October 2023

ESTATE TAX
Atty. C. Llamado

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

Tangible Personal Intangible Personal

Decedent Real Property
Property Property
Within Without Within Without Within Without
1) Citizen ☺ ☺ ☺ ☺ ☺ ☺
2) Resident Alien ☺ ☺ ☺ ☺ ☺ ☺

3) Non-resident ☺ ☺ ☺
Alien

(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 stock,
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 (including corporate bonds)
(1) Domestic corporation Within the Philippines
(2) Foreign corporation Without the Philippines
Except:
i) If ≥ 85% of business is in the Philippines Within the Philippines
ii) If shares have acquired a business situs in
the Philippines Within the Philippines

PROPERTIES INCLUDED IN THE GROSS ESTATE OF A DECEDENT

- Includes all properties, rights, and interests which the decedent owns at the time of his
death;

1) Properties owned 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 at

the time of death (Ex. usufructuary rights, leasehold rights);

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October 2023

3) Taxable Transfers – made 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. Such properties which were supposedly transferred during the lifetime of the transferor
shall still be included in the gross estate of the transferor when he/she dies.

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 (either legal or beneficial) and remains in full control
of the property during his lifetime;
3) The transfer is revocable by the donor at will during his lifetime; and
4) The transfer is void if the donee dies first.

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 or 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.

4) 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.

5) 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 (of the property transferred) shall be
included in the gross estate.

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October 2023

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.

6) 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.

7) 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

8) Conjugal/community properties, if decedent was married.

- the decedent’s gross estate will include both his exclusive properties, and the
conjugal/community properties of his marriage.

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 of the decedent.

Note: Exclusive property of the surviving spouse is EXCLUDED from the decedent’s
gross estate.

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October 2023

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
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
as 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;

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October 2023

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

Community 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.

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October 2023

ACQUISITIONS OR TRANSMISSIONS WHICH ARE NOT INCLUDED IN THE GROSS ESTATE

OF A DECEDENT1

(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 legatee 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 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 the said bequests, devices, legacies, or
transfers shall be used by such institutions for administration purposes.

Other Exemptions from the estate tax:

(e) Proceeds of life insurance and benefits received by members of the Government Service
Insurance System (“GSIS”);2

(f) Benefits received by members from the Social Security System by reason of death;3

(g) Amounts received from the Philippine and United States governments for war damages;4

(h) Amounts received from the United States Veterans Administration;5

(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;6 and

(k) Personal Equity and Retirement Account (“PERA”) assets shall not be considered assets
of the Contributor for purposes of estate taxes.7

Furthermore, Qualified PERA Distributions received by 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.8

1
Sec. 87, NIRC.
2
P.D. No. 1146.
3
R.A. No. 1161, as amended.
4
R.A. No. 227.
5
R.A. No. 360.
6
Sec. 104, NIRC.
7
R.A. No. 9505.
8
Sec. 10, RR No. 17-2011.
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 October 2023

(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 bank to the BIR upon withdrawal by the heirs.

NEW
(n) In case of death of a health worker, public or private, who contracted COVID-19 in the line
of duty, the National Government, upon submission of the required documents, shall
provide the amount of One Million Pesos (₱1,000,000) to the heirs of the deceased health
worker. Said amount shall not be included in the gross estate of the decedent subject to
estate tax. Provided, the amount is given or to be given from February 1, 2020 and during
the state of national emergency due to COVID-19 as declared by the President.9, 10

9
Sec. 4(k), R.A. No. 11494; Rev. Reg. No. 29-2020.
10
Sec. 4(k) of R.A. No. 11494 shall survive the expiration of R.A. No. 11494 for as long as a health worker
contracts the COVID-19 infection while in the line of duty or dies while fighting during the state of
national emergency as declared by the President (Sec. 4(k), R.A. No. 11494).

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October 2023

VALUATION OF THE GROSS ESTATE

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

Property Valuation
Usufruct, use, habitation, Value shall be based on the probable life of the beneficiary in
annuity accordance with the latest Basic Standard Mortality Table
approved by the Department of Finance
Real Property FMV which is the higher of the zonal value or the assessor’s value
Personal Property Generally, FMV at the time of death of the decedent
Stocks listed in the stock Average of the lowest and highest quotes on the valuation date
exchange (date of death) or day nearest to the valuation date.
Stocks not listed in any For common shares: Book value on the valuation date (date of
local exchange death), or on the date nearest the valuation date.

For preferred shares, par value.

Notes; accounts FMV is the discounted amount of the unpaid principal plus interest.
receivable
Units of participation in FMV is the bid price on the date of death or nearest the date of
any association, death published in any newspaper or publication of general
recreation, or amusement circulation.
club (also called
proprietary shares)
Cash in bank in local or The peso value of the balance at the date of death.
foreign currency

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October 2023

DEDUCTIONS FROM THE GROSS ESTATE

I. ORDINARY DEDUCTIONS
A) CLUT (Claims, Losses, Unpaid Mortgages, Taxes, etc.)

1) 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 enforced11 against the estate by his creditors.

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.

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

(B) If the claim is in the form of a loan, the following requirements must be
complied with:
1) the instrument must be notarized except if it is not the business practice
of the financial institution-lender to notarize such instruments;
2) notarized certification from the creditor as to the unpaid balance of the
debt, inclusive of interest;
3) proof of financial capacity of the creditor to lend the amount at the time
the loan was granted;
4) if the loan was contracted within 3 years prior to the death of the
decedent, a statement under oath executed by the administrator/executor
of the estate stating the disposition of the proceeds of the loan.

(C) Where settlement of the estate is made through the courts:

1) Documents filed with the court evidencing the claims;
2) The court order approving the claims;
3) The documents in (A) or (B) above.

2) 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.

3) 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.

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Must not have been forgiven by the creditor, or the action to collect must not have prescribed.
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October 2023

- 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.

4) 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.

5) 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).

B) TRANSFERS for PUBLIC USE

1) Transfers made to the government or any political subdivision for public purposes; or

2) Transfers to social welfare, cultural, and charitable institutions, provided:

a) No part of its net income inures to the benefit of any individual; and
b) ≤ 30% of the bequest, devise, or legacy is used for administrative purposes.

Note: No purely religious organization

C) 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.

1. Conditions for Allowance of the Vanishing Deduction

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

2. Percentage of Vanishing Deduction

The rates depend on the interval between:

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October 2023

(a) The death of the present decedent, and the death of the prior decedent if the property
previously taxed (“PPT”) was acquired by inheritance, or

(b) The death of the present decedent, and the date of the gift, if the PPT was acquired
by donation.

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

3. Procedure in Computing the Vanishing Deduction

(a) Determine the lower value of the PPT - ₱ xxxx

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.

(b) 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 ₱ xxxx

(c) Prorate the ordinary deductions and subtract from the net value:

Net Value of PPT x Ordinary Deductions (xxx)

Gross Estate (excluding the Van. Ded.)

Final Basis ₱ xxxx

(d) Apply the rate of Vanishing Deduction

Rate (based on number of years interval) %

Vanishing Deduction ₱ xxxx

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 October 2023

II. SPECIAL DEDUCTIONS

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

A) 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:
1) FMV of the family home;
a) If family home is exclusive property of the decedent: FMV
b) If family home is conjugal property: FMV/2
c) If family land is exclusive while the family house is conjugal:
FMV of land + FMV of house/2
d) If family land is conjugal while family house is exclusive:
FMV of land/2 + FMV of house
OR

2) ₱10,000,000.

B) STANDARD DEDUCTION
1) ₱5,000,000 for estates of citizens and resident aliens; ₱500,000 for estates of non-
resident aliens.
2) Substantiation not required.

C) 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.

III. 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

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October 2023

SUMMARY OF DEDUCTIONS
I. What deductions are available against the estates of citizens, residents, or non-
resident aliens?

Deduction Citizens/Resident Non-Resident

Aliens Alien
A. CLUT *
1) Claims against the estate √ √
2) Claims against insolvent persons √ √
3) Unpaid mortgages √ √
4) Taxes √ √
5) Losses √ √

B. Transfer for public use √ √

C. Vanishing Deduction √ √
D. Family Home √ X
E. Standard Deduction √ (₱5.0 M) √ (₱0.5M)
F. Amounts received by heirs under RA 4917 √ X
G. 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

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

Exclusive Conjugal/ Total Gross

Properties Community Estate
Properties
A. CLUT
1) Claims against the estate √ √
2) Claims against insolvent persons √ √
3) Unpaid mortgages √ √
4) Taxes √ √
5) Losses √ √

B. Transfer for public use √

C. Vanishing Deduction √ √
Net estate before Special Deductions xxxxx xxxxx xxxxx
D. Family Home √
E. Standard Deduction √
F. Amounts received by heirs under RA 4917 √
G. Share of surviving spouse in conjugal
√
net assets
NET ESTATE NET ESTATE

ESTATE TAX RATE - 6%

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October 2023

CREDIT FOR FOREIGN ESTATE TAX PAID

- Available only to estates of citizen or resident alien decedents

- Subject to Limits

Limits:

(A) Net Estate (per Foreign Country) x Philippine Estate Tax

Entire Net Estate

(B) Net Estate (in all Foreign Countries) x Philippine Estate Tax
Entire Net Estate

Rules:
1) If there is only one (1) foreign country, only Limit (A) is used.
2) 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
Countries 1 and 2 Lower = Limit (B)
Limit B

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October 2023

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; or

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?
1) If decedent was a resident – the administrator or executor shall register the estate and
secure a 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:

(a) an Authorized Agent Bank (“AAB”), or
(b) Revenue District Officer or Collection Officer having jurisdiction over the place
where the decedent was domiciled at the time of death, or
(c) duly authorized Treasurer of the city or municipality in which the decedent was
domiciled at the time of his death,

whichever is applicable following prevailing rules and procedures on collection.

2) If decedent was a non-resident (whether citizen or alien) – the TIN for the estate
shall be secured from, and the estate tax return shall be filed with:

a) With an AAB, or with the RDO where the executor/administrator is registered.

b) If the executor/administrator is not registered with the BIR, with an AAB or with
the RDO having jurisdiction over the legal residence of the executor/administrator.
c) If there is no executor/administrator, with the Office of the Commissioner (RDO
No. 39, South Quezon City).

3) In case of “No Payment Return”, the return shall be filed with the Revenue District
Office (“RDO”) having jurisdiction over the place of domicile of the decedent at the
time of death. If the decedent has no legal residence in the Philippines, the return shall
be filed with the Office of the Commissioner (RDO No. 39, South Quezon City).12

12
RMC No. 54-2019.
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October 2023

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 ₱5 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:

(1) Cash Installment

a. The estate tax return shall be filed within one (1) year from the date of
decedent’s death;

b. The cash installments shall be made within two (2) years from the date of filing
of the estate tax return;13

13
In case the available cash of the estate is insufficient to pay the total estate tax due, payment by installment
shall be allowed within two (2) years from the statutory date for its payment without civil penalty and
interest (Sec. 91(C), NIRC as inserted by R.A. No. 10963).

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October 2023

c. 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;

d. 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

e. 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.

(2) Partial Disposition of Estate and Application of its Proceeds to the Estate Tax
Due14

a. The estate tax return shall be filed within one (1) year from the date of
decedent’s death;

b. The written request for the partial disposition15 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;

c. The computed estate tax due shall be allocated in proportion to the value of
each property;

d. The estate shall pay to the BIR the proportionate estate tax due of the property
intended to be disposed of;

e. 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

f. 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.

14
The application for payment by installment or partial disposition of the estate 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.
15
For purposes of this option, disposition shall refer to the conveyance of property, whether real, personal,
or intangible property, with the equivalent cash consideration (Rev. Reg. No 12-2018).
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October 2023

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 of his share in the net estate.

Payment of Estate Tax 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.16 In all cases, the final tax withheld shall not be refunded.
However, such final tax may be credited from the estate tax due in instances when the bank
deposit subjected to such final withholding tax has been included in the gross estate in the
estate tax return.

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.

16
The bank shall issue the corresponding BIR Form No. 2306 (Certificate of Final Tax Withheld At Source)
certifying such withholding.

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