I.
Amendment of the Estate Tax Rate
Section 22 of the TRAIN law amends Section 84 of the Tax Code, which provides
for the estate-tax rate. Previously, a tax based on the value of the net estate of
the decedent, whether resident or nonresident of the Philippines, was computed
based on a tax schedule where an estate worth P200,000 and over was taxed
from 5 percent to 20 percent. Under the TRAIN law, it will now be subject to a flat
rate of 6 percent.
II. Amendments on Estate Tax Deductions
Section 23 of the TRAIN law amends Section 86 of the Tax Code, which provides
for the computation of the net estate or, effectively, the deductions allowed to
the gross estate of an individual.
The TRAIN law removes funeral expenses, judicial expenses and medical expenses
as allowable deductions.
Instead, the law increases the Standard Deduction to P5 million, which previously
only amounted to P1 million. Only available to citizens (resident or nonresident)
and resident aliens, TRAIN law now provides that nonresident aliens can avail
themselves of a standard deduction, although only up to P500,000.
Another TRAIN law significant change from the old tax rule is that now, family
homes that are worth up to P10 million will be exempted from estate tax.
Previously, only family homes worth P1 million are exempted.
III. Amendments on the Procedure for Estate Tax Settlement
A. Repeal of Filing of Notice of Death provision
Section 24 of the TRAIN law repeals Section 89 of the Tax Code. The repealed
provision provides for when a notice of death should be filed and the period to
file the same.
B. Amendment on Filing of Estate Tax Return
Section 25 of the TRAIN law amends Section 90 of the Tax Code, which provides
for the procedural requirements for the estate-tax return.
The TRAIN law requires that estate-tax returns showing a gross value exceeding
P5 million must be certified by a certified public accountant. This is P3 million
higher than the old tax rule, which only required CPA certifications for estate-tax
returns that exceed a gross value of P2 million. The TRAIN law has also increased
the period for filing of estate-tax returns from six months from the decedent’s
death to one year.
C. Amendment of Payment of Estate Tax by Installment
Section 26 of the TRAIN law amends Section 91(c) of the Tax Code, which provides
for the payment of estate tax by installment.
Under the TRAIN law, payment by installment has been particularly simplified.
However, the law has provided for an implied limitation of two years for the
payment of the full estate-tax liability, which was previously not contained in the
old tax rule.
IV. Amendment on Withdrawals from Deceased’s Bank Account
Section 27 of TRAIN Law amends Section 97 of the Tax Code, which concerns
allowable withdrawals from the deceased person’s account.
Under the old Tax Rule, only withdrawals up to P20,000 are allowed. The
administrator of the estate or any one of the heirs may, when authorized by the
commissioner, withdraw an amount not exceeding P20,000. However, the Train
Law has increased allowable withdrawals from the deceased person’s account to
any amount, subject to a 6-percent final withholding tax.
Estate Tax - Instead of having a complicated tax schedule with different rates,
TRAIN reduces and restructures the estate tax to a low and single tax rate of 6%
based on the net value of the estate with a standard deduction of P5 million and
exemption for the first P10 million for the family home.
Donor Tax - TRAIN also simplifies the payment of donor’s taxes to a single tax rate
of 6% of net donations is imposed for gifts above P250,000 yearly regardless of
relationship to the donor.
Estate tax
From a graduated tax rate of 5 percent to 20 percent, a flat tax rate of 6 percent
will now be applied to the value of the net estate upon transfer of the decedent,
whether the decedent is a resident or non-resident of the Philippines. The TRAIN
Law revised pertinent provisions of Section 86 of the Tax Code, relating the
allowed deductions to the estate of a citizen or a resident. It removed the
allowable deduction for funeral expenses, judicial expenses and medical expenses
incurred by the decedent.
In lieu of the aforementioned deductions, the law increased the standard
deduction — from P1 million to P5 million, and the exemption on family home —
from P1 million to P10 million. Also, the provision requiring the certification of a
barangay captain for a decedent’s home to be considered a family home for the
purposes of estate tax has been removed.

Furthermore, RA No. 10963 introduced the standard deduction of P500,000
against the gross estate of non-residents. It also removed the provision allowing
only deductions in the gross estate of a nonresident alien when the executor,
administrator, or heir(s), as the case may be, includes in the estate tax return the
gross estate not situated in the Philippines.
In addition, the TRAIN Law eradicated the provision requiring the filing of an
estate tax return for gross estate exceeding P200,000, which is exempt from
estate tax. Further, the threshold value of an estate has been increased from P2
million to P5 million, where the estate tax return to be filed should be supported
by a statement duly certified by a certified public accountant (CPA).
The last day for filing the estate tax return was further amended by extending the
period from six months to one year from the decedent’s death. The said law
added a provision allowing the payment of estate tax by installment should the
estate have insufficient cash to pay the total tax due. Payment by installment will
be allowed within two years from the statutory date for its payment without civil
penalty and interest. The law also allowed the withdrawal of bank deposits of the
deceased, which will be subjected to 6 percent final withholding tax, and eased
the rule on the amount that can be withdrawn from the said bank deposits.
Donor’s tax
The TRAIN Law also amended the taxation of donations by imposing a uniform tax
rate of 6 percent based on the value of the total gift in excess of P250,000 made
during a calendar year, regardless of the relation of the donor to the donee.
Previously, the donations were subjected to a graduated tax rate of 2 percent to
15 percent on donations to relatives, and 30 percent on donations to strangers.
Furthermore, the TRAIN Law added a provision on Section 100 of the Tax Code
relative to the transfer for less than adequate and full consideration. The sale,
exchange, or other transfer of property made in the ordinary course of business
(bona fide transaction and at arm’s length) will now be considered made for
adequate and full consideration in money and money’s worth; therefore, not
subject to donor’s tax. It also erased the exemption to donor’s tax of the first
P10,000 of dowries or gifts made on account of marriage.
Lastly, donations of real property are now subject to documentary stamp tax
(DST) at the same rate as deeds of sale and conveyances of real property, i.e., P15
for each P1,000. However, donations or transfers of real property under Section
101 (A) and (B), such as gifts made to the national government and to qualified
non-stock, non-profit organizations, which are exempt from donor’s tax, will also
not be subjected to DST.
Having lowered the tax rate and imposed uniform taxation on the gratuitous
transfer of properties, the government expects to incur a loss of revenue. But the
goal is to offset this with a more efficient land market and improved compliance
among taxpayers. By lowering the estate tax rates and relaxing the payment of
estate tax, the government hopes to encourage heirs to update the
documentation of land ownership, paving the way for the development of idle
lands, which, in turn, should unlock their value through more efficient use that
can help foster investments and create jobs. Moreover, these changes are
expected to alleviate some of the burden that comes with losing a loved one,
whereas abridging donor’s tax will give the government an equal share of the
kindness of Filipinos.
With the hope that this new law will help fuel the many development projects of
the Philippine government, taxpayers are expected to observe keenly and work
hand in hand with the tax authorities in implementing and conforming with the
said law.