Taxpayer and Tax Base The estate tax is imposed on the transfer of the decedent’s estate to his lawful

heirs and beneficiaries based on the fair market value of the net estate at the time of the decedent’s
death. It is not a tax on property. It is a tax imposed on the privilege of transmitting property upon the
death of the owner. The estate tax is based on the laws in force at the time of death notwithstanding
the postponement of the actual possession or enjoyment of the estate by the beneficiary.

(1) The fair market value as determined by the Commissioner, or

(2) The fair market value as shown in the schedule of values fixed by the provincial
and city assessors, whichever is higher.

Computation of Net Estate

a. Gross estate. The value of the gross estate of the decedent includes the value at the time of his
death of all property, real or personal, tangible or intangible, wherever situated.
b. In the case of a nonresident decedent who at the time of his death was not a citizen of the
Philippines, only that part of the entire gross estate situated in the Philippines is included in the
taxable estate.1

Gross estate includes property falling under any of the

following categories:

(1) Decedent’s interest, to the extent of his interest therein

at the time of his death;
(2) Transfers in contemplation of death;
(3) Revocable transfers;
(4) Property passing under general power of appointment;
(5) Proceeds of life insurance;
(6) Prior interests; and
(7) Transfer for insufficient consideration.
The following are excluded from the gross estate:119
(1) GSIS proceeds/ benefits
 1. . Claims against the estate or indebtedness in respect of property may arise out of: (1)
Contract; (2) Tort; or (3) Operation of Law.

1.1. Requisites for Deductibility of Claims Against the Estate -

1.1.1. The liability represents a personal obligation of the deceased existing at the
time of his death;

1.1.2. The liability was contracted in good faith and for adequate and full
consideration in money or money’s worth;

1.1.3. The claim must be a debt or claim which is valid in law and enforceable in
court;

1.1.4. The indebtedness must not have been condoned by the creditor or the action
to collect from the decedent must not have prescribed.

(A) Deductions Allowed to the Estate of Citizen or a Resident. - In the case of a citizen or resident of
the Philippines, by deducting from the value of the gross estate -.

(1) Expenses, Losses, Indebtedness, and taxes. - Such amounts:

(a) For actual funeral expenses or in an amount equal to five percent (5%) of the gross estate, whichever
is lower, but in no case to exceed Two hundred thousand pesos (P200,000);

(b) For judicial expenses of the testamentary or intestate proceedings;

(c) For claims against the estate: Provided, That at the time the indebtedness was incurred the debt
instrument was duly notarized and, if the loan was contracted within three (3) years before the death of
the decedent, the administrator or executor shall submit a statement showing the disposition of the
proceeds of the loan;

(d) For claims of the deceased against insolvent persons where the value of decedent's interest therein
is included in the value of the gross estate; and

(e) For unpaid mortgages upon, or any indebtedness in respect to, property where the value of
decedent's interest therein, undiminished by such mortgage or indebtedness, is included in the value of
the gross estate, but not including any income tax upon income received after the death of the
decedent, or property taxes not accrued before his death, or any estate tax.