Chapter 1
Succession and Transfer Tax
Modes of Acquiring Ownership
1. Succession
2. Contract
3. Occupation
4. Law
5. Donation
6. Tradition
7. Intellectual creation
8. Prescription
Transfer taxes – imposed upon gratuitous
disposition of private properties or rights
§ Gratuitous transfer – neither imposes
burden nor requires consideration from
transferee or recipient; there is absence of
financial consideration (essentially
donations)
§ Onerous transfer – the transferee gives
consideration in return for the property or
rights received; this transfer is subject to
business taxes, not transfer taxes
Kinds of Gratuitous Transfers
Mortis Causa Inter Vivos
Effectivity is time of Effectivity is during the
death of the donor lifetime of both the
donor and the donee
Estate tax is Donor’s tax is imposed
imposed
succession donation
Succession – mode of acquisition by virtue of
which, the [PRO] property, rights, and
obligations to the extent of the value of the
inheritance of a [person are transmitted
through his death to another, or others, either
by his will or by operation of law
- The inheritance includes all the PRO of a
person which are not extinguished by death
Nature of Transfer Taxes
§ It is an excise tax; the subject matter of a
transfer tax is the privilege of the
transferor to gratuitously transfer
property or rights
o Transfer tax is classified as
excise/privilege tax imposed on the act
of passing the ownership or property,
and not on the value of property/right
§ takes effect at the date of death or during
lifetime of the donor
§ Amount of transfer tax is based on net
estate/net gifts
Estate tax accrues as the date of death of
decedent, accrual of the tax is distinct/different
from the obligation to pay the same
§ Under the TRAIN law, the filing of estate
tax return is within one year from date of
death
§ The amount of liability to be assumed by
the heirs shall be limited only to the extent
of the value of the properties and gifts
inherited
Kinds of Succession
1. Testamentary/testate succession – a type
of succession that results from the
designation of an heir, made in a will,
executed in the form prescribed by law
2. Legal/intestate succession – a type of
succession which is effected by
operations of law, since the decedent did
not execute, a will, or if the last will and
testament executed by him is void
3. Mixed succession – a type of succession,
which is affected partly by will, and partly
by operation of law
Causes of legal succession/intestacy:
1. If a person dies without a will, or with a void
will, or one which has subsequently lost its
validity
2. When the will does not institute an heir
3. Partial institution of heir; intestacy
(succession with no will) takes place to
undisposed portion, while part of it will he
testate/succession with a will
4. Other causes of legal succession
a. When the heir is not capable of
succeeding [vice of consent?]
b. Non-fulfillment of suspensive condition
attached to the institution of heir
c. preterition – omission in the testator’s
will of one, some, or all of the
compulsory heirs in the direct line which
has the effect of annulling the institution
of heir
d. fulfillment of resolutory condition
e. non-compliance/impossibility of
compliance with the will
f. repudiation of the instituted heir
 Elements of succession Primary compulsory Secondary compulsory
A. decedent – person whose property is A. legitimate D. Legitimate parents
transmitted through succession whether he did children and their & legitimate
or did not leave a will, if he left a will – testator legitimate ascendants, if A is
§ executor – person designated in the last descendants absent
will to carry out the provisions of the B. surviving spouse E. illegitimate parents
decedent's will (if A and C are absent)
o performs a fiduciary duty of taking care C. illegitimate NOTE: Brothers and
of the decedent's estate prior to final children & their sisters are neither
disposition to the heirs descendants, compulsory heirs nor
§ administrator - person appointed by the whether legitimate strangers, however,
court to perform the executor's duty, if (1) or illegitimate they may be voluntary
no executor, (2) appointed executor did not heirs
accept the appointment, (3) executor failed
to qualify under the law, (4) will did not B. Voluntary heirs - Those instituted by the
appoint an executor testator in his/her will to succeed to the
inheritance of the portion thereof, which the
B. inheritance or estate – Includes all the PRO testator can freely dispose.
that are not extinguished by death § Free portion - refers to the portion or
§ purely personal rights are NOT value let in the estate after deducting
transmissible (extinguished by death) the legitimes of the compulsory heirs.
§ A voluntary heir is determined through
C. successor - person who is called to the the last will and testament.
succession either through provision of the will
or by operation of law C. Legal/Intestate heirs - Those who succeed
§ devisees or legatees – persons to whom to the estate of the decedent by operation of
gifts of real / personal property are law.
respectively given by virtue of a will § By operation of law occurs when the (a)
decedent died without a valid will or (b)
Classifications of Successors his/her estate was not entirely disposed
A. Compulsory heirs – those who succeed by of by will.
force of law to some portion of the
inheritance by legitime; succeeds whether Composition of Gross Estate
the testator likes it or not Legitime (i.e. 75% of estate) à reserved by law
§ They cannot be deprived unless there is specifically to compulsory heirs
a properly effected disinheritance
§ Legitime - an amount predetermined Free portion (i.e. 25% of estate) à provided in
which the testator cannot dispose of will; in absence of will, however, estate shall be
because the law has reserved it for distributed to intestate heirs based in order of
certain compulsory heirs priority

Types of Compulsory Heirs Order of Intestate Succession

§ Primary – has precedence over and
exclude other compulsory heirs i.e.
legitimate children and descendants
§ Secondary – those who succeed only in
the absence of primary heirs i.e.
legitimate parents and ascendants
§ Concurring – those who succeed
together with the primary/secondary
heirs i.e. illegitimate children &
descendants & surviving spouses
1. Legitimate children/descendants
2. Legitimate parents/ascendants
3. Illegitimate children/descendants
4. Surviving spouse
5. Brothers and sisters, nephews and nieces
6. Other collateral relatives within the 5th
degree
7. State/government
Consanguinity – relation of persons
descending from the same stock/common
ancestors
 § Blood relatives – may either be lineal or
collateral
o Lineal consanguinity – subsists
between persons who have the same
ancestors in a direct line from the
other
o Collateral consanguinity – subsists
between persons who have the same
ancestors, but do not descend/ascend
one from the other
§ Affinity – connection existing in
consequence of a marriage between
each of the married spouse and the
kindred/siblings of the other
Will – is a strictly personal act wherein a
person is permitted, with the formalities
prescribed by law, to control to a certain degree
the disposition of his estate to take effect after
his death.
§ Cannot be left to the discretion of a third
person whether in whole or in part or
through the instrumentality of an
agent/attorney
§ Those who are incapable of creating a
will include (1) below 18 years old (2)
those who are of not sound mind
o The law presumes that every
person is of sound mind, in the
absence of proof to the contrary
§ Supervening incapacity does NOT
invalidate an effective will, nor is the will
of an incapable is validated by the
supervening of capacity i.e. married
persons can create wills without consent
of their partners, including his/her
separate property as well as his/her
share of the conjugal
partnership/absolute community
property
Kinds of Wills
1. Notarial/Ordinary/Attested will – executed
in accordance with the formalities in law;
requisites for a valid notarial will include:
a. At least 18 years of age and of sound mind
b. In writing; in language/dialect known to
testator
c. Subscribed at the end by the testator
himself
d. Attested and subscribed by three or more
credible witnesses in the presence of the
testator and of one another (witnesses)
e. Signed by testator and the witnessed on
each page, except the last page: on every
page they’ll sign on the left margin
f. Collaterally paged in letters placed on the
upper part;
g. There has to be an attestation clause,
which must provide the following:
• (1) the number of pages used upon
which the will is written;
• (2) that the testator signed the will and
every page thereof in the presence of
the instrumental witnesses; and
• (3) that the instrumental witnesses
witnessed and signed the will and all
the pages thereof in the presence of
the testator and of one another.
h. It must be acknowledged before a notary
public;
i. If testator is deaf or deaf-mute, he must
personally read the will if able to do so, or
shall designate TWO persons to read it
and communicate to him; and
j. If testator is blind, the will shall be read to
him twice (by the subscribing witness and
by the notary public who acknowledged).
2. Holographic will – A will which must be (a)
entirely written, (b) dated and (c) signed by
the hand of the testator himself. It is subject
to no other form.
a. It may be made in or out of the Philippines
and need not be witnessed.
b. In case of any insertion, cancellation,
erasure or alteration in a holographic will,
the testator must authenticate the same
by his full signature.
3. Foreign will - The will of an alien who is
abroad produces effect in the Philippines if
made with the formalities by the law of the:
• Place in which he/she resides;
• Country of such alien; or
• New Civil Code of the Philippines
o A will made in the Philippines by a
citizen or subject of another country,
which is executed in accordance with
the law of the country of which he/she
is a citizen or subject, and which might
be proved and allowed by the law of
his/her own country, shall have the
same effect as if executed according
to the laws of the Philippines.
o If a Filipino is in a foreign country,
he/she is authorized to make a will in
any of the forms established by the
 law of the country in which he/she
may be. Such will may be probated in
the Philippines.
Codicil – is a supplement or addition to a will,
made after the execution of the will and annexed
to be taken as a part thereof
§ Explains any disposition made in the original
will; additions or alterations
§ In order for it to be effective, it shall be
executed as in the case of a will
Probate of a will – is a court procedure by
which a will is proved to be valid or invalid
§ In probate of a holographic will, at least
one witness that knows the handwriting &
signature of the testator is necessary
Intestate proceedings – proceedings in the
absence of a last will and testament
Revocation of Wills & Testamentary
Dispositions
§ A will may be revoked by the testator at
any time before his death, any waiver or
restriction to this is void
§ Revocation is still valid even if a person
does not have domicile in the Philippines
Modes of Revoking a Will
1. By implication of law
2. By some will, codicil, or other writing
executed as provided in the case of wills
3. By burning, tearing, cancelling or
obliterating the will with intention of
revoking it, either by:
a. Testator himself destroys it
b. Some other person in his presence
c. By his express direction
Institution of heir (Art. 840 CC)
§ An act wherein a testator designates in
their will the person/s who are to succeed
them in their properties, transmissible
rights, and obligations
§ A will is valid even if it does not name an
heir or if that heir does not receive the
entire estate. It is also valid even if the
person named in the will is incapable of
inheriting or does not accept the
inheritance.
§ A compulsory heir is NOT automatically
given a share in the estate because they
may be deprived of it due to
disinheritance
Disinheritance – testamentary disposition by
which a compulsory heir is deprived of/excluded
from the inheritance
§ Disinheritance is not applicable to
voluntary heirs
§ Requisites for disinheritance include the
following:
o Effected only through a valid will
o For a cause expressly stated by law
o Cause must be certain and true
o Unconditional
o Total (no partial disinheritance)
o Heir disinherited must be designated in a
way that there can be no doubt as to his
identity
Causes of disinheritance:
Children/descendants
1. When a child or descendant has been
found guilty of an attempt against the life of
the testator, his or her spouse,
descendants, or ascendants;
2. When a child or descendant has accused
the testator of a crime for which the law
prescribes imprisonment for six years or
more, if the accusation has been found
groundless;
3. When a child or descendant has been
convicted of adultery or concubinage with
the spouse of the testator;
4. When a child or descendant by fraud,
violence, intimidation, or undue influence
causes the testator to make a will or to
change one already made;
5. A refusal without justifiable cause to
support the parent or ascendant who
disinherits such child or descendant;
6. Maltreatment of the testator by word or
deed, by the child or descendant;
7. When a child or descendant leads a
dishonorable or disgraceful life;
8. Conviction of a crime which carries with it
the penalty of civil interdiction.
Spouse
1. When the spouse has been convicted of an
attempt against the life of the testator, his or
her descendants, or ascendants;
2. When the spouse has accused the testator
of a crime for which the law prescribes
imprisonment of six years or more, and the
accusation has been found to be false;
3. When the spouse by fraud, violence,
intimidation, or undue influence cause the
 testator to make a will or to change one
already made;
4. When the spouse has given cause for legal
separation;
5. When the spouse has given grounds for the
loss of parental authority;
6. Unjustifiable refusal to support the children
or the other spouse. (Art. 921, NCC)
Rights of Representation
- A right created by fiction of law where the
representative is raised to the place and
degree of the person represented
- Acquires the rights which somebody would
have if they were living/could have inherited
- Representation may arise either because of:
o Death
o Incapacity
o Disinheritance
Chapter 2
Gross Estate
The right of the state to tax the privilege to
transmit the estate vests instantly upon the
death.
Justification for the Imposition of Estate Tax
1. Benefit received theory – services by the
government requires funding
2. Privilege/state partnership - inheritance is
a privilege and not a right; the State is a
passive silent partner in the accumulation of
property having the right to collect the share
which is properly due to it.
3. Ability to pay theory - as properties and
assets are placed into the hands of the
heirs/beneficiaries, this creates an ability to
pay the tax and contribute to the funding
required by the government.
a. Receipt of inheritance which is in the
nature of an unearned wealth or windfall
4. Redistribution of wealth theory -
imposition of estate tax reduces the property
received by the successor; thus, helping
promote equitable distribution of wealth in
the society.
Decedent Gross Estate
Citizen 1. Property (real/personal)
wherever situated
Resident Intangible personal property,
Alien wherever situated
- The representative/s shall not inherit more
than what person they represent would
inherit if he were living or could inherit.
- Further, the law provides that representation
is not available to:
o Compulsory heirs in case of repudiation
(the one who repudiates/refuses his/her
inheritance cannot be represented)
o Voluntary heirs
o Voluntary heirs, legatees and devisees
who:
§ Predecease the testator; or
§ Renounce the inheritance
- The right of representation only takes place
in favor of children of brothers or sisters
(whether full blood or half blood) AND if they
concur with at least one uncle or aunt
(meaning an uncle or aunt is also living).
Non- 1. Real property situated in the
resident Philippines
Alien 2. Tangible personal property
situated in the Philippines
3. Intangible personal property
with situs in the Philippines
unless excluded on the basis
of reciprocity
Intangible Asset
• Not defined in the Tax Code.
• Accounting Standards: Identifiable
nonmonetary assets without physical
substance. These assets derive their value
from intellectual or legal rights, and from
the value they add to other assets.
• General Rule: The situs of intangible
personal property is the domicile of the
owner.
• Exceptions:
o If the intangible property has situs
elsewhere; or
o Where the intangible property has
acquired a business situs in another
jurisdiction
Intangible Assets: Within the Philippines
1. Franchise, which must be exercised in the
Philippines.
2. Shares, obligations or bonds issued by any
corporation or Sociedad anonima
 organized and constituted in the
Philippines in accordance with its laws
3. Shares, obligations or bonds issued by any
foreign corporation, which 85% of its
business is located in the Philippines.
4. Shares, obligations or bonds issued by any
foreign corporation if such shares,
obligations or bonds have acquired a
business situs in the Philippines.
5. Share or rights in any partnership,
business or industry established in the
Philippines. (Sec. 104, Tax Code)
Reciprocity Clause
• The Tax Code EXCLUDES intangible
personal property with situs in the
Philippines from the gross estate of a non-
resident alien decedent if there is
reciprocity.
• Accordingly, there is reciprocity if:
o The decedent at the time of his/her death
was a resident citizen of a foreign country,
which at the time of his/her death did not
impose an estate tax of any character to
the intangible personal property of citizens
of the Philippines no resident in that
foreign country; OR
o The laws of the foreign country of which
the decedent was a resident citizen at the
time of his death allow a similar exemption
from estate taxes of every character with
respect to the intangible personal property
owned by Filipino citizen not residing in the
foreign country.
Valuation of the Gross Estate
In General Fair Market Value (FMV) at the
time of death.
Real The HIGHER value between:
Property a. FMV determined by the
Commissioner; and b. FMV as
shown in the schedule of values
fixed by the provincial and city
assessors
Personal FMV at the time of death.
Property
Shares of 1. Unlisted common share:
Stock book value per share of the
issuing corporation. Take note
that appraisal surplus and
assigned amount to preference
shares shall not be considered.
2. Unlisted preference share:
par value per share
3. Listed share: FMV is the
arithmetic mean between the
highest and lowest quotation at
a date nearest the date of
death. If none is available, then
at the date of death itself.
Valuation of the Gross Estate, continued
Units of The bid price nearest the
participation in date of death published in
any any newspaper or
association, publication for general
recreation or circulation.
amusement
club (e.g. golf
clubs and polo
clubs)
Right to In accordance with the
usufruct, use or latest Basic Standard
habitation and Mortality Table, taking into
annuity account the probable life of
the beneficiary, to be
approved by the Secretary
of Finance upon
recommendation of the
Insurance Commissioner
Exemptions and Exclusions from the Gross
Estate
Exclusions under Sections 85 and 86 of the
Tax Code
1. Exclusive property of the surviving
spouse.
o These are properties not owned by the
decedent upon his/her death.
o For estate tax purposes, the exclusive
properties of a surviving spouse is
called “paraphernal properties”
o The property will be classified as
“exclusive” or “common” depending on
the property relations of the husband
and wife.
2. Property outside the Philippines of a
non-resident alien decedent
o Only properties situated or with situs
within the Philippines are subject to
estate tax for a non-resident alien.
3. Intangible personal property in the
Philippines of a non-resident alien under
the Reciprocity Law.
Exclusions under Section 87 of the Tax Code
1. Merger of the usufruct in the owner of the
naked title to the property;
2. Fideicommissary substitution – where
the inheritance/legacy is delivered or
transmitted by the fiduciary heir or legatee
to the second heir
3. Transmission from the first heir, legatee
or donee in favor of another beneficiary, in
accordance with the desire of the
predecessor;
4. All bequests, devises, legacies, or
transfers to social welfare, cultural and
charitable institutions, no part of the
income of which inures to the benefit of
any individual. PROVIDED, however, that
NOT MORE THAN 30% of said bequests,
devises, legacies or transfers shall be
used by such institutions for administration
purposes.
Exclusions under Special Laws
1. Proceeds of life insurance and benefits
received by members of the GSIS;
2. Benefits received by members from the
SSS by reason of death;
3. Life insurance proceeds on life insurance
policy taken out by the decedent himself,
upon his/her own life, where the beneficiary
is a third person and is irrevocably
designated.
4. Life insurance proceeds on insurance
policy (group insurance) taken out by the
decedent’s employer on the decedent’s life,
whoever the beneficiary maybe, whether
the designation of such beneficiary is
revocable or irrevocable.
5. Amounts received from the Philippine and
US governments for war damages;
6. Payments from the Philippines of US
government to the legal heirs of World War
II Veterans and deceased civilian for
supplies/services furnished to the US and
Philippine Army
7. Amounts received from the US Veterans
Administration;
8. Transfer by way of bona fide sales
9. Properties held in trust by the decedent
10. Acquisition and/or transfer expressly
declared as not taxable
11. Personal Equity and Retirement Account
(PERA) assets of the decedent contributor
Inclusions in the Gross Estate
Items Included in the Gross Estate
1. Properties owned by the decedent actually
and physically present in his/her estate at
the time of his/her death. Examples are:
o Land
o Buildings
o Shares of stock
o Vehicles
o Bank Deposit
2. Decedent’s interest
o The extent of equity or ownership
participation of the decedent on any
property physically existing and present
in the gross estate, whether or not in his
possession, control or dominion.
o Refers to the value of any interest in
property owned or possessed by the
decedent at the time of his/her death.
o Examples:
§ Dividends already declared before
decedent’s death but only received
after his/her death
§ Partnership profit, which have
accrued before decedent’s death
§ Usufructuary rights
3. Properties not physically in the estate
o Already been transferred during the
lifetime of the decedent but are still
subject to the payment of tax.
3A. Transfer in Contemplation of Death
o This is donation mortis causa or donation
which takes effect upon the death of the
donor, and therefore partakes of the
nature of a testamentary disposition.
o It is the thought of death as the
controlling motive, which induces the
disposition of the property for the
purpose of avoiding the estate tax.
o Accordingly, the value of the property
transferred in anticipation of a decedent’s
death is included in his/her gross estate.
Examples are:
§ Transfer of property in favor of
another person, but the transfer was
intended to take effect only upon the
transferor’s death.
§ Transfer by gift intended to take effect
at death, or after death or under which
the donor reserved the income or the
right to designate persons who should
enjoy the income.
3B. Transfer with retention or reservation of o The right, either alone or in conjunction
certain rights with any person to designate the persons
o The decedent transferred his/her property who shall possess or enjoy the property or
during his/her lifetime; however, he/she the income therefrom.
retained for himself/herself the beneficial
enjoyment of the thing or the right to receive 3E. Transfer for Insufficient Consideration
income from the same. o When a sale or transfer (other than a valid
sale) was made for a price less than its FMV
3C. Revocable Transfer at the time of sale/transfer, the excess of the
o Transfer where the terms of enjoyment of FMV of the transferred property at the time
the property may be altered, amended, of death over the value of the consideration
revoked or terminated by the decedent. It is received should be included in the gross
sufficient that the decedent had the power to estate of the decedent. The following FMVs
revoke even though he did not exercise the are considered:
power. FMV of Used to determine whether or not
the the consideration was full and
3D. Transfers under a General Power of property adequate. If the consideration
Appointment at the received is substantially the
o The power of appointment is considered time of same with the FMV at the time of
“general” if it authorizes the donee of the sale or transfer, such sale or transfer is
power to appoint any person he/she transfer considered as a bonda fide sale;
pleases. This may be exercised in favor of hence, not subject to estate tax
anybody, including the donee-decedent. FMV of Used to determine the amount to
§ The donee of a GPA holds the appointed the be included in the gross estate. If
property with all the attributes of property the consideration received is
ownership. Thus the appointed property at the substantially lower or for less
shall form part of the gross estate of the time of than full and adequate
donee of the power upon his/her death. death consideration compared to the
o The power of appointment is considered FMV at the time of sale or
“special” when the donee can appoint only transfer, such sale or transfer
from a restricted or designated class of was made for insufficient
persons other than himself. consideration and the excess
§ Property transferred under a special should be included in the gross
power of appointment should be estate of the decedent.
excluded from the gross estate of the
donee of the power because the donee-
decedent only holds the property in trust. Consideration ≥ Transaction is a bona fide
§ The treatment is similar to a FMV at the time sale. Hence, excluded
fideicommissary substitution and of transfer from the decedent’s gross
transmission of rights from one heir to estate.
another. Consideration < Transfer for insufficient
o The power of appointment may be exercised FMV at the time consideration. Hence,
by the donor-decedent through the of transfer included in the gross estate
following: is the excess of FMV at
o By will; the time of death over the
o By deed to take effect in possession or consideration received.
enjoyment at or after his/her death; Sale was made Transaction is a bona fide
o By deed under which he/she has retained in the ordinary sale.
for his/her life or any period not course of trade
ascertainable without reference to his/her Non Either donation mortis
death or for any period, which does not in consideration causa or donation inter
fact end before his/her death; received vivos.
o The possession or enjoyment of, or the
right to the income from the property; or
3F. Claims Against Insolvent Persons 2018), the net estate of such decedent,
o An insolvent person is an individual whose resident or nonresident, shall be subject to
properties are not sufficient to satisfy (fully an estate tax rate of 6%.
or partially) his/her debt/s. § If the decedent died prior to the effectivity of
o A judicial declaration of insolvency is not the TRAIN Law, his/her net estate shall be
required but the incapacity of the debtor to subject to the old estate tax table, to wit:
pay his/her obligation should be proven.
o Rule: Regardless of the amount the debtor
is unable to pay, the full amount of the
claim against the insolvent person should be
included in the gross estate of the
decedent.
o The portion of the claim that is not collectible
should be allowed as a deduction from the Filing and Payment
gross estate. § The estate tax shall be paid by the
executor/administrator or any legal heirs at
3G. Proceeds of LIFE insurance the time the return is filed as the Philippines
§ Proceeds of life insurance taken out by the adhere to the “pay as you file” system.
decedent on his/her own life should be § Accordingly, an estate tax return shall be
included in the gross estate IF the following filed under oath in any of the following
requisites are present: situation:
1. It must be an insurance on the life of the 1. In cases of transfer subject to Estate
decedent; and Tax; and
2. The beneficiary must either be of the 2. The estate consists of registered or
following: registrable property (real property,
a. The decedent’s estate, his/her motor vehicle, shares of stock or other
executor or administrator (whether similar property), regardless of the
revocable or irrevocable); or gross value, for which a Certificate
b. Any third person provided that the Authorizing Registration (CAR) from
designation is irrevocable the BIR is required as a condition
§ Accordingly, the Insurance Code presumes precedent for the transfer of ownership
that the designation of a policy is revocable in the name of the transferee,
in case the designation of the beneficiary is executor/administrator or any of the
not clear or silent. legal heirs, as the case may be.
§ Estate tax return showing gross value
Beneficiary Designation Gross Estate exceeding P5,000,000 shall be supported
Estate Revocable or Included with a statement duly certified by a CPA.
Irrevocable § The said certification by a CPA shall contain
Executor Revocable or Included the following:
Irrevocable 1. Itemized asset of the decedent with their
Administrator Revocable or Included corresponding gross value at the time of
Irrevocable his/her death. In the case of a
3rd party (other Revocable Included nonresident alien, his/her itemized
than those assets that are only situated in the
mentioned Philippines.
above, e.g. 2. Itemized deductions allowed from the
spouse) gross estate.
3rd party (other Irrevocable Excluded 3. The amount of tax due, whether paid or
than those still due and outstanding.
mentioned
above, e.g. Deadline of Filing
spouse)
§ The estate tax return shall be filed within 1
year from the death of the decedent.
Tax Rate § The court approving partition shall furnish
§ If the decedent died during or after the the CIR a certified copy of the said court’s
effectivity of the TRAIN Law (i.e. January 1,
 order of partition within 30 days after
promulgation of such order.
§ Take note that the one-year deadline of filing
is the allowable period of filing of the return
without surcharges/penalties and interest.
§ As to extension of the deadline: The CIR
may extend the time for payment under the
following conditions:
1. For meritorious cases only;
2. The extension shall not exceed 30
days
§ The application for extension to file an
estate tax return must be filed with the RDO
where the estate is required to secure its TIN
and file the estate tax return.
Deadline of Payment
§ The estate tax shall be paid at the time the
estate tax return is filed by the executor,
administrator or the heir/s.
§ As to extension of the deadline: The CIR
may extend the time for payment under the
following conditions:
1. Payment would impose undue
hardship upon the estate or any of the
heirs.
2. The extension granted shall not
exceed 5 years in case there is judicial
settlement or not exceed 2 year in
case there is extrajudicial settlement.
§ The application for extension to file an
estate tax return must be filed with the RDO
where the estate is required to secure its TIN
and file the estate tax return. Such
application shall be approved by the CIR or
his/her duly authorized representative
§ If the request for extension is based on
negligence, fraud or intentional disregard of
the taxpayer, no extension will be granted.
§ If an extension is granted, the CIR or his duly
authorized representative may require the
executor, administrator or beneficiary, as
the case may be, to furnish a bond NOT
exceeding double of the TAX and with such
sureties as the CIR deems necessary.
Taxpayers’ Options
§ If there is 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:
1. Cash Installment
2. Partial Disposition of estate
Basis: RR No. 12-2018, as amended by RR No. 8-2019
Taxpayers’ Options: Cash Installment
§ The cash installments shall be made within
2 years from the date of the estate tax return
using BIR Form 0605 or a payment form
dedicated for this transaction for succeeding
installment payments after filing the 1st
payment through the estate tax return.
§ The estate tax return shall be filed within 1
year from the date of the decedent’s death.
§ The frequency of payment (i.e. monthly,
quarterly, semi-annually, annually) and the
amount of each installment shall be
indicated in the estate tax return subject to
the approval of the BIR.
§ If there is lapse of 2 years without payment
of the entire estate tax due, the remaining
balance shall be due and demandable,
subject to applicable penalties and interest
computed from the prescribed deadline for
the filing of the return and payment of estate
tax.
§ No civil penalties or interest may be
imposed on the estates that are permitted to
pay the estate tax due by installment.
However, nothing prevents the CIR from
executing enforcement action against the
estate tax due of the estate provide that all
the applicable laws and required procedures
are observed.
Taxpayers’ Options: Partial Disposition
§ Disposition: Conveyance of property (real or
personal; tangible or intangible) with the
equivalent cash consideration
§ The estate tax return shall be filed shall be
filed within 1 year from the death of the
decedent.
§ The written request for the partial disposition
of estate shall be approved by the CIR. 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.
§ The computed estate tax due shall be
allocated in proportion to the value of each
property.
§ The estate shall pay to the BIR the
proportionate estate tax due of the property
intended to be disposed of.
§ An electronic Certificate Authorizing
Registration (eCAR) shall be issued upon
presentation of the proof of payment of the
proportionate estate tax due of the property
intended to be disposed. As such, multiple
eCARs shall be issued if there are multiple
 properties to be disposed to cover the total
estate tax due.
§ If there is failure to pay the total tax due after
considering the proceeds of disposition, the
estate tax due shall be immediately due and
demandable subject to the applicable
penalties and interest reckoned from the
prescribed deadline for the filing the return
and payment of the estate tax.
§ This is without prejudice to the withholding
the issuance of eCARs on the remaining
properties until the payment of the
remaining balance of the estate tax due,
penalties and interest.
Taxpayers’ Options: Extension
§ Request for extension to file the return, pay
the estate tax and payment by installment
shall be filed with the RDO where the estate
is required to secure its TIN and file the
estate tax return.
§ This request shall be approved by the CIR
or his duly authorized representative.
Venue of Filing and Payment
§ If the decedent is a resident, the
administrator/executor shall register the
estate of the decedent and secure a new
TIN therefor from the RDO where the
decedent was domiciled at the the time of
his/her death
§ The filing of the estate tax return and
payment of the estate tax due can be made
in any of the following:
o a. Accredited Agent Bank (AAB)
o b. Revenue District Office
§ If the decedent is a non-resident and
his/her administrator/executor is in the
Philippines, the estate tax return shall be
filed to and the TIN for the estate be secured
from the RDO where such
administrator/executor is registered.
o If the administrator/executor is not
registered, the estate tax return shall be
filed with and the TIN of the state shall
be secured from the RDO having
jurisdiction over the
administrator/executor’s legal
residence.
o However, if the non-resident does not
have an executor or administrator in the
Philippines, the estate tax return shall be
filed with and the TIN dor the estate shall
be secured from the Office of the
Commissioner through RDO No. 39
(South Quezon City).
§ The CIR may exercise his/her power to
allow a different venue/place in the filing of
tax returns.
Liability for the Payment of Estate Tax
§ The executor/administrator of an estate has
the primary obligation to pay the estate tax;
however, the heir or beneficiary has the
subsidiary liability for the payment of that
portion of the estate which his/her
distributive share bears to the value of the
net estate.
§ If there is no executor/administrator
appointed, qualified and acting within the
Philippines, then any person in actual or
constructive possession of any property of
the decedent must file the return.
§ Take note that the estate tax shall be paid
before the delivery of the distributive
share in the inheritance to any heir or
beneficiary.
§ If there are 2 or more executor or
administrators, all of them are severally
liable for the payment of the tax.
§ The estate tax clearance issued by the CIR
or RDO having jurisdiction over the estate
will serve as the authority to distribute the
remaining properties in the inheritance to
the heir or beneficiary.
Civil Penalties and Interest
§ Any amount paid after the statutory tax due
date of the tax, but within the extension
period (if any), shall be subject to interest
but NOT to surcharge penalty.
o 25% surcharge penalty: if there is no
false or fraudulent intent on the
taxpayer.
o 50% surcharge penalty: if there is false,
malice or fraudulent intent on the
taxpayer.
§ Interest shall be computed on the unpaid
amount of tax from the date computed until
fully paid.
§ Take note that under the TRAIN Law, the
interest is is double the legal interest rate set
by the BSP. Considering that the legal
interest rate is currently at 6%, then the
imposable interest now is at 12% per
annum.
Transfer of Shares, Bonds or Rights
§ There shall be no transfer of any share,
obligation, bond or right to any new owner in
 the books of any corporation, sociedad
anonima, partnership business or industry
organized or established in the Philippines
by way of donation or inheritance unless
there is a certification from the CIR that
the applicable tax have been paid.
§ If a bank has knowledge of the death of a
person, who maintained a bank deposit
account (alone or jointly owned with
another), the bank shall allow any
withdrawal from the said deposit account,
subject to a final withholding tax of 6%,
which is also the estate tax rate.
o 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.
o In case the available cash of the estate
is insufficient to pay the total estate tax
due, payment by installment shall be
allowed within 2 years from the statutory
date for its payment without civil penalty
and interest.