ESTATE TAX

ATTY. V. SALUD
ESTATE TAX
Tax on the right of the deceased person to transmit his estate to his lawful heirs and beneficiaries at the time of
death and on certain transfers, which are made by law as equivalent to testamentary disposition.

Nature
It is a privilege tax, and not a property tax.

Governing Law in the Imposition of Estate Tax

The statute in force at the time of death of the decedent.
Accrual of Estate Tax
Upon death of the decedent.

Tax Rate
6% (Effective January 1, 2018)

Tax Base
Net Taxable Estate
Estate Tax Schedule from January 1, 1998 to December 31, 2017

Net Estate The Tax Shall Be

Not over P200,000 Exempt
Over P200,000 but not over P500,000 5% of the excess over P200,000

Over P500,000 but not over P2 million P15,000 + 8% of the excess over P500,000

Over P2 million but not over P5 million P135,000 + 11% of the excess over P2 million

Over P5 million but not over P10 million P465,000 + 15% of the excess over P5 million

Over P10 million P1,215,000 + 20% of the excess over P10 million
Gross Estate
Less: Ordinary Deductions
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Estate after Ordinary Deductions
Less: Special Deductions
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Net Estate
Less: ½ Share of Surviving Spouse in Net Conjugal Estate
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Net Taxable Estate
Composition of the Gross Estate
Value of Gross Estate of the property, real or personal, tangible or intangible, to the extent of Decedent’s Interest:

Location of Property

Type of Decedent at the time of Death

1. Resident or Citizen All,

(RC, NRC or RA) regardless of location

2. Non-resident alien (NRA), Only situated in

the Philippines

a. With reciprocity Intangible personal properties excluded

b. Without reciprocity Intangible personal properties included

Reciprocity

1. The decedent at the time of death was a resident citizen of a foreign country which at
the time of his death did not impose a transfer tax of any character in respect to
intangible personal property of non-resident Filipino citizens in that foreign country, OR

2. The laws of the foreign country of which the decedent was a resident citizen at the
time of death allows a similar exemption from transfer or death taxes in respect of
intangible personal property of non-resident Filipino citizens in that foreign country
Intangible Personal Properties Deemed Situated in the Philippines

1. Franchise which must be exercised in the Philippines

2. Shares, obligations or bonds issued by domestic corporation
3. Share, obligations or bonds issued by any foreign corporation 85% of the business of which
is located in the Philippines
4. Shares, obligations or bonds issued by any foreign corporation, if such shares, obligation or
bonds have acquired a business situs in the Philippines
5. Shares or rights in any partnership, business or industry in the Philippines
Inter Vivos Transfers Subject to Estate Tax (Except Bonafide Sale for Adequate and Full
Consideration)

1. Transfer in Contemplation of Death

• Transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or
after death (donation mortis causa).

• It does not refer to the general expectation of death which all people entertain.

• Thought of death, although it may not be imminent, is the controlling motive which induces the disposition of
property for the purpose of avoiding the tax.
Circumstances Indicative of Transfer is in Contemplation of Death
1. Age and state of health of the decedent at the time of gift.
2. Length of time between the gift and date of death.
3. Concurrent making of a will or making a will within a short time after a transfer.

Motives Associated with Life

1. Desire to assist members of the donor’s family.
2. Desire to avoid or reduce income or property taxes.
3. Desire to aid the donor or members of his family in business
4. Desire to provide independent income for dependents
2. Transfer with Retention or Reservation of Rights
• Transfer, by trust or otherwise, under which the decedent has retained for his life or for any period
which does not in fact end before death
a. the possession or enjoyment of, or the right to the income from the property, or
b. the right, either alone or in conjunction with any person, to designate the person who shall possess
or enjoy the property or the income therefrom.

Example: Dante transfers an apartment building to Lito on the condition that Dante shall receive or
enjoy the rentals during Dante’s lifetime, thereafter to Lito or his estate.
Since enjoyment of the property remains in Dante, the transferor, the value of the apartment building
forms part of the gross estate, and thus taxable.
3. Revocable Transfer

• Transfer, by trust or otherwise, where the enjoyment of the property transferred was subject at the
date of death of the decedent to any change through the exercise of a power by him alone, or in
conjunction with any other person, to alter, amend revoke or terminate, or where any such power is
relinquished in contemplation of decedent’s death.

Example: Dante transfers his property in trust with the income payable to Lito, but Dante retains the
power to alter, amend, revoke or terminate the income interest of Lito. The value of the property is part
of the gross estate of Dante upon his death.
4. Property passing under General Power of Appointment
• General power of appointment was exercised by:
• Will
• Deed executed in contemplation of death
• Deed under which the decedent retained certain rights until death

Example: Dante transfers his property in trust for his child Lito for life and then in trust for any
person as Lito shall by will appoint. The property is included as part of the gross estate of Lito
upon is death because the power of appointment given by Dante to Lito is general.
Power of Appointment
• Right to designate the person or persons who shall enjoy or possess certain property from the estate
of a prior decedent.

Kinds of Power of Appointment

• General – it authorizes the decedent to appoint any person he pleases, including himself. The property
subject of this power is included in the gross estate
• Special – the decedent can appoint only among a restricted or designated class of persons other than
himself. The property is excluded from the gross estate.
Value to be Included in the Gross Estate for Inter Vivos Transfers

Scenario Value to be Included

1. FMV at the time of transfer = None,
Consideration
the transfer being a Bonafide Sale

2. FMV at the time of transfer > Excess of FMV at the time of death
Consideration
over the Consideration

3. No Consideration (Donation Mortis

Causa)
FMV at the time of death
Proceeds of Life Insurance

Nature of Estate Tax

Designation
Beneficiary Consequence

Revocable or
Irrevocable
Estate, Executor or Administrator Taxable
Third person (other than Estate, Executor
Revocable or Administrator Taxable

Irrevocable Third Person Not Taxable

• If the life insurance policy is silent on the nature of designation of the beneficiary, it is REVOCABLE.

• In the event the insured does not change the beneficiary during his lifetime, the designation is deemed
IRREVOCABLE.

• Proceeds of Life Insurance from SSS or GSIS are exempted from estate tax, regardless of the
beneficiary and nature of designation.
Composition of Gross Estate, if Decedent was Married

1. Exclusive property of the decedent

a. Capital – exclusive property of husband
b. Paraphernal – exclusive property of wife

2. Conjugal or Community property

Absolute Community of Property
• The property regime for marriages celebrated on or after August 3, 1988, the effectivity date of the
Family Code of the Philippines, in absence of any marriage settlements.

1. Exclusive Property
a. Property acquired during marriage by gratuitous title by either spouse, the fruits as well as the
income thereof, if any, unless it is expressly provided by the donor, testator or grantor that they shall
form part of the community property.
b. Property for personal and exclusive use of either spouse, except jewelry,
c. Property acquired before marriage by either spouse who has legitimate descendants by a former
marriage, and the fruits as well as income, if any, of such property.
2. Community property
a. Property owned by the spouses at the time of the celebration of the marriage.
b. Property acquired during marriage.
Conjugal Partnership of Gains
• The property regime for marriages celebrated prior to August 3, 1988, while the Civil Code of the
Philippines was still in effect, in absence of any marriage settlements.

1. Exclusive Property
a. Property brought to the marriage as his or her own.
b. Property acquired during marriage by gratuitous title.
c. Property acquired by right of redemption, by barter or by exchange with exclusive property of one
of the spouses.
d. Property purchased with exclusive money of one of the spouses.
2. Conjugal property
a. Property acquired by onerous title during the marriage at the expense of the common fund of the spouses.
b. Property obtained from labor, industry, work or profession of either or both of the spouses.
c. Fruits, natural, industrial or civil, due or received during marriage from the common property, as well as the net
fruits from the exclusive property of each spouse.
d. Share of either spouse in the hidden treasure which the law awards to the finder or owner of the property
where the treasure is found.
e. Property acquired through occupation such as fishing or hunting.
f. Livestock existing upon dissolution of the partnership in excess of the number of each kind brought to the
marriage by either spouse.
g. Property acquired by chance, such as winnings from gambling or betting. However, losses therefrom shall be
borne exclusively by either spouse.
Summary of Rules pertaining to Property Relations/Regimes

Property/
Fruits or Income Absolute Community Conjugal Partnership of Gains
of Property
Property acquired before marriage, whether
by onerous or gratuitous title
Community Exclusive
Property acquired during marriage by onerous
title
Community Conjugal
Property acquired during marriage by
gratuitous title
Exclusive Exclusive

Fruits or income from exclusive property Exclusive Conjugal

Fruits or income from common property Community Conjugal

Valuation of Gross Estate

1. In General – Fair market Value as of the time of death

2. Real Property –
a. Zonal Value or
b. FMV fixed by provincial and city assessors, whichever is higher.
3. Shares of Stock
a. Listed shares – FMV is the arithmetic mean between the highest and lowest quotation on the
date of death, if none, at a date nearest the date of death.
b. Unlisted shares
i. Common shares – BOOK VALUE, which excludes appraisal surplus and value assigned to
preferred shares.
ii. Preferred shares – valued at PAR VALUE.

4. Usufruct – Value based on 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 the
Insurance Commissioner.
Exemptions from Estate Tax under the Tax Code

1. Merger of usufruct in the owner of the naked title.

Example: Dante devised in his will a parcel of land; naked title to Lito and usufruct to Glen for as
long as Glen lives, thereafter to Lito. The transmission from Dante to Lito and Glen is subject to
estate tax, but the merger of the naked title and usufruct in Lito upon death of Glen is exempted.

2. Transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the
fideicommissary.
Example: Dante devised in his will a parcel of land to his brother, Lito, (fiduciary heir) who is
entrusted with the obligation to preserve and to transmit the property to Glen
(fideicommissary), a son of Lito, when Glen becomes of age. The transmission from Lito to Glen
is exempted from estate tax.
Exemptions from Estate Tax under the Tax Code

3. Transmission from the first heir, legatee or donee in favor of another beneficiary, in accordance
with the desire of the predecessor.
Example: Dante devised in his will a parcel for land to his brother Lito for 3 years and after which
it shall belong to Glen, another brother of Dante. The transmission from Lito to Glen is exempted
from estate tax.

4. Bequests, devises, legacies or transfers to social welfare, cultural and charitable institutions, no
part of the net income of which inures to the benefit of any individual and not more 30% thereof
shall be used for administration purposes.
Exemptions from Estate Tax under Special Laws

1. Benefits received from SSS

2. Benefits received from GSIS

3. Benefits received from US Veterans Administration

4. Life insurance proceeds on group insurance policy taken out by his employer on the employee’s
life, regardless of the beneficiary named and nature of designation.
Deductions from the Gross Estate

1. Decedent is RC, NRC or RA

A. Ordinary Deductions
a. Claims against the estate
b. Claims against insolvent persons
c. Unpaid mortgages, unpaid taxes and casualty losses
d. Property previously taxed (vanishing deduction)
e. Transfers for public use
f. Amount received by heirs under Rep. Act No. 4917.

B. Special Deductions
a. Family home
b. Standard deduction of P5,000,000
2. Decedent is NRA
A. Ordinary Deductions
a. Proportion of (i) Claims against the estate, (ii) Claims against insolvent persons, and (iii)
Unpaid mortgages, unpaid taxes and losses, using the following formula:
Gross Estate - PHI
---------------------------- x the sum of (i), (ii) and (iii)
Gross Estate - World
b. Property previously taxed (vanishing deduction)
c. Transfers for public use

B. Special Deduction
Standard deduction of P500,000
3. Net Share in the Community/Conjugal Property, where the decedent was married

Community/Conjugal property
Less: Obligations properly chargeable to such property
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Net community/conjugal property

Multiply by: 50% Share of the Surviving Spouse
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Net Share of the Surviving Spouse in the Community/ Conjugal Property

Allowable Deductions from Gross Estate
Ordinary Deductions
1. Claims Against the Estate
Debts or demands of a pecuniary nature which could have been enforced against the deceased in his
lifetime and could have been reduced to simple money judgments.

Sources:
a. Contract
b. Tort
c. Operation of Law

Requisites for Deductibility

a. Liability represents a personal obligation of the deceased existing at the time of his death
b. Liability was contracted in good faith and for adequate and full consideration in money or money’s
worth.
c. Claim must be a debt or claim which is valid in law and enforceable in court.
d. Indebtedness must not have been condoned by the creditor or the action to collect from the
decedent must not have prescribed.
 Substantiation Requirements:
a. In case of Simple Loan including Advances
i. Debt instrument must be notarized, except loans granted by financial institutions where
notarization is not part of the business policy of the financial institution/lender.
ii. Notarized Certification from the Creditor as to the unpaid balance as of the time of death.
iii. Proof of financial capacity of the Creditor to lend the amount, as well as its latest audited balance
sheet with a detailed schedule of its receivable showing the unpaid balance of the decedent.
iv. Statement under oath executed by the administrator or executor of the estate reflecting the
disposition of the proceeds of the loan if said loan was contracted within 3 years prior to the death
of the decedent.

b. In unpaid obligations arose from Purchase of Goods or Services

i. Documents evidencing the purchase of goods or service, such as sales invoice/delivery receipt (for
sale of goods), or contract for services (for sale of services).
ii. Notarized Certification from the Creditor as to the unpaid balance of the debt, including interest
as of the time of death.
iii. Certified true copy of the latest audited balance sheet of the Creditor with a detailed schedule of
its receivable showing the unpaid balance of the decedent.
c. Where the settlement is made through the Court in a testate or intestate proceeding, in addition
to Requirements (a) or (b)

i. Documents filed with Court evidencing the claims against the estate.
ii. Court Order approving the claims.
 Charges Upon and Obligations of the Absolute Community
a. The support of the spouse, their common children, and the legitimate children of either spouse.
b. Debts and obligations contracted during marriage by the designated administrator-spouse for the
benefit of the community, or by both spouses, or by one of them with the consent of the other.
c. Debts or obligations contracted by either spouse without the consent of the other to the extent
that the family may have been benefitted.
d. Taxes, lien, charges and expenses, including major or minor repairs upon the community property.
e. Taxes and expenses for mere preservation made during the marriage upon the separate property of
either spouse.
f. Expenses to enable either spouse to commence or complete a professional, vocational, or other
activity for self-improvement.
g. Antenuptial debts of either spouse insofar as they have redounded to the benefit of the family.
h. Value of what is donated or promised by both spouses in favor of their common legitimate children
for the exclusive purpose of commencing or completing a professional or vocational course or other
activity for self-improvement.
i. Expenses of litigation between the spouses unless the suit is found to be groundless.
 Charges Upon and Obligations of the Conjugal Partnership
a. The support of the spouse, their common children, and the legitimate children of either spouse.
b. Debts and obligations contracted during marriage by the designated administrator-spouse for the benefit
of the conjugal partnership of gains, or by both spouses, or by one of them with the consent of the
other.
c. Debts or obligations contracted by either spouse without the consent of the other to the extent that
the family may have been benefitted.
d. Taxes, lien, charges and expenses, including major or minor repairs upon the conjugal partnership
property.
e. Taxes and expenses for mere preservation made during the marriage upon the separate property of
either spouse.
f. Expenses to enable either spouse to commence or complete a professional, vocational, or other activity
for self-improvement.
g. Antenuptial debts of either spouse insofar as they have redounded to the benefit of the family.
h. Value of what is donated or promised by both spouses in favor of their common legitimate children for
the exclusive purpose of commencing or completing a professional or vocational course or other
activity for self-improvement.
i. Expenses of litigation between the spouses unless the suit is found to be groundless.
2. Claims of the Decedent against Insolvent Person where the Value of the Decedent’s
Interest is included in the Value of the Gross Estate

• What is being deducted is the uncollectible portion of the claims against insolvent person, so entire
or gross claims must be included first in the gross estate to avoid double deduction.

GROSS ESTATE

Claims against Insolvent Persons – gross P15,000,000

or entire amount
ALLOWABLE DEDUCTIONS

ORDINARY DEDUCTIONS

Claims against Insolvent Persons (P15,000,000)

(Uncollectible Portion)
3. Unpaid Mortgages, Unpaid Taxes and Casualty Losses
a. Unpaid Mortgage
• Value of the mortgaged property, undiminished by the unpaid mortgage or indebtedness, must be
included first in the gross estate before the unpaid mortgage or indebtedness may be deducted
from the gross estate.

• If loan is merely an accommodation loan where the loan proceeds went to another person, the value
of the unpaid loan must be included as receivable of the estate.

• If there is a legal impediment to recognize the same as receivable, the unpaid obligation is not
allowed as a deduction.

GROSS ESTATE
Mortgaged Real Property P15,000,000
ALLOWABLE DEDUCTIONS
ORDINARY DEDUCTIONS
Unpaid Mortgage Debt (P6,000,000)
b. Unpaid Taxes
• Taxes accrued as of the death of the decedent which were unpaid as of the time of death, excluding:
i. Income tax upon income received after death
ii. Property taxes not accrued before his death
iii. Estate tax.

c. Casualty Losses
• Requisites for Deductibility
i. Incurred during the settlement of the estate
ii. Incurred not later than the last day for the payment of estate tax (one year from date of death)
iii. Arising from fires, storms, shipwreck, or other casualties, or from robbery, theft or embezzlement
iv. Not compensated for by insurance or otherwise
v. Not been claimed as deduction for income tax purposes in an income tax return
4. Property Previously Taxed (Vanishing Deduction)
• Deduction to mitigate or ease the harshness of successive taxation of the same property within a
relatively short period of time due to death of the transferee after receipt of the property from prior
decedent or donor.

• Requisites
i. Property must be situated in the Philippines at the time of death.
ii. Property must be included in the present decedent’s estate.
iii. Property must have been received by the present decedent from a prior decedent or donor.
iv. Property must have been received by present decedent within 5 years prior to his death.
v. Property must have been identified as the one originally received or one which was received in
exchange therefor.
vi. No vanishing deduction was previously claimed on the property.
vii. Prior estate tax or donor’s tax on the property must have been paid.
Formula:

FMV at the time of death or FMV at the time of the previous transfer, whichever is lower
Less: Mortgage paid by present decedent
--------------------------------------------------------
Initial Basis
Less: Pro-rated allowable deductions
Initial Basis Claims against estate
------------------- x Claims against insolvent persons
Gross Estate Unpaid mortgages, taxes and losses
Transfer for public use
-------------------------------------------------------
Final Basis

Multiply by: Vanishing Deduction Rate

Vanishing Deduction
Vanishing Deduction Rates

Period of Transfer Prior to

Death of Present Decedent Rate
a. Within 1 year 100%
b. More than 1 year but not more than 2 years 80%
c. More than 2 years but not more than 3 years 60%
d. More than 3 years but not more than 4 years 40%
e. More than 4 years but not more than 5 years 20%
 Example: Dante died leaving a real property valued at P25 million at the time of death. The property
was previously donated to him by his mother 18 months ago. At the time of donation, the market value
of the property was P18 million. How much is the estate tax of Dante?

Gross Estate

Property Donated by Mother P25,000,000

Ordinary Deduction

Vanishing Deduction (14,400,000)

Special Deduction

Standard Deduction (5,000,000)

Net Taxable Estate P5,600,000

Tax Rate 6%

Estate Tax P336,000

FMV at the Time of Death P25,000,000

FMV at the Time of Previous Transfer (Donation) P18,000,000

Basis of Vanishing Deduction P18,000,000

(Whichever is Lower)
Vanishing Deduction Rate – 18 months 80%
(More than 1 year but not more than 2 years)

Vanishing Deduction P14,400,000

5. Transfer for Public Use
• The amount of all bequests, legacies, devises or transfers to or for the use of the Government of the
Republic of the Philippines, or any political subdivision thereof, for exclusively public purposes. The
transfer must be testamentary in character.

• The property transferred must be added first to the gross estate before any deduction can be made.

GROSS ESTATE

Real Property Devised to the P15,000,000

Government
ALLOWABLE DEDUCTIONS

ORDINARY DEDUCTIONS

Transfer for Public Use (P15,000,000)

 6. Amount Received by Heirs Under Republic Act No. 4917
• Amount received by the heirs from the decedent’s employer as a consequence of the death of the
decedent-employee, provided the separation benefit is included in the gross estate of the decedent.

GROSS ESTATE

Death/Separation Benefits P1,000,000

ALLOWABLE DEDUCTIONS

ORDINARY DEDUCTIONS

Amount Received under (P1,000,000)

Republic Act No.4917
 Special Deductions
1. Family Home
• The deductible amount is the current fair market value at the time of death but not exceeding
P10,000,000.

Family Home
• The dwelling house, including the land on which it is situated, where the husband and wife, or a head
of the family, and members of their family reside, as certified by the Barangay Captain of the locality. It
is considered as such for as long as any of its beneficiaries actually resides therein.

• The family home must be part of the properties of the absolute community or of the conjugal
partnership, or of the exclusive properties of either spouse depending upon the classification of the
family home and the property relations of the spouses. It may also be constituted by an unmarried
head of a family on his or her own property.
Persons who may Constitute Family Home
a. Husband and wife
b. Unmarried Head of a Family – unmarried or legally separated man or woman with
i. One or both parents
ii. One or more brothers or sisters,
iii. One or more legitimate, recognized natural or legally adopted children, living with and dependent
upon him or her for their chief support, where such brother, sisters or children are
(i) Not more than 21 years of age
(ii) Unmarried
(iii) Not gainfully employed
(iv) Incapable of self-support because of mental or physical defect, regardless of age
iv. Any of the beneficiaries of the family home
(i) Husband and wife, or the head of the family
(ii) Their parents, ascendants, descendants, including legally adopted children, brothers and sisters,
whether the relationship be legitimate or illegitimate, who are living in the family home and
who depend upon the head of the family for legal support.
Conditions for Deductibility of Family Home
a. Family home must be the actual residential home of the decedent and his family at the time of death,
as certified by the Barangay Captain of the locality where the family home is situated.
b. Total Value of the family home must be included as part of the gross estate.
c. Allowable deduction must be in an amount equivalent to the current fair marker value of the family
home as declared or included in the gross estate, but not exceeding P10,000,000.
FAMILY HOME VALUE FAMILY HOME VALUE

1) Land - Conjugal P5,000,000 2) Land - Exclusive P5,000,000

House - Conjugal P7,000,000 House - Conjugal P7,000,000

Total P12,000,000 Total P12,000,000

Family Home Deduction P6,000,000 Family Home Deduction P8,500,000

 FAMILY HOME VALUE FAMILY HOME VALUE

3) Land - Exclusive P5,000,000 4) Land - Conjugal P5,000,000

House - Exclusive P7,000,000 House - Exclusive P7,000,000

Total P12,000,000 Total P12,000,000

Family Home Deduction P10,000,000 Family Home Deduction P9,500,000

2. Standard Deduction
P5,000,000 – Decedent is RC, NRC or RA
P500,000 – Decedent is NRA
Compliance Requirements

When Required to File Estate Tax Return

1. In all cases of transfers subject to estate tax
2. Regardless of the gross value of the estate, where the estate consists of registered or registrable
property

When Required to Attached CPA Certificate

Gross value of the estate exceeds P5,000,000.

Time for the Filing and Payment of Estate Tax

Within 1 year from decedent’s death.

Extension of Time for Filing of Estate Tax Return

Not exceeding 30 days, in meritorious cases.
Extension of Time for Payment of Estate Tax
• Not to exceed 5 years – in case the estate is settled through the courts.
• Not to exceed 2 years – in case the estate is settled judicially,
when the Commissioner finds that the payment on due date would impose undue hardship upon
the estate or any of the heirs.

• If extension is granted, any amount paid after the statutory due date, but within the extension
period, shall be subject to interest but no surcharge.

Cases where Extension is Not Allowed

Where the taxes are assessed by reason of:
1. Negligence
2. Intentional disregard of the rules and regulations
3. Fraud on the part of the taxpayer
Additional Requirement if Extension is Granted
• The Commissioner may require the executor, or administrator, or beneficiary, to furnish a bond in
such amount, not exceeding double the amount of the tax and with such sureties as the
Commissioner deems necessary.

Payment by Installment
a. In case the available cash of the estate is insufficient to pay the total estate tax due, the cash
installments shall be made within 2 years from the date of filing of the estate tax return.
b. The estate tax return must be filed within 1 year from the date of decedent’s death.
c. In case of lapse of 2 years without payment of the entire tax due, the remaining balance thereof
becomes 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.
d. No civil penalties or interest may be imposed on estates permitted to pay the estate tax due by
installment.
Partial Disposition of Estate and Application of the Proceeds to the Estate Tax Due
1. The disposition refers to the conveyance of property, whether real, personal or intangible property,
with the equivalent cash consideration.
2. The estate tax return must be filed within 1 year from decedent’s death.
3. The written request for the partial distribution of the estate must be approved by the BIR. It must
be filed together with a notarized undertaking that the proceeds thereof must be exclusively used
for the payment of the total estate tax due.
4. The estate must pay to the BIR the proportionate estate tax due of the property intended to be
disposed of.
5. In case of failure to pay the total estate tax due out of the proceeds of the disposition, the estate tax
due becomes 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.
Liability for Payment
1. Primarily, Severally and Personally liable – Executor/s or administrator/s, the estate tax to be paid
before delivery to any beneficiary of his distributive share of the estate.
2. Subsidiarily liable – Beneficiary, to the extent of his distributive share of the estate, for the payment
of such portion of the estate tax as his distributive share bears to the value of the total net estate.

Discharge of Executor or Administrator from Personal Liability

1. Executor or administrator makes a written application to the Commissioner for determination of
the estate tax and discharge from personal liability.
2. The Commissioner, as soon as possible, and in any event within 1 year after the making of such
application, if the application is made before the return is filed, then 1 year after the return is filed
but not after the expiration of prescriptive period for assessment of tax, notifies the executor or
administrator of the amount of tax.
3. Executor or administrator pays the amount of which he is notified.
Prohibition when there is No Estate Tax Certification or Clearance from the Commissioner
1. Judge is not authorize the executor or administrator to deliver a distributive share to any heir.
2. Registers of Deeds should not register in the Registry of Property any document transferring real
property or real rights.
3. Debtor should not pay his debts to the heirs, legatee, executor or administrator of the creditor.
4. Corporation or partnership should not transfer to any new owner in the books of the corporation
or partnership any share, obligation, bond or right by way of gift inter vivos or mortis causa, legacy
or inheritance.

Duties of Certain Officers

1. Registers of Deeds – to immediately notify the BIR of the non-payment of tax discovered by them.
2. Lawyer, notary public or any government who intervenes in the preparation or acknowledgment of
documents regarding partition, or disposal of donation inter vivos or mortis causa, legacy of
inheritance – to furnish the BIR with copies of such documents to facilitate the collection of the
tax.
Payment of Estate Tax Before Withdrawal of Bank Deposit

• If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or
jointly with another, it shall allow any withdrawal from the said deposit account, subject to a final
withholding tax of 6%. Provided the withdrawal is within one year from the date of decedent’s death.

• The final tax withheld cannot be refunded, however, may be credited from the tax due in instances
where the bank deposit account subjected to the final withholding tax has been actually included in
the gross estate declared in the estate tax return of the decedent.
Example:
Dante died leaving a bank deposit worth P2,000,000.

a. If the heirs of Dante will withdraw the bank deposit without filing first the estate tax return, the
withdrawal is subject to 6% final withholding estate tax. The heirs will receive from the bank P1,880,000,
net of final withholding tax of P120,000.

b. If the heirs will file estate tax return and secure estate tax clearance from BIR, they will get the entire
P2 million from the bank. The estate tax in this case is P0, computed as follows:

Gross Estate
Bank Deposit P2,000,000
Special Deduction
Standard Deduction (5,000,000)

Net Taxable Estate (3,000,000) or P0

6% Estate Tax P0
Where to File the Return and Pay the Tax

• For resident decedents – Authorized Agent Bank, the Revenue District Officer, Revenue Collection
Officer of duly authorized Treasure of the city or municipality where the decedent was domiciled at
the time of death.
• For non-resident decedents with executor or administrator in the Philippines – Authorized Agent
Bank, the Revenue District Officer, Revenue Collection Officer of duly authorized Treasure of the city
or municipality where the executor or administrator is registered, if not registered his legal
residence.
• For non-resident decedents without executor or administrator in the Philippines – The Office of the
Commissioner (Revenue District Office having jurisdiction over BIR-National Office or RDO No. 39
– South Quezon City)
THE END