ST.

ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

ESTATE TAX

GROSS ESTATE
- Depends upon the citizenship and/or residence of the decedent:

Real Property Tangible Personal Property Intangible Personal Property

Decedent
Within Without Within Without Within Without

Citizen / / / / / /

Resident Alien / / / / / /

Nonresident Alien / X / X X
X
(If there is
reciprocity)

Intangible personal property means incorporeal property which do not have any physical form but represents
rights and privileges. Examples include bank deposits, trademarks, shares of capital, patents, copyrights, bonds,
notes, interest in a partnership, etc.

Intangible asset Situs

1. Receivable (Promissory Note) Residence of the Debtor
2. Bank Deposit Location of the Bank
3. Other Intangible Properties:
a. Franchises, Patents, Copyrights, Trademarks Where Property is Used or Exercised
b. Investment in Partnership Where Partnership Is Established
c. Shares of Stock (Include Corporate Bonds)
i. Domestic Corporation Within the Philippines
ii. Foreign Corporation Without the Philippines
Except:
1. If ≥ 85% of Business is in the Philippines Within the Philippines
2. If Shares have acquired a Business Situs in the Within the Philippines
Philippines

PROPERTIES INCLUDED IN THE GRASS ESTATE OF A DECEDENT

- Includes all properties, rights and interests which the decedent owns at the time of his death;
1. Properties own by the decedent and physically present in his estate at the time of death;
2. Interest (whether legal or beneficial) in property owned or possessed by the decedent and at the
time of death (ex. Usufructuary writes, leasehold rights);
3. Taxable transfers - meet during lifetime but are in the nature of testamentary dispositions (mortis causa
in substance), Though he has transferred the property during his lifetime, he remains in control of the
property, and the transfer is intended to take effect only at or after his death.

a. Transfers in Contemplation of Death

- Transfer is impelled by the thought of death.

Ex. Donation Mortis Causa — donation which takes effect upon the death of the donor, and
therefore partakes of the nature of a testamentary disposition.

1. No transfer of title or ownership to the donee;

2. The donor retains ownership (cither legal or beneficial) and remains in full control of the
property during his lifetime;
3. The transfer is revocable by doner at will during his lifetime; and
4. The transfer is void if the donee dies first.
 ST. ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

b. Revocable Transfers
The transferor reserves the power to alter, amend, revoke, or terminate the enjoyment of the
property by the transferee, or where such power is relinquished in contemplation of the
decedent’s death.

- Whether or not such power is exercised during lifetime. If not exercised during lifetime, it is
considered exercised at the time of death.

c. Transfer with retention ox reservation of certain rights over the income or enjoyment of the
property transferred.
- Transferor reserves his right to the income of the property until his death.
- Transferor reserves his right to the possession or enjoyment of the property until his death.

d. Property passing under a General Power of Appointment (GPA)

- The decedent is the donee.
- The (appointed) property comes from a donor (of the power) with a GPA for the donee (of the
power). The donee is authorized to dispose of the property by exercising his power of
appointment in designating any person who shall possess or enjoy the property and/or its
income.
- A GPA makes the appointed property, for all purposes, the property of the donee of the power
of appointment.

e. Transfer for Insufficient Consideration

In all the taxable transfers above, if the transfer is a bona fide sale for adequate and full
consideration in money or money's worth, no value (or the property transferred) shall be included
in the gross estate.

However:
1. If the transfer is not a bona fide sale for an adequate and full consideration in money or
money's worth, there shall be included in the gross estate the excess of the FMV of the
property at the time of death over the value of the consideration received by the decedent;

Included in gross estate = FMV of property at time of death — Consideration received

2. If transfer is fictitious, the total value of the property at time of death shall be included in the
gross estate of the decedent.

f. Proceeds of Life Insurance

Proceeds of life insurance taken out by the decedent upon his own life shall be included in his
gross estate when:
1. His estate, his executor or administrator is the beneficiary; whether nor not the designation of
the beneficiary is revocable; or
2. The beneficiary is any other person, but the decedent retains the power to revoke the
designation.

Note: When designation of the beneficiary is not clear, it is presumed to be revocable.

Proceeds of life insurance are NOT included in gross estate when:

1. Beneficiary is other than the estate, his executor or administrator, and the designation is
irrevocable;
2. Proceeds of a group insurance policy;
3. Benefits from the GSIS, SSS, accruing by reason of death.

4. Claims Against Insolvent Persons

- Receivables due from persons who are insolvent.
- Shall be included in the gross estate at its full amount.
- Bad debt deduction is taken for the uncollectible portion.

5. Conjugal/community properties, if decedent was married.

- The decedent’s gross estate will include both his exclusive properties and the conjugal/communities
properties of his marriage.
 ST. ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

Note: Proceeds of life insurance are:

a. Conjugal or community property if the money used to pay the premiums comes from the
conjugal or community funds,
b. Exclusive property of the decedent, if the money used to pay the premiums comes from the
decedent’s exclusive properties;
c. Partly conjugal or community property and partly exclusive property of the decedent if the
premiums were paid partly from the conjugal funds and partly from the exclusive funds af the
decedent.

PROPERTIES OF SPOUSES
- The extent of the gross estate of the decedent shall depend upon the property relations between the decedent
and his/her spouse.

Property Regimes:
1. Absolute Community of Property (ACP)
2. Conjugal Partnership of Gains (CPG)
3. Separation of Property

The spouses may, in a pre-nuptial agreement (marriage settlement), agree upon the regime that shall govern their
property relations.

However, in the absence of a marriage settlement, the property relations shall be governed by:
a. the CPG for those married before August 3, 1988, or
b. the ACP for those married on or after August 3, 1988.

What is the CPG?

Exclusive Property of Husband Exclusive Property of Wife

1. Property owned before marriage.
2. Property acquired during the marriage
by gratuitous title (by inheritance or
donation).
3. Property acquired with the exclusive
money of the husband or exchanged
for exclusive property of the husband.
4. Property designated as exclusive in a
marriage settlement.
1. Property owned before marriage.
2. Property acquired during the marriage
by gratuitous title (by inheritance or
donation).
3. Property acquired with the exclusive
money of the wife or exchanged for
exclusive property of the wife.
4. Property designated as exclusive in a
marriage settlement.

Husband Wife

Conjugal Properties

1. Properties acquired by onerous title using the common funds (even if

the property is only for one of the spouses).
2. Properties obtained from the labor or work of the spouses during
marriage.
3. Properties acquired by chance such as winnings from gambling or
betting. (However, losses therefrom shall be borne exclusively by the
loser-spouse).
4. Fruits (natural or civil) and income of the conjugal properties.
5. Fruits (natural or civil), and income of the exclusive properties of each
spouse.
 ST. ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

What is the ACP?

Exclusive Property of Husband Exclusive Property of Wife

1. Property acquired during the marriage
by gratuitous title (by inheritance or
donation) UNLESS the donor or
testator expressly provides that the
property shall form part of the
community property.
2. Fruits and income of exclusive
properties.
3. Properties for the personal or
exclusive use of the husband except
jewelry.
4. Property acquired before marriage by
the husband who has legitimate
descendants from a previous marriage.
5. Property designated as exclusive in a
marriage settlement.
1. Property acquired during the marriage
by gratuitous title (by inheritance or
donation) UNLESS the donor or
testator expressly provides that the
property shall form part of the
community property.
2. Fruits and income of exclusive
properties.
3. Properties for the personal or exclusive
use of the wife except jewelry.
4. Property acquired before marriage by
the wife who has legitimate
descendants from a previous marriage.
5. Property designated as exclusive in a
marriage settlement.

Husband Wife

Conjugal Properties

1. ALL properties owned by the spouses at the time of the marriage

(except (4) above).
2. ALL properties acquired thereafter.
3. Fruits and income of community properties.

ACQUISITIONS OR TRANSMISSIONS WHICH ARE NOT INCLUDED IN THE GROSS ESTATE

OF A DECEDENT

a. Merger of the usufruct in the owner of the naked title to the property.
b. Fideicommissary substitution — where the inheritance or legacy is delivered or transmitted by the
fiduciary heir or legate to the second heir (fideicommissary).
c. The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with
the desire of the predecessor.

Note: In the three (3) cases, there is actually one transfer involved. Such transfers were already Subjected
to estate tax, and taxing these would amount to double taxation,

d. All bequests, devises, legacies, or transfer to social welfare, cultural, and charitable institutions, no part of
the income of which insures to the benefit of any individual: Provided, however, that not more than 30%
of the said bequests, devices, legacies, or transfers shall be used by such institutions for administration
purposes (Sec. 87, NIRC).

Other Exemptions from the estate tax:

e. Proceeds of life insurance and benefits received by members of the Government Service Insurance
System (GSIS”) (P.D. No. 1 146);
f. Benefits received by members from the Social Security System by reason of death (R.A. No. 1161, as
amended).
g. Amounts received from the Philippine and United States governments for war damages (R.A. 227).
h. Amounts received from the United State} Veterans Administration (R.A. No. 360).
i. Retirement benefits of employees of private firms from private pension plans approved by the BIR:
j. Intangible personal property located in the Philippines of a non-resident alien decedent under the principle
of reciprocity (Sec. 104, NIRC) and
 ST. ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

k. Personal Equity and Retirement Account (PERA) assets shall not be considered assets of the Contributors
for purposes of estate taxes (R.A. No, 9505).

Furthermore, Qualified PERA Distributions received Sy the Contributor, or in case of the death of the
Contributor, received by his heirs or beneficiaries, whether in a lump sum or pension for a definite period
or lifetime pension, shall not be subject to estate tax (Sec, 10, Rev. Regs. No. 17-20] \).

l. Proceeds of life insurance when the beneficiary is not the estate, the executor, or the administrator, and
the designation is irrevocable.
m. Bank deposit in the name of the decedent on which the 6% estate tax has been withheld and remitted by
the bark to the BIR upon withdrawal by the heirs.

VALUATION OF THE GROSS ESTATE

- Properties shall be valued at the time of death of the decedent.

Property
Usufruct, use, habitation,
annuity
Real Property
Personal Property
Stocks listed in the stock
exchange
Stocks not listed in any | local
exchange
Notes; accounts receivable
Units of participation in any
association recreation, or
amusement club
Valuation
Value shall be based on the probable life of the beneficiary in accordance with
the latest Basic Standard Mortality Table approved by the Department of
Finance.
FMV which is the higher of the zonal value or the assessor's Value
Generally, FMV at the time of death of the decedent.
Average of the lowest and highest quotes on the valuation date (date of death) or
day nearest to the valuation date.
For common shares: Book value on the valuation date (date of death), or on the
date nearest the valuation date.
For preferred shares, par value.
FMV is the discounted amount of the unpaid principal plus interest.
FMV is the bid price nearest the date of death published in any newspaper or
publication of general circulation.

DEDUCTIONS FROM THE GROSS ESTATE

A. ORDINARY DEDUCTIONS

1. CLUT (Claims, Losses, Unpaid Mortgages, Taxes, etc.)

a. Claims against the estate — consist of the bona fide unpaid personal obligations of the decedent of a
pecuniary nature. These can arise from contract, tort, or by operation of law. These must be incurred in
good faith by the decedent during his lifetime and can be enforced against the estate by his creditor.

These include personal obligations of the decedent at the time of his death except unpaid obligations
incurred incidental to his death such as funeral or medical expenses.

i. If the claim arises from the purchase of goods or services by the decedent, the following must be
submitted:
- Documents evidencing the purchase (invoices, receipts, statements of accounts).
- Creditor’s certification as to the unpaid balance of the debt, including interest; and
- Certified true copy of the latest audited balance sheet of the creditor showing the unpaid balance
of the decedent.

ii. If the claim is in the form of loan, the following requirements must be complied with:
- The instrument must be notarized except if it is not the business practice of the financial
institution-lender to notarize such instruments.
- Notarized certification from the creditor as to the unpaid balance of the debt, inclusive of
interest.
- Proof of financial capacity of the creditor to lend the amount at the time the loan was granted:
- If the loan was contacted within 3 years prior to the death of the decedent, a statement under
 ST. ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

oath executed by the administrator/executor of the estate stating the disposition of the proceeds
of the loan.

iii. Where settlement of the estate is made through the courts:

- Documents filed with the court evidencing the claims.
- The court order approving the claims.
- The documents in (A) or (B} above.

b. Claims against insolvent persons

- Must first be included in the gross estate.
- Portion or amount that cannot be collected from the decedent’s debtor is deductible from the gross
estate.

c. Unpaid mortgages — the unpaid mortgage or indebtedness is deductible from the gross estate
provided that the decedent’s interest in the property, gross of the mortgage, is included in the gross
estate.
- If the loan is an accommodation loan where the loan proceeds went to another person, the value of
the unpaid loan must be included in the gross estate as a receivable.

d. Income taxes and property taxes

- The following taxes can be deducted from the gross estate:
a. Unpaid income taxes on income due or received before the death of the decedent.
b. Real property taxes which have accrued prior to the death of the decedent.
Note: Real property taxes accrue at the beginning of the year.

e. Casualty Losses — on account of mishaps, accidents, casualties, acts of God, robbery, theft,
embezzlement can be deducted provided:
a. The loss is not compensated for by insurance or otherwise.
b. The loss is not claimed as a deduction in an income tax return.
c. The loss must occur not later than the last day for payment of the estate tax (generally, within 1
year after death).

2. TRANSFERS for PUBLIC USE

- Transfers made to the government or any political subdivision for public purposes; or
- Transfers to social welfare, cultural, and charitable institutions, provided:
i. No part of its net income inures to the benefit of any individual; and
ii. ≤ 30% of the bequest, devise, or legacy is used for administrative purposes.

Note: No purely religious organization

3. VANISHING DEDUCTION (Property previously Taxed - “PPT”)

- To minimize double taxation on same property (located in the Philippines) which was previously
received by the decedent as a donation or inheritance.

a. Conditions for Allowance of the Vanishing Deduction

i. The present decedent must have acquired the property by inheritance or donation within five (5) years
prior to his death.
ii. The property acquired formed a part of the gross estate of the prior decedent, or of the taxable gift of
the donor.
iii. The estate tax on the prior estate, or the gift tax on the gift must have been paid; and
iv. The estate of the prior decedent has not previously availed of the vanishing deduction.

b. Percentage of Vanishing Deduction

The rates depend on the interval between:

i. The death of the present decedent, and the death of the prior decedent if the property previously taxed
(“PPT”) was acquired by inheritance, or
ii. The death of the present decedent, and the date of the gift, if the PTT was acquired by donation,
 ST. ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

IF the interval is:

More Than Not More Than Percentage

xxx 1 year 100%
1 year 2 years 80%
2 years 3 years 60%
3 years 4 years 40%
4 years 5 years 20%
5 years xxx xxx

c. Procedure in Computing the Vanishing Deduction

i. Determine the lower value of the PPT P xxx

FMV of the PPT in the estate of the prior decedent, or FMV of

the PPT in the estate of the present decedent, if PPT was inherited.

FMV of the PPT at the date of donation, or FMV of the PPT in the
estate of the present decedent if the PPT was donated.

Where the PPT consists of 2 or more properties, the aggregate of the

lower values shall be taken.

ii. Deduct any mortgage or lien on the PPT which was paid by (xxx)
the present decedent, where such mortgage or lien was used as a
deduction in the computation of the estate tax of the prior decedent, or
as a deduction in determining the donor's tax.

Net Value of PPT P xxx

iii. Prorate the deductions and subtract from the net value:

Net Value of PPT

Gross Estate
𝑥 Ordinary Deductions (excluding the VD) (xxx)

Final Basis
P xxx
iv. Apply the rate of Vanishing Deduction
Rate (based on number of years interval) %

Vanishing Deduction P xxx

B. SPECIAL DEDUCTIONS
- Deducted only after the ordinary deductions have been deducted from the gross estate.

1. FAMILY HOME
- Must be included in the gross estate.
- The deduction is only for one family home which must be the actual residential home of the decedent
as certified to by the barangay captain.

- Lower of:
a. FMV of the family home:
i. If family home is exclusive property of the decedent: FMV.
ii. If family home is conjugal property: FMV/2.
iii. If family land is exclusive while the family house is conjugal: FMV of land + FMV of
house/2.
iv. If family land is conjugal while family house is exclusive: FMV of land/2 + FMV of house.

OR
b. P10,000,000.
 ST. ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

2. STANDARD DEDUCTION
- P5,000,000 for estates of citizens and resident aliens; P500,000 for estates of non-resident aliens.
- Substantiation not required.

3. AMOUNTS RECEIVED BY HEIRS UNDER R.A, NO. 4917

- Amounts/benefits received by the heirs from the decedent's employer as a consequence of his death.
- Such benefits must first be included in the gross estate before the same can be deducted.

C. SHARE OF THE SURVIVING SPOUSE IN THE NET CONJUGAL PROPERTIES

- Share of the surviving spouse is not subject to estate tax and must therefore be deducted from the gross
estate of the decedent.

Amount of deduction = [Conjugal properties less obligations chargeable to such properties

(Conjugal deductions)] divided by 2

SUMMARY OF DEDUCTIONS

1. What deductions are available against the estates of citizens, residents, or non-resident aliens?

Citizens/Resident Non-Resident
Deductions
Aliens Alien
1. CLUT
1.1. Claims against the estate / /
1.2. Claims against insolvent persons / /
1.3. Unpaid mortgages / /
1.4. Taxes / /
1.5. Losses / /
2. Transfer for public use / /
3. Vanishing Deduction / /
4. Family Home / X
5. Standard Deduction / (P5M) / (P0.5M)
6. Amounts received by heirs under RA 4917 / X
7. Share of surviving spouse in conjugal net assets / /

*For the estate of a non-resident alien, the allowable CLUT deduction shall be prorated based on the size of
the gross estate in the Philippines relative to his entire worldwide gross estate, as follows:

Philippine Gross Estate

𝑥 𝐶𝐿𝑈𝑇
Worldwide Gross Estate

2. If the decedent was married, how do we allocate the deductions between the exclusive and conjugal
properties?

Conjugal/
Exclusive Total Gross
Community
Properties Estate
Properties
1. CLUT
1.1. Claims against the estate / /
1.2. Claims against insolvent persons / /
1.3. Unpaid mortgages / /
1.4. Taxes / /
1.5. Losses / /
2. Transfer for public use / /
3. Vanishing Deduction / /
Net Estate before Special Deductions Pxxx Pxxx Pxxx
4. Family Home /
5. Standard Deduction /
6. Amounts received by heirs under RA 4917 /
7. Share of surviving spouse in conjugal net assets /
NET ESTATE Pxxx
 ST. ANTHONY’S COLLEGE
San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

ESTATE TAX RATE - 6%

CREDIT FOR FOREIGN ESTATE TAX PAID

- Available only to estates of citizen or resident alien decedents
- Subject to Limits

Limits:

1. Limit A:

2. Limit B:

Rules:
a. If there is only one (1) foreign country, only Limit (A) is used.
b. If there are ≥ two (2) foreign countries, use both Limits.

Formula:

Estate tax paid in Country 1 Lower (1)

Limit A (Country 1)
+

Estate tax paid in Country 2 Lower (2)

Limit A (Country 2)
Limit (A)
Lower = Credit
Sum of estate taxes paid in Lower = Limit (B)
Countries 1 and 2
Limit B

ESTATE TAX RETURN

The estate tax return is required to be filed in the following cases:

a. When the transfer is subject to estate tax.
b. When the gross estate includes properties for which clearance from the BIR (Certificate Authorizing
Registration (CAR)) is needed before transfer of ownership to. The transferees/heirs can be effected
(regardless of the value of the gross estate)

Who files?
- The executor or administrator, or any of the legal heirs.

Time of filing?
- Within 1 year from death of decedent.

Time of filing can be extended for another 30 days or less in meritorious cases. The application for the
extension of time to file the estate tax return must be filed with the Revenue District Office (“RDO”)
where the estate is required to secure its TIN and file its tax returns. This request shall be approved by the
Commissioner or his duly authorized representative,

Where filed?
a. If decedent was a resident — the administrator or executor shall register the estate and secure e new TIN
therefor from the RDO where the decedent was domiciled at the time of his death.

The administrator/executor shall file the estate tax return with:

i. an Authorized Agent Bank (“AAB”), or
ii. Revenue District Officer or Collection Officer having jurisdiction over the place where the decedent
was domiciled at the time of death, or
iii. duly authorized ‘Treasurer of the city or municipality in which the decedent was domiciled at the
time of his death,
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San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

whichever is applicable following prevailing rules and procedures on collection.

b. If decedent was a non-resident (whether citizen er alien) — the TIN for the estate shall be secured
from, and the estate tax return shall be filed with:
i. With the RDO where the executor/administrator is registered.
ii. If the executor/administrator is pot registered the BIR, with the RDO having jurisdiction over the
legal residence of the executor administrator.
iii. If there is no executor/administrator, with the Office of the Commissioner (RDO No. 39, South
Quezon City).

Contents of the Estate Tax Return

1. Value of the gross estate;
2. Gross estate outside the Philippines for non-resident alien decedents:
3. Deductions allowed and taken;
4. Other supplemental data;
5. For estate tax returns showing a gross value exceeding P5 Million, a statement certified by a CPA as to
the assets, deductions, and tax due.

PAYMENT OF THE ESTATE TAX

When paid?
- Estate tax is paid at the time the return is filed (pay as you file).

Extension of time to pay:

When the Commissioner finds that the payment on the due date of the estate tax or 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 extrajudicially.

The application for extension of time to pay the estate tax shall be filed with the RDO where the estate is required
to secure its ‘TIN and file its estate tax return. This request shall be approved by the Commissioner or his duly
authorized representative.

The Commissioner may require the executor, or administrator, or beneficiary, as the case may be, to furnish a
bond in such amount, not exceeding double the amount of the tax, conditioned upon the payment of the said tax in
accordance with the terms of the extension.

Any amount paid after the statutory due date of the tax, but within the extension period, shall be subject to
interest but not to surcharges.

Payment by Installment

In case of insufficiency of cash for the immediate payment of the total estate tax due, the estate may be allowed to
pay the estate tax due through the following options:

a. Cash Installment
i. The estate tax return shall be filed within one (1) year from the date of decedent’s death;
ii. The cash installments shall be made within two (2) years from the date of filing of the estate tax
return;
iii. The frequency (i.e., monthly, quarterly, semi-annually, or annually), deadline, and amount of each
installment shall be indicated in the estate tax return, subject to the prior approval of the BIR;
iv. No civil penalties or interest may be imposed on estates permitted to pay the estate tax due by
installment. However, the Commissioner is not prevented from executing enforcement actions
against the estate after the due date of the estate tax, provided that all the applicable laws and
required procedures are followed/observed; and
v. In case of the lapse of 2 years without the entire estate tax due being paid, the remaining balance
thereof shall be due and demandable subject to the applicable penalties and interest reckoned from
the prescribed deadline for filing the return, and payment of the estate tax.

b. Partial Disposition of Estate and Application of its Proceeds to the Estate Tax Due
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San Jose, Antique

BUSINES EDUCATION DEPARTMENT

AEC 215 Business Taxation

i. The estate (ax return shall be filed within one (1) year from the date of decedent's death.
ii. The written request for the partial disposition of the estate shall be approved by the BIR. The said
request shall be filed, together with a notarized undertaking that the proceeds thereof shall be
exclusively used for the payment of the total estate tax due.
iii. The computed estate tax due shall be allocated in proportion to the value of each property.
iv. The estate shall pay to the BIR the proportionate estate tax due of the property intended to be
disposed of.
v. An electronic Certificate Authorizing Registration (“eCAR") shall be issued upon presentation of
proof of payment of the proportionate estate tax due of the property intended to be disposed.
Accordingly, there may be as many eCARs issued as there are properties intended to be disposed to
cover the total estate tax due, net of the proportionate estate taxes previously paid under this option;
and
vi. In case of failure to pay the total estate tax due out of the proceeds of the said disposition, the estate
tax due shall be immediately due and demandable subject to the applicable penalties and interest
reckoned from the prescribed deadline for filing the return and payment of the estate tax. This is
without prejudice to the withholding of the issuance of the eCARs on the remaining properties until
the payment of the remaining balance of the estate tax due, including the penalties and interest.

Who pays the estate tax?

1. The executor or administrator. Where there are 2 or more executors or administrators, all of them shall be
severally liable for the payment of the tax.
2. An heir shall be subsidiarily liable but only to the extent oi his share in the net estate.

Payment of Estate as a Prerequisite to Distribution

The estate tax clearance (CAR) issued by the Commissioner or the RDO having jurisdiction over the estate will
serve as the authority to distribute the remaining or distributable properties or shares in the inheritance to the heirs
or beneficiaries.

No judge shall authorize the executor or a judicial administrator to deliver a distributive share to any party
interested in the estate unless a certification from the Commissioner that the estate tax has been paid is shown.

Payment of Estate Tax as a Prerequisite to Transfer of Shares, Bonds, Rights

There shall not be transferred to any new owner in the books of any corporation, sociedad anonima, partnership,
business, or industry organized or established in the Philippines any share, obligation, bond, or right by way of
gift inter vivos or mortis causa, legacy, or inheritance, unless an eCAR is issued by the Commissioner or his duly
authorized representative.

Payment of Tax as a Requirement for Withdrawal from Bank Account

The executor, administrator, or any of the legal heirs may be allowed to withdraw from a bank deposit of the
decedent within 1 year from the date of death. The amount withdrawn shall be subject to a 6% final withholding
tax.

For joint accounts, the 6% final withholding tax shall be based on the share of the decedent in the joint bank
deposit.

The bank is required to file the prescribed quarterly return on the final tax withheld on or before the last day of the
month following the close of the quarter during which the withholding was made.’ In all cases, the final tax
withheld shall not be refunded nor credited against the tax due on the net taxable estate of the decedent.

In instances where the bank deposit accounts have been duly included in the gross estate of the decedent, and the
estate tax due thereon paid, the executor, administrator, or any of the legal heirs shall present the eCAR issued for
the said estate prior to withdrawal. Such withdrawal shall no longer be subject to the withholding imposed under
Section 97 of the Tax Code.