an inheritance tax, unless the language of the
TRANSFER TAXES statute clearly demands or expresses that it shall
ESTATE TAX
*It’s the tax imposed on the transfer of property
from the decedent to the heirs.
*Its an excise tax on the privilege/right to transfer
property gratuitously at the time of death.
Lorenzo v. Posadas, G.R. No. L-43082, 1937
*In the will of Thomas there was a provision stating
that the property is to be transferred to a certain
Matthew after 10 years
*When does the inheritance tax accrue and when
must it be satisfied?  - It accrues from the time of
death of decedent. The accrual of such tax is
different from the obligation to pay the same.
*The tax is imposed upon what? every transmission
by virtue of inheritance, devise, bequest,
gift mortis causa, or advance in anticipation of
inheritance,devise, or bequest.
*It is in reality an excise or privilege tax imposed on
the right to succeed to, receive, or take property by
or under a will or the intestacy law, or deed, grant,
or gift to become operative at or after death.
*What is the basis of the value of the inheritance
tax, at the time of death or after 10 years? Time of
death! Because that is when succession occurs. The
heirs succeed immediately to the property
*transmission by inheritance is taxable at the time
of the predecessor's death, notwithstanding the
postponement of the actual possession or
enjoyment of the estate by the beneficiary, and the
tax measured by the value of the property
transmitted at that time regardless of its
appreciation or depreciation
*what law should govern the tax? The applicable
law at the time of death of decedent.
*legislative intent that a tax statute should operate
retroactively should be perfectly clear.
*A statute should be considered as prospective in
its operation, whether it enacts, amends, or repeals
have a retroactive effect.
APPLICABLE LAW FOR ESTATE TAX
*the law in force at the time of death of decedent
*TRAIN would apply to deaths that occurred
January 1, 2018 onwards. Before the said date,
provisions of tax code before TRAIN will apply.
WHO IS THE TAXPAYER FOR ESTATE TAX?
-the estate through the executor/administrator
DO ESTATES HAVE TO BE REGISTERED?
-Yes. An estate is given a TIN number
IF THERE IS DEFICIENCY IN ESTATE TAXES WHO
WILL PAY?
-the beneficiary if ever the properties were already
transferred to him
TAX BASE?
-value of the estate at the time of death
WHAT IS THE NET ESTATE?
-Gross estate less allowable deductions
KINDS OF DECEDENT FOR ESTATE TAX PURPOSES
1. Resident and/or citizens (RC, NRC, RA) – taxed on
worldwide property wherever situated
2. NRA – taxable for properties within only
WHAT ARE INCLUDED IN THE GROSS ESTATE
Note: value of the properties of the gross estate
shall be determined as the fair market value at the
time of decedent’s death.
PROPERTIES PHYSICALLY IN THE ESTATE
1. REAL AND TANGIBLE PERSONAL PROPERTIES
-location of the properties would be determinative
of inclusion in the gross estate depending on the
kind of decedent involved. (resident and/or citizens
are taxable worldwide while non resident alien are
taxable within only)
VALUATION OF REAL PROPERTY – whichever is
higher between FMV determined by commissioner
or FMV fixed by provincial or city assessor
*valuation made by an independent assessor will
not be used unless the above valuation are not
available.
VALUATION OF SHARES OF STOCK
*If listed/traded in stock exchange then the
quotation at the time of death, if none, then the
average between the highest and lowest quotation
at a date nearest time of death
*If not listed/traded in stock exchange then it
depends on what shares are involved. If CS then
book value. If PS then par value.
VALUATION OF PARITICPATION IN ANY ASSOC,
RECREATION, AMUSEMENT CLUB (GOLF, POLO OR
SIMILAR CLUBS)
*bid price nearest the date of death published in
any newspaper or publication of general circulation
VALUATION OF RIGHT OF USUFRUCT, USE OF
HABITATION, AS WELL AS THAT OF ANNUITY
(decedent’s interest)
*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
Insurance Commissioner.
2. INTANGIBLE PERSONAL PROPERTIES
The ffg are considered tangible prop. Located
within PH
 Franchise w/c must be exercised within PH
 Shares, obligations, bonds issued by any
corp organized in the PH
 Shares, obligations, bonds issued by any
foreign corp of w/c 85% of its business is
located in the PH
 Shares, obligations, bonds issued by any
foreign corp if such Shares, obligations,
bonds have acquired a business situs in the
PH
 Shares or rights in any partnership, business
or industry
TAKE NOTE OF RECIPROCITY CLAUSE FOR
INTANGIBLE PERSONAL PROPERTY
*No tax is to be collected if the decedent at the
time of his death is a citizen/resident of a foreign
country w/c at the time of his death did not impose
a transfer tax of any in character in respect or
allows a similar exemption from transfer taxes of
every character on intangible personal property
located in that foreign country owned by PH
citizens and not a resident of that foreign country
APPLICABILITY OF RECIPROCITY CLAUSE
-Applies only to non resident alien decedents with
respect to their intangible property located in the
PH
-same rules applies to DONORS TAX
FORECLOSED PROPERTY
-still forms part of estate of borrower prior to the
expiration of redemption period pero deduct from
gross estate unpaid mortgage/debt
DIVIDENDS ALREADY DECLARED
-dividends declared prior to decedents death
although not paid forms part of GE
PROPERTIES NOT PHYSICALLY IN THE ESTATE
-properties no longer in the name of the decedent
but may still be considered part of gross estate
1. TRANSFER IN CONTEMPLATION OF DEATH
This covers 2 types of transfers:
 Transfer in contemplation of death
Ex: survivorship agreement – in case of joint
accounts and one of co-depositor stipulates
that upon death of any one of them entire
remaining balance belongs to the surviving
depositor and such person can withdraw. Such
 is a transfer in contemplation of death hence
kasali pa din sa GE ung part sa joint account ng
namatay na co-depositor.
Ex: what if malapit na mamatay si A and
executes deed of sale. The land is still part of
GE of A. MOTIVATION OF TRANSFER IS THE
THOUGHT OF DEATH.
 Transfer to take effect after death or
donation mortis causa where decedent
retained possession, enjoyment, right to
income, right to designate person who shall
possess/enjoy the property/income
EXP: if transfer was under a bona fide sale for an
adequate and full consideration in money or
money’s worth
Ex: A died leaving land in favor of B under an SPA
where B is required to transfer the same land to C
upon B’s death. In this case, land will still form part
of A’s estate. Upon death of B land will be given
kay C pero not included in GE of B
Ex: If deed transferring property from A to B
provides that B can only transfer to C and no one
else, is property part of B’s estate? Yes part ng
estate ni B but not ni C.
4. TRANSFER FOR INSUFFICIENT CONSIDERATION
-if transfer made for less than the MV of the
property, the excess of the FMV at the time of
death over the amount of consideration is included
in GE.

5. PROCEEDS OF LIFE INSURANCE

2. REVOCABLE TRANSFER
*policies taken out by decedent upon his life shall
*one where the terms of the enjoyment of the
form part of his GE if the beneficiary is:
property may be altered, amended, revoked or
 Estate of the decedent, his
terminated by the decedent.
executor/administrator
*Revocable trust agreement – property continues
 3rd person and the designation of the
to be owned by the transferor during his lifetime
beneficiary is revocable
notwithstanding the transfer. Para maging
Note: presumed revocable unless stated otherwise
donation inter vivos dapat no strings attached ang
by the insured
pag transfer para hindi na kasali sa GE ni
*Life insurance taken by an employer on life of its
transferor-decedent
employees not included.
*WON such right to revoke has been exercised or
not, does not matter, what matters is may right to
6. CAPITAL OF THE SURVIVING SPOUSE
revoke si transferor para included pa din sa GE nya
*if may conjugal property exclude mo half of such
property kase buhay pa naman isang spouse. In
3. TRANSFER UNDER GPA
short exclusive property of the surviving spouse
Whats a power of appointment? Right to designate
not included.
the person/s who will succeed to the property of a
prior decedent.
EXEMPTIONS FROM ESTATE TAX
GPA – may be exercised in favor of anybody
1. Merger of the usufruct in the owner of the
including the decedent (pag ganito kasama pa din
naked title
sya sa GE)
*usufruct and naked title were given to different
SPA – exercised only in favor of a certain person
persons. Upon death of usufructuary, the usufruct
designated by prior decedent. (hindi kasama sa
merges with the naked title. Such merger is not
GE)
subj to estate tax kase nung namatay si
**this SPA exemptions pertains only to the
usufructuary, nasubj na sya sa estate tax
subsequent transfer.
2. transmission of inheritance by the fiduciary heir
to the fideicommissary
3. transmission from the 1st heir, legatee or done in
favor of another beneficiary in accordance with the
desire of the predecessor.
4. all transfers to social welfare, cultural, and
charitable institutions, no part of the income inures
to the benefit of the individual, provided that not
more than 30% of said transfers shall be used by
such institutions for administration purposes
*does not include religious institutions hence
subject sa estate tax
DEDUCTIONS IN GROSS ESTATE
Its more equitable to tax the net rather than the
gross
*Deductions are of 2 types.. Ordinary and standard
deductions
ORDINARY DEDUCTIONS
1. LOSSES, INDEBTEDNESS, TAXES, ETC (LITE)
a. Funeral Expenses – under TRAIN no longer
deductible
b. Judicial Expenses – under TRAIN no longer
deductible
c. Claims against estate – obligations contracted by
decedent during his lifetime which were still
enforceable after his death. Such claims may arise
from contract, tort or operation of law.
**kung magkano utang ni estate.
REQUISITES
 Personal obligation of the deceased existing
at the time of death (this does not include
unpaid funeral expense, unpaid medical
expense)
 Liability was contracted in good faith and
for an adequate consideration
 Claim is valid in law and enforceable in
court (notarized) (see pp 416-417 for those
na kahit notarized ay tatanggapin padin)
 Indebtedness must have not been
condoned by creditor or action to collect
from decedent did not yet prescribe
d. Claims against insolvent persons
*the insolvent person must have been declared
insolvent under the insolvency act.
*the amount that cannot anymore be collected by
the estate is the amount deductibe, provided ung
full AR mo sa insolvent person is included sa GE
e. Unpaid Mortgage/indebtedness on property
*the full value of the property to which the
mortgage or indebtedness is attached to must be
included in GE
f. Taxes – those that accrued before death of
decedent but remained unpaid as of death are
deductible for tax purposes
*The ffg are not deductible:
 Income tax on income received after death
 Property taxes that accrued after death
 Estate tax
g. Losses
REQUISITES:
 Arose from fire, storm, shipwreck, or other
casualty, robbery, theft or embezzlement.
 Not compensated by insurance or
otherwise
 Not claimed as an income tax deduction in
an income tax return of the estate subj to
income tax
 Occurring during the settlement of the
estate and before the last day for payment
of estate tax or within 1 yr from the date of
death of decedent.
 Property subject of the loss must be
included in the GE
2. TRANSFER FOR PUBLIC USE – amount of all
bequests, legacies, devises or transfers to or for the
use of the government of PH or any political subd
thereof for exclusively for public purposes.
*the said property must be included in GE
3. VANISHING DEDUCTION
Ratio: since transfer tax is imposed on each
transfer such VD is allowed to ease the burden of
heavy taxes on properties that switch hands within
a short period of time.
REQUISITES:
 Current decedent dies within 5 yrs from
receipt of the property from prior donor
 Property on which VD is claimed is within
PH
 Property must have formed part of the
taxable estate of prior decedent or taxable
gift of donor
 Estate/donors tax finally determined and
paid
 No VD was allowable to the estate of the
prior decedent
Formula:
Applicable rate – depends, if the prior decedent
died within __ yrs prior to the death of decedent..
SPECIAL DEDUCTIONS
1. Family Home – dwelling house, including the
land, where husband and wife and members of the
family reside
*A FH may be constituted by a married couple (1/2
lang nun deductible kase conjugal) or an unmarried
head of family
*only (1) FH for deduction is allowed
*an amount equivalent to the FMV of the FH not
exceeding 10million. Said FH must be included in
the GE
*What if FH is not in the name of decedent pero
dun talaga sila nakatira ng family nya, is it
considered as FH hence deductible? No. not part of
GE. Hindi naman sya pagmamayari ni decedent eh.
2. Standard Deduction
*5 million w/o need of substantiation
3. MEDICAL EXPENSES
*Under TRAIN no longer allowed as deductions
4. Amounts received under R.A 4917
*amounts received by heirs of decedent-employee,
provided kasama sya sa GE
ALLOWABLE DEDUCTIONS FOR NON-RESIDENT
ALIENS
1. ratable portion of LITE (gross estate PH/gross
estate world)
2. Transfer for Public use
3. VD
4. Net share of SS in conjugal property
PROPERTY REGIME (SEE PP 425-427)
SAMPLE COMPUTATION
Decedent - A, married; left family home worth
30M, other real properties worth 14M, condo
inherited from his parents worth Php 5M. A had
unpaid loans worth P2M. Compute gross estate.
 cert. authorizing registration from BIR is rqd
as a condition for the transfer of ownership.

NOTE: the return shall be files in duplicate by

the executor/administrator or any of the legal
heirs

IMPORTANT PERIODS
NOTE: deductions will follow the corresponding WHAT TO SUBMIT PERIOD
property . If deduction is against exclusive property Estate Tax Return Within 1 y r from
then dun mo deduct otherwise sa conjugal if dun decedent’s death
related ung deduction Payment of estate tax Same period sa filing
ng return
NOTE: APPROVAL OF PROBATE COURT not
ESTATE TAX CREDIT
necessary for payment of estate tax. Actually ang
*Applies only to estate tax of RC, NRC, RA
probate court ang bawal magdistribute ng
TWO SITUATIONS IN TAX CREDIT
inheritance unless may certificate from CIR na
1. IF INVOLVES 1 COUNTRY
bayad na estate tax.
*The allowable credit is the lower between the
actual estate tax paid in the foreign country versus
Can there be an extension for filing of return? Yes.
the ((net estate abroad/net estate world)*estate
In meritorious cases an extension not to exceed 30
tax due on worldwide))
days. (dpat may request from TP asking for
extension, file with RDO)
2. IF INVOLVES 2 OR MORE FOREIGN COUNTRY
EXP: where estate taxes are assessed by reason of
A. apply formula as if 1 country for each country
negligence/fraud on TP, no extension
and get whichever is lower sa allowable vs actual
tax paid and get total
Can there be an extension for payment of estate
B. use formula ((net estate all abroad/net estate
tax? Yes if upon finding of commissioner payment
worldwide)*estate tax due worldwide)). Compare
of such tax would impose undue hardship on the
the result with the total of the actual foreign estate
part of TP
tax paid get whichever is lower
 If judicial settlement – until 5 years
C. result above is compared with total of (a) and
 If extrajudicial – until 2 years
get which ever is lower yun ang deduct mo.
Note: if an extension is granted the commissioner
may require the executor/admin to execute a bond
ADMINISTRATIVE REQUIREMENTS
in an amount not to exceed double the amount of
Form: Form No. 1801
tax and with such sureties as deemed necessary by
When is estate tax rqd to be files?
commissioner conditioned upon the payment of
 Estate is subject to tax
the tax in accord with the terms of the extension
 If exempt, but GE exceeds 200k
 Regardless of the amount of the estate,
INSTALLMENT PAYMENT
where the estate consists of registered or
When? In case of insufficiency of cash for
registrable property, motor vehicle, shares
immediate payment. This is not a matter of right
of stock or toher similar property for w/c a
ha.
Period? Pede installment for a period of 2 yrs from
date of filing of return subj to the following
conditions:
 Estate tax return is filed on time
 Frequency, amount and deadline of each
installment indicated in the return subj to
approval of BIR
 In case naglapse ang 2 yrs and hindi pa din
bayad, remaining balance due and
demandable subj to penalties and interest
reckoned from prescribed deadline for filing
of the return and payment of the estate tax
 NO CIVIL PENALTIES / INTEREST may be due
for those na napayagan mag installment

Surcharge – if after statutory period but within

extension, then no surcharge. However interest of
12% accrues until actual date of payment except if
installment.

PERSONS LIABLE
 Executor/administrator before delivery of
the inheritance to the heirs
 Heirs/beneficiary subsidiary liable up the
amount of the inheritance they receive

REGISTRATION AND PLACE OF PAYMENT

 Resident decedent – estate registered in
the RDO where decedent was domiciled at
time of death. The return and tax due paid
with the AAB, RDO, CO, MT, where
decedent domiciled
 Non resident citizen or alien with
executor/administrator in the PH – RDO
kung san reg. si exec/admin. If not reg. then
RDO having juris. Over his residence
 Nonresident citizen or alien without
executor/administrator in the PH – RDO 39

When is certification from CPA rqd? When GE

exceeds 5,000,000