Funeral Expenses REPEALED ACTUAL
Judicial Expenses REPEALED ACTUAL
Claims against the Estate ACTUAL ACTUAL
Claims aginst Insolvent ACTUAL ACTUAL
Persons
TPU ACTUAL ACTUAL
Vanishing Deduction AS COMPUTED NOT CONSIDERED
Standard Deduction FIXED AMOUNT NOT CONSIDERED
Family Home WITH LIMIT NOT CONSIDERED
Amount Received under RA ACTUAL NOT CONSIDERED
4917
Share of Surviving Spouse AS COMPUTED AS COMPUTED
NET TAXABLE ESTATE PXX

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 MINDANAO STATE UNIVERSITY - GENERAL SANTOS CITY
COLLEGE OF BUSINESS ADMINISTRATION AND ACCOUNTANCY
DEPARTMENT OF ACCOUNTANCY

Estate Tax Due PXX (PXX)

NET DISTRIBUTABLE PXX
ESTATE

- END-

REFERENCES
Tabag, E. D. (2019). Transfer and Business Taxation. Manila: Info Page.

Valencia, E. G. (2017). Transfer and Business Taxation. Baguio City: Valencia Educational Supply.