Prior to TRAIN Law Under TRAIN Law or RA 10963 and Rev.

Reg, 12-2018
The estate of a non-resident alien decedent cosists of property in the Philippines The TRAIN Law deletes the "no deduction allowance" provision above under Section
and in the country or countries. For estate tax purposes, only his property in the 86 (D) of the NIRC.
Philippines shall be considered in the gross estate computation. The estate is entitled
to the following deductions: Section 86(B) provides that the value of the net estate of a decedent who is a non-resident
1. Expenses, losses, and taxes subject to limitation as follows: alien in the Philippines shall be determined by deducting from the value of that part of his gross
estate which at the time of his death is situated in the Philippines the following items of deductions:
Gross estate, Phil World expenses, losses, 1. Standard deduction - A deduction in the amount of Five Hundred Thousand Pesos (P500,000)
Gross estate, World X indebtedness & taxes ˭ Deduction allowed shall be allowed without need of substantiation. The full amount of P500,000 shall be allowed as
deduction for the benefit of the decedent.

2. Property previously taxed/Vanishing deduction on property situated in the Philippines.
3. Transfers for publc use of property situated in the Philippines.
4. Net share of the surviving spouse
No deduction shall be allowed in the case of a non-resident decedent not a citizen of the
Philippines, unless the executor, or anyone of the heirs, as the case may be, included in the
return required to be filed the value at the time of the decedent's death of that part of his gross
estate not situated in the Philippines.
2. The proportion of the total losses and indebtedness which the value of such part bears to the value
of hs entire gross estate wherever situated. Losses amd indebtedness shall include the following:
2.1. Claims against the estate
2.2 Claims of the deceased against insolvent persons where the value of the interest therein is
included in the value of the gross estate.
2.3 Unpaid mortgages, taxes and casualty losses
The allowable deduction under this subsection shall be computed using the following formula:

Phil. Gross Estate

World Gross Estate X Item no. 2 ˭ Alllowable Deduction

3. Property Previously Taxed

4. Transfers for Public Use
5. Net Share of the Surviving Spouse in the Conjugal Partnership or Community Property

Accordingly, the estate shall not be allowed the following deductions:

Formula: 1. Family home
2. Standard deduction equivalent to one million pesos (P5,000,000)
Gross estate Pxx 3. Medical expenses
 Less: Deductions xx 4. Amount received by heirs under Republic Act 4917
Net taxable Pxx

Estate tax at 6% of the net estate Pxx Illustration:

Gross Estate, Philippines P 1,500,000
Gross Estate, China 3,000,000
Summary of Deductions from the Gross Estate Expenses, losses, indebtedness, taxes, etc., Philippines 750,000
The following are the deductions from the gross estate: Expenses, losses, indebtedness,, taxes, etc., China 1,125,000
1. Standard Deductions P5,000,000 Vanishing deduction, as computed, Philippines 3,000
2. Claims against the estate Yes Transfer for public use, Philippines 297,000
3. Claims against insolvent persons Yes
4. Unpaid mortgage or indebtedness Yes The net taxable estate is computed as follows:
5. Casualty losses, or from robbery, theft or Gross estate, Philippines P1,500,000
embezzlement Yes Less: Deductions
6. Vanishing deduction Yes Expenses, losses, indebtedness, taxes, etc.* P625,000
7. Transfer for public use Yes Vanishing deduction 3,000
8. Family home (at fair market value of family home Transfer for public use 297,000
in the gross estate) maximum P10,000,000 Standard deduction 500,000 1,425,000
9. Amount received by heirs under Republic Act 4917 Yes Net taxable estate 75,000
10. Share of the surviving spouse in the joint property Yes

Gross Estate, Philippines/Gross Estate, World X 1,875,000 = 625,000

NET TAXABLE ESTATE, IF THE DECEDENT WAS SINGLE.

Problem Solving: Mr. Patricio, a citizen and resident of the Philippines, single, a head of family
died leaving the following properties and charges thereon:

Land in Rizal P5,000,000

Car 500,000
Land and building (family home) 12,500,000
Personal properties 2,000,000
 Claims against the estate 500,000

The land and car were inherited from the mother four and one-half years before, with the
following data:

Land Car
Fair market value when inherited P10,000,000 P600,000
Payment on mortgage indebtedness (in full) 1,000,000 50,000

Solution:
Gross estate
Land in Rizal P5,000,000 Computation of Vanishing Deductions:
Car 500,000 Land 5,000,000
Family home 12,500,000 Car 500,000 5,500,000
Personal properties 2,000,000 Less: Mortgage paid on land 1,000,000
Total P20,000,000 Mortgage paid on car 50,000 1,050,000
Deductions: Initial basis 4,450,000
Claims against the estate 500,000 Less: 2nd Deduction (ELITE + Transfer for public puspose)
Vanishing deductions (schedule) 867,750 (4,450,000/20M x P500,000) 111,250
Family home Final basis 4,338,750
Fair market value P12,500,000 x Percentage of transfer 20%
Maximum 10,000,000 Vanishing deductions 867,750
Allowed
Standard deduction 5,000,000 16,367,750
NET TAXABLE ESTATE 3,632,250
Date of death of the prior decedent September 30, 2014
Estate tax at 6% of P3,632,250 P217,935 Date of death of the present decedent May 15, 2017
2016 4 + 12
2017 5 15+30
2014 9 30
Format of Computation ( Married Decedent) 2 7 15 60%

Exclusive Common Total

Gross Estate PXXX PXXX PXXX Date of death of the prior decedent: December 25, 2015
Less: Ordinary Deductions (XXX) (XXX) (XXX) Date of death of the present decedent: March 29, 2019
PXXX PXXX PXXX
Less: Share of Surviving Spouse (XXX) 4 years, 9 mos, 4 days
XXX 3 years, 3 mos, 4 days
Less: Special Deductions (XXX) 2018 3+12
Net Taxable Estate XXX 2019 3 29
2015 12 25
3 3 4
Seatwork
Mr. Gatu, single and Japanese, died On November 1, 2018. He left the following assets, expenses,
charges and obligations: Date of death of the present decedent: October 21, 2019
Assets: Date of death of the prior decedent: December 10, 2016
Cash in bank, Makati City 1,200,000
Investment in a Domestic Partnership 1,000,000 2 years, 10 months, 11 days correct
Car 700,000 2 years, 11 months, 11 days
Foreign shares, Japan-based company with 40% business in the Phil 700,000
Domestic shares 500,000 2019 10 21
Accounts receivable from a debtor residing in Japan. Debtor is 2016 12 10
fully insolvent 100,000 2 10 11 60%

Expenses, charges and obligations:

Funeral expenses 150,000
Judicial expenses 100,000
Loss in business 80,000
Unpaid Income tax for 2017 160,000
Legacy in favor of the Philippines National Red Cross 50,000
Legacy to City of Makati 100,000

Required:
Compute for the net taxable estate
1. Decedent is a resident of the Philippines at the time of death.
2. Decedent is a non-resident alien and there is no reciprocity
3. Decedent is a non-resdent alien and there is reciprocity
 non-resident
art of his gross
ems of deductions:
Pesos (P500,000)
00 shall be allowed as

h part bears to the value

include the following:

e interest therein is

g the following formula:

Alllowable Deduction