HANDOUT 2: ESTATE TAX, PART 1 Integrative Course for Taxation Instructor: K.

J-Culajara

ATENEO DE ZAMBOANGA UNIVERSITY its free disposal in case of survival, while a DIV is Formula for estate tax (if the decedent dies as single person)
School of Management and Accountancy made without such consideration but out of
Accountancy Department donor’s generosity. GROSS ESTATE P x-x-x-x-x-x
 A DMC is not a contract, but a legacy. A DIV is a LESS: DEDUCTIONS
I. INTRODUCTION TO TRANSFER contract of donation. Ordinary deductions x-x-x-x
TAXES1  In a DMC, the transfer of the property is effected Special deductions x-x-x-x
upon the death of the donor. In a DIV, the transfer TOTAL DEDUCTIONS (x-x-x-x-x-x)
Transfer tax is tax imposed upon the gratuitous of ownership is made during the lifetime of the TAXABLE NET ESTATE x-x-x-x-x-x
transfer of property ownership. It is a privilege tax which is donor. MULTIPLY: APPLICABLE RATE %_
imposed on the act of passing ownership of property and not ESTATE TAX DUE P x-x-x-x-x
 In a DMC, acceptance by the donees is not
a tax on the property itself.
required. In a DIV, acceptance by the donees is
required.
Types of transfer taxes Formula for estate tax (if decedent dies as a married person
 Estate tax – an excise tax imposed upon the right Mobilia sequuntur personam
of transmitting property at the time of death, and The principle of mobilia sequuntur personam GROSS ESTATE P x-x-x-x-x-x
the privilege of controlling the disposition of one’s refers to the principle that taxation of intangible personal LESS: DEDUCTIONS
property to take effect upon death. SKS: In layman’s property generally follows the residence or domicile of the Ordinary deductions x-x-x-x
term, estate tax is tax on inheritance. This is tax on owner thereof. Special deductions x-x-x-x
donations mortis causa. Total (x-x-x-x-x-x)
 Donor’s (Gift) tax – tax imposed on the privilege II. ESTATE TAX NET ESTATE x-x-x-x-x-x
of transmitting one’s property to another during LESS: SHARE OF SURVIVING
his lifetime without adequate and full valuable Estate tax is an excise tax or privilege tax and its SPOUSE (SS) (x-x-x-x-x-x)
consideration. SKS: This is tax on donations inter object is to tax the shifting of economic benefits and TAXABLE NET ESTATE x-x-x-x-x-x
vivos. enjoyment of property from the dead to the living. MULTIPLY: APPLICABLE RATE %_
ESTATE TAX DUE P x-x-x-x-x
Estate tax and donor’s tax distinguished A. Justification of estate tax
Estate tax is imposed upon privilege to transmit  Benefit-received theory
property upon death, while donor’s tax is tax imposed upon SKS: How does one compute for the share of the surviving spouse?
 Privilege theory or the State partnership This is the tricky part of the entire estate tax lecture.
one’s privilege to transfer during lifetime.
theory – Succession to the property of a
Donation inter vivos (DIV) and donation mortis causa
decease person is not a fundamental right III. BASIC CONCEPTS OF SUCCESSION
(DMC), distinguished
and consequently, the legislature can AND WILL
 A DMC is made in consideration of death, without constitutionally burden such succession
the donor’s intention to lose the thing conveyed or with a tax. Succession is mode of acquisition by virtue of
 Ability to pay theory – those who have which the property, rights, and obligations to the extent of
1
Based on the amendments introduced by R.A. No. 10963, or the more properties to transfer to their heirs the value of the inheritance of a person are transmitted
TRAIN Law. upon death shall pay more estate tax.

1
HANDOUT 2: ESTATE TAX, PART 1
through death to another or others by will or by operation
of law.
A. Elements of succession
 Decedent – the person whose property is
transmitted through succession, whether or not he
left a will;
 Heir – the person called to succession either by the
provision of a will or by operation of law;
 Estate – refers to all the property, rights and
obligations of a person which are not extinguished
by his death.
B. Kinds of succession
 Testamentary – results from the designation of an
heir, made in a will executed in the form
prescribed by law;
 Legal or intestate – transmission of properties
where there is no will, or if there is a will, the
same is void or nobody succeeds in the will;
 Mixed – transmission of properties which is
effected partly by will and partly by operation of
law.
C. Kinds of successors in a testamentary succession
 Legatee – an heir to a particular personal property;
 Devisee – an heir to a particular real property
given by virtue of a will.
The right to the succession are transmitted from
the moment of the death of the decedent.
D. Persons authorized to manage the estate
 Executor – the person nominated by a testator to
carry out the directions and requests in his will and
Integrative Course for Taxation
to dispose of his property according to his
testamentary provisions after his death;
 Administrator – the person appointed by the court,
in accordance with the governing statute, to
administer and settle intestate estate and such
testate estate as no competent executor designated
by the testator.
E. Wills, in general
A will is an act whereby a person is permitted with
the formalities prescribed by law, to control to a certain
degree the disposition of his estate, to take effect after his
death.
All persons (as long as they are capacitated) can
make a will.
Two or more persons cannot make a will jointly,
or in the same instrument, either for their reciprocal benefit
or for the benefit of a third person.
As a rule, every will must be acknowledged before
a notary public by the testator and the witnesses, in which
case it is called a “notarized will”.
Any person not domiciled in the Philippines and
those who have been convicted of falsification of a
document, perjury, or false testimony are disqualified from
being witnesses to a will.
Holographic will
A holographic is a secret will which is written,
dated, and signed by the hand of the testator himself. It is
subject to no other form, and may be made in or out of the
Philippines, and need not be witnessed.
It is easy to forge, and subject to wrong
construction since the language of the testator may be vague
or unclear. There is also no guarantee that there was no
fraud, force, intimidation, undue influence; and no guaranty
regarding testator’s soundness of mind.
2
Instructor: K. J-Culajara
In case of any insertion, cancellation, erasure, or
alteration in a holographic will, the testator must
authenticate the same by his full signature.
Revocation of a will
A will may be revoked at any time before the
testator’s death. Any waiver or restriction of the right to
revoke is void.
A codicil is a supplement or addition to a will,
made after the execution of a will and annexed to be taken
as a part thereof, by which any disposition made in the
original will is explained, added to, or altered.
Revocation of a will may be made by: (a)
implication of law; (b) by some will, codicil, or other
writing executed as provided in case of wills; or (c) by
burning, tearing, cancelling or obliterating the will with the
intention of revoking it, by the testator himself, or by some
other person in his presence and his express direction.
IV. WHAT CONSTITUTES THE GROSS
ESTATE
The estate shall be appraised at its fair market value
as of the time of the death. However, the appraised value of
real property as of the time of death shall be, whichever is
the higher of –
 The fair market value as determined by the
Commissioner of Internal Revenue (CIR);
 The fair market value as shown in the schedule of
values fixed by the Provincial and City Assessors.
Properties that are still owned by the decedent at
the time of his death, to the extent of his equity or interest
in such property, whether as exclusive owner, conjugal or
community property owner, or common owner, which may
include:
HANDOUT 2: ESTATE TAX, PART 1 Integrative Course for Taxation Instructor: K. J-Culajara

 Dividends Resident Ok Ok Ok Ok Ok Ok  Shares, obligations or bonds issued by any foreign

 Partnership profits alien corporation where 85% of its business is located in
 Proceeds of life insurance policy payable to a Non- Ok Ok Ok2 the Philippines;
revocable beneficiary resident  Shares, obligations or bonds issued by a foreign
alien corporation if such shares, obligations or bonds
 Right of usufruct if transferable to the heirs
have acquired a business situs in the Philippines;
SKS: The value of the gross estate of the decedent shall be and
Assets or properties owned by decedent during his
determined by including the value at the time of his death.  Shares or rights in any partnership, business or
lifetime but were no longer owned by him at the time of his
death are not included in the gross estate. However, the industry established in the Philippines.
The rule on reciprocity
following transfers would be taxable
 The rule on reciprocity applies only to non- SAMPLE PROBLEM
 Transfer in contemplation of death;
resident aliens, particularly on mortis causa
 Revocable transfers; donations when the properties are intangible Jose Cerna (Filipino), who was married to Maria Cerna,
 Property passing under the general power of personal which are located in the Philippines. died in a vehicular accident in NLEX on July 10, 2007. The
appointment;  If the decedent at the time of his death was a citizen spouses owned, among others, a 100-hectare agricultural
 Proceeds for life insurance; and resident of a foreign country which at the time land in Sta. Rosa, Laguna with current fair market value of
 Prior interests; of his death did not impose a transfer tax on P20 million, which was the subject matter of a Joint
 Transfer for insufficient consideration; intangible personal property of the citizens of the Venture Agreement about to be implemented with Star
 Capital of the surviving spouse. Philippines not residing in that foreign country. Land Corporation (SLC). Jose bought the real property for
 If the laws of the foreign country of which the P2 million 50 years ago. On January 5, 2008, the
The inheritance of a person includes not only the decedent at the time of his death allows a similar administrator of Jose’s estate and SLC jointly announced
property and the transmissible rights and obligations exemption from transfer taxes of every character their big plans to start conversion and development of the
existing at the time of his death, but also those which have or description in respect of intangible personal agricultural lands in Sta. Rosa, Laguna into first-class
accrued thereto since the opening of the succession. property owned by citizens of the Philippines not residential and commercial centers. As a result, the prices of
residing in that foreign country. real properties in the locality have doubled. The
A. Taxability of estate, depending upon citizenship or administrator of the estate of Jose Cerna filed the estate tax
residence of the decedent Intangible personal properties considered situated in the return on January 9, 2008, by including in the gross estate
Real Tangible Intangible Philippines the real property at P2 million. After 9 months, the BIR
Property Personal Personal  Franchise which must be exercised within the issued deficiency estate tax assessment, by valuing the real
Property Property Philippines; property at P40 million. Was the BIR correct in its
In Out In Out In Out  Shares, obligations or bonds issued by any assessment?
Resident Ok Ok Ok Ok Ok Ok corporation or society organized or constituted in
Filipino the Philippines in accordance with its laws; Suggested answer: No. The value of the gross estate of the
Non- Ok Ok Ok Ok Ok Ok decedent shall be determined by including the value at the
resident 2
time of death in 2007 of all property. The fair market value
Intangible personal property with a situs in the Philippines, unless of P20 million shall be used as basis in computing estate tax.
Filipino exempted on the basis of reciprocity.

3
HANDOUT 2: ESTATE TAX, PART 1
A. Transfers in contemplation of death
A transfer of property where the thought of death
is the controlling motive. The main reason behind this
provision is to reach ingenious schemes to avoid estate tax
liability, by the use of other forms of conveyances rather
than by succession or transfer mortis causa.
Factors in determining whether transfers are made
in contemplation of death:
 Age and health of the decedent at the time of the
gift, especially when he was aware of a serious
illness;
 Length of time between the gift and the date of
death. A short interval suggests the that the
thought of death was the controlling motive.
 Concurrent making of a will or making a will
within a short time after the transfer. There is such
transfer when the decedent transferred the
possession or enjoyment of his property to
another, but this transfer was intended to take
effect only upon his death;
 The decedent transferred title to the property but
retained for his lifetime the right to possess or
enjoy the property or the income therefrom, or the
rights to designate whom shall possess or enjoy the
same. This is not applicable when the sale is in
good faith and for an adequate or full
consideration.
B. Revocable transfers (transfers with retention or reservation
of certain rights)
A situation where the decedent transfers the
enjoyment of his property to another, subject to his right to
revoke the transfer at will, with or without notifying the
transferee, anytime before he dies. This may include trust
Integrative Course for Taxation
funds, leased properties, transfers resulting to usufructuary
rights.
Revocable transfers shall not include as part of the
gross estate where the transfer is a bona fide sale for an
adequate and full consideration in money’s worth (sale with
right to repurchase).
C. Transfers of property under general power of appointment
(GPA)
A power of appointment is a right to designate by
will or deed the person or persons who are to receive
certain property from the estate of a prior decedent.
A power of appointment may either be general or
limited (special).
A special power of appointment is one which
authorizes the donee or holder of the power to appoint only
among a restricted class or designated class of persons other
than himself.
A general power of appointment is one which
authorizes the done to appoint any beneficiary including
himself, his estate, his creditor, or the creditors of his
estate.
If the power of appointment is general, the
decedent is practically the owner of the property, and so the
property is deemed part of his gross estate. But if the power
is specific, the decedent is only a trustee to the property,
and so it should not be included in his estate.
D. Proceeds of life insurance
Taxable proceeds of life insurance
 Beneficiary is the estate of the deceased, his
executor or administrator, irrespective of whether
or not the insured retained the power of
revocation;
4
Instructor: K. J-Culajara
 Beneficiary is other than the decedent’s estate,
executor or administrator, when designation of
beneficiary is not expressly made irrevocable or the
designation of the beneficiary is revocable.
Non-taxable proceeds
 Accident insurance proceeds; SKS: The Tax Code
specifically mentions only life insurance policies.
 Proceeds of a group insurance policy taken out by a
company for its employees; SKS: The law speaks of
policies taken out by the decedent upon his own life.
 Amount receivable by any beneficiary irrevocably
designated in the policy of insurance by the
insured. SKS: The transfer is absolute and the insured
did not retain any legal interest in the insurance.
 Proceeds of insurance policies issued by the GSIS
to government officials and employees;
 Benefits accruing under the SSS Law;
 Proceeds of life insurance payable to heirs of
deceased members of military personnel.
E. Transfers for insufficient consideration
A fictitious donation where transfers are made in
order to evade estate tax liability. This normally happens
when there is insufficient price or consideration which may
indicate that the contract is fictitious and/or simulated.
The amount included in the gross estate is the
difference between the fair market value at the time of death
over the value of the consideration received by the
decedent.
Applies only under the following situations:
 Transfers in contemplation of death
 Property passing under general appointment
 Revocable transfers
HANDOUT 2: ESTATE TAX, PART 1 Integrative Course for Taxation Instructor: K. J-Culajara

 Transfers for public use be allowed. SKS: The point is, you apportion deductible claims
F. Exemptions under special laws  Amount received by heirs under R.A. No. 4917; according to the proportionate value of the estate located in the
 Benefits received by members of the GSIS and the Philippines as against his total gross estate worldwide.
 Share of the surviving spouse. SKS: We will have a
SSS by reason of death; separate and exhaustive discussion about how to compute
 Amounts received from the Philippines and the C. Claims against insolvent persons
the share of surviving spouse since the process is quite
United States governments for damages suffered For claims against insolvent persons to be
complicated and requires ample knowledge about family
during the last war; deductible from the gross estate, it is important to show
relations law. Hang on!
that:
 Benefits received by beneficiaries residing in the
Philippines under laws administered by the U.S. A. Funeral expenses  The amount of said claims has been initially
Veterans Administration; The TRAIN removed funeral expenses, judicial included as part of his gross estate; and
 Bequests, legacies or donations mortis causa to expenses and medical expenses from the allowable  The incapacity of the debtors to pay their
social welfare, cultural, or charitable organizations; deductions. SKS: The old law provided that amounts for actual obligations is proven, not merely alleged.
but bequests to religious and educational funeral expenses or in an amount equal to 5% of the gross estate,
institutions are not exempt; whichever is lower, but in no case to exceed P200,000 shall be For a non-resident alien, the proportion of the
deducted from the gross estate. claims against the estate which the value of such part bears
 Grants and donations to the Intramuros
to the value of his entire gross estate wherever situated shall
Administration.
B. Claims against the estate be allowed. SKS: The point is, you apportion deductible claims
The requirements for the deductibility of claims according to the proportionate value of the estate located in the
V. WHAT CONSTITUTES THE
against the estate are: Philippines as against his total gross estate worldwide.
ALLOWABLE DEDUCTIONS
 They were contracted in good faith and for an
adequate and full consideration in money or D. Unpaid mortgages and taxes
The following are the items deductible from the decedent’s
money’s worth; Unpaid mortgages upon, or any indebtedness in
estate:
respect to, property shall be deductible from gross estate,
 Funeral expenses; SKS: The TRAIN removed this as  They must be existing against the estate;
where the value of the decedent’s interest therein,
allowable deduction.  They must be enforced by the claimants; undiminished by such mortgage or indebtedness, is included
 Claims against the estate;  They must be reasonably certain in amount; and in the value of the gross estate.
 Claims against insolvent persons;  At the time the indebtedness was incurred, the However, unpaid income tax upon income
 Unpaid mortgages and taxes; debt instrument was duly notarized and, if the loan received before his death, or any estate tax shall not be
 Losses; was contracted within 3 years before the death of deductible from his gross estate.
the decedent, the administrator or executor shall The unpaid mortgages and taxes must be
 Family home;
submit a statement showing the disposition of the contracted bona fide and for an adequate and full
 Standard deduction; proceeds. consideration in money or money’s worth.
 Medical expenses; SKS: The TRAIN removed this as
allowable deduction. For a non-resident alien, the proportion of the For a non-resident alien, the proportion of the
 Property previously taxed (or “vanishing claims against the estate which the value of such part bears claims against the estate which the value of such part bears
deduction”); to the value of his entire gross estate wherever situated shall to the value of his entire gross estate wherever situated shall

5
HANDOUT 2: ESTATE TAX, PART 1
be allowed. SKS: The point is, you apportion deductible claims
according to the proportionate value of the estate located in the
Philippines as against his total gross estate worldwide.
E. Losses
Losses incurred during the settlement of the estate
arising from fires, storms, shipwreck, or other casualties, or
from robbery, theft or embezzlement, when such losses are
not compensated for by insurance or otherwise, and if at the
time of the filing of the estate return, such losses have not
been claimed as a deduction for income tax purposes in an
income tax return, and provide that such losses were
incurred not later than the last day for the payment of the
estate tax (i.e. 6 months from the date of death) are
deductible from the gross estate.
F. Family home
Conditions for the allowance of family home as
deduction from the gross estate:
 The family home must be the actual residential
home of the decedent and his family at the time of
his death, as certified by the Barangay Captain of
the locality where the family home is situated;
 The total value of the family home must be
included as part of the gross estate of the decedent;
 Under the TRAIN, an amount equivalent to the
current fair market value of the decedent’s family
home: Provided, however, that if the said current
fair market value exceeds P10,000,000, the excess
shall be subject to estate tax. SKS: Under the old law,
allowable deduction must be in an amount equivalent to
the current fair market value of the family home as
declared or included in the gross estate, or the extent of
the decedent’s interest (whether conjugal or community,
or exclusive property), whichever is lower, but not
exceeding P1 million.
Integrative Course for Taxation
G. Standard deduction
Under the TRAIN, an amount equivalent to
P5,000,000 shall be allowed as an additional deduction from
the estate of a citizen or a resident. SKS: The old law only
provided for P1,000,000 standard deduction.
For a non-resident alien, a standard deduction of
only P500,000 is allowed under the TRAIN.
H. Medical expenses
The TRAIN removed funeral expenses, judicial
expenses and medical expenses from the allowable
deductions. SKS: Under the old law, all medical expenses (cost of
medicines, hospital bills, doctors’ fees, etc.) incurred (whether paid
or unpaid) within 1 year before the death of the decedent shall be
allowed as a deduction, provided that the same are duly
substantiated with official receipts for services rendered by the
decedent’s attending physicians, invoices, statements of account
duly certified by the hospital, and such other documents in support
thereof and provided, further, that the total amount thereof whether
paid or unpaid, does not exceed P500,000.
I. Property previously taxed (or “vanishing deduction”)
Requisites for the deductibility
 The present decedent died within 5 years from the
date of death of the prior decedent or date of gift.
 The property with respect to which deduction is
sought can be identified as the one received from
prior decedent or from the donor, or as the
property acquired in exchange for the original
property so received.
 The property must have formed part of the gross
estate situated in the Philippines of the prior
decedent, or have been included in the total
6
Instructor: K. J-Culajara
amount of the gifts of the donor within 5 years
prior to the present decedent’s death.
 The estate tax on the prior succession, or the
donor’s tax on the gift, must have been finally
determined and paid by the prior decedent or by
the donor, as the case may be.
 No previous vanishing deduction on the property,
or the property given in exchange therefore, was
allowed in determining the value of the net estate
of the prior decedent.
Limitations as to the amount of deduction allowable
 The deduction is limited by the value of the
property previously taxed or the aggregate value of
such property if more than 1 item, as finally
determined for the purpose of the prior estate or
gift tax, or the value of such property in the
present decedent’s gross estate, whichever is
lower.
 The initial amount of the value shall be reduced by
the total amount paid by the present decedent on
any mortgage or other lien on the property where
a deduction was allowed, by reason of the payment
of such mortgage or other lien from the gross
estate of the prior decedent, or gift of the donor, in
determining the estate tax of the prior decedent or
the donor’s tax.
 The value as reduced shall be further reduced by an
amount allowed as deductions for expenses, losses,
indebtedness, taxes, and transfers for public use as
the amount otherwise deductible for property
previously taxed bears to the value of the
decedent’s gross estate.
 The vanishing deduction shall be computed using
the following percentages:
HANDOUT 2: ESTATE TAX, PART 1 Integrative Course for Taxation Instructor: K. J-Culajara

a. 100% - if prior decedent died, or the legacies or transfers shall be used by such
donation was effected within 1 year prior Any estate tax imposed by the authority of a institutions for administration purposes;
to the death of the present decedent; foreign country shall be credited as against the estate tax  The exclusive (separate) property of the surviving
b. 80% - if the period is more than 1 year imposed by the Philippines, subject to the following spouse.
but not more than 2 years; limitations:
c. 60% - if the period is more than 2 years  The amount of the credit in respect to the tax paid A. Merger of usufruct in the owner of the naked title
but not more than 3 years; to any foreign country shall not exceed the same Usufruct is defined as a real right, of a temporary
d. 40% - if the period is more than 3 years proportion of the tax against which such credit is nature, which authorizes its holder to enjoy all the benefits
but not more than 4 years; taken, which the decedent’s net estate situated which results from the normal enjoyment of another’s
e. 20% - if the period is more than 4 years within such country taxable bears to his entire net property, with the obligation to return, at the designated
but not more than 5 years. estate; and time, either the same thing or, in special cases, its
 The total amount of the credit shall not exceed the equivalent.
VALUE OF ESTATE same proportion of the tax against which such The owner of the naked title, during the usufruct,
PREVIOUSLY TAXED P x-x-x-x-x-x credit is taken, which the decedent’s net estate can exercise all the rights of ownership consistent with the
LESS: MORTGAGE DEBT PAID (x-x-x-x-x-x) situated outside the Philippines taxable bears to his enjoyment of the thing by the usufructuary. But none of
INITIAL BASIS x-x-x-x-x-x entire net estate. these acts can affect the rights of the usufructuary.
LESS: SHARE IN EXPENSES* (x-x-x-x-x-x) There is merger of the usufruct in the owner of the
FINAL BASIS OF ESTATE x-x-x-x-x-x VII. EXEMPTIONS OR EXCLUSIONS FROM naked title when the naked ownership and the usufruct
MULTIPLY: APPLICABLE RATE %_ THE GROSS ESTATE come to be held by the same person.
AMOUNT OF VANISHING The exemption is premised on the fact that there is
DEDUCTION P x-x-x-x-x The following are exemptions or exclusions from the gross only one transmission of property, i.e. from the testator to
estate: the owner of the naked title. Moreover, the reason for the
*Expenses x (Initial Basis/Gross Estate of Present law is that the transfer had been previously subject to estate
 The merger of the usufruct in the owner of the
Decedent) = Share in Expenses tax; hence, the exemption.
naked title;
J. Transfers for public use  Transmission or delivery of the inheritance or
B. Transmission from fiduciary heir to the fideicommissary
The amount of all bequests, legacies, devices or legacy by the fiduciary heir or legacy to the
Fideicommissary substitution is that by virtue of
transfers to or for the use of the government, or any fideicommissary;
which a testator institutes a first heir, and charges him to
political subdivision for exclusively public purposes, shall be  The transmission from the first heir, legatee or preserve and transmit the whole or part of the inheritance
deductible. donee in favor of another beneficiary, in later on to a second child.
accordance with the desire of the predecessor; In a fideicommissary substitution, there must be a
K. Amount received by heir  All bequests, devises, legacies or transfers to social first heir and a second heir whose relationship must be one
L. Share of the surviving spouse welfare, cultural and charitable institutions, no degree such that of parent and child, vice versa.
SKS: More of this in a separate handout. part of the net income of which inures to the The first transfer is subject to estate tax, while the
benefit of any individual. Provided, however, that second transfer is exempt. The exemption is premised on
VI. TAX CREDIT FOR ESTATE TAXES PAID not more than 30% of the said bequests, devises, the fact that there is only one transmission of property, i.e.
TO A FOREIGN COUNTRY

7
HANDOUT 2: ESTATE TAX, PART 1 Integrative Course for Taxation Instructor: K. J-Culajara

from the testator to the owner of the naked title. Moreover, SKS: The old law provides that in all cases of transfers (₱5,000,000)4 shall be supported with a statement
the reason for the law is that the transfer had been subject to tax, or where, though exempt from tax, the gross value of duly certified to by a Certified Public Accountant
previously subject to estate tax; hence, the exemption. the estate exceeds P20,000, the executor, administrator or any of containing the following:
the legal heirs, as the case may be, within 2 months after the o Itemized assets of the decedent with their
C. Second transfer in accordance with the desire of the decedent’s death, or within a like period after qualifying as such corresponding gross value at the time of
predecessor executor or administrator, shall give a written notice to the his death, or in the case of a non-resident,
This refers to the transmission of property from Commissioner. not a citizen of the Philippines, of that
the first heir, legatee or donee in favor of another part of his gross estate situated in the
beneficiary in accordance with the desire of the predecessor. B. Estate Tax Returns (ETR) Philippines;
In all cases of transfers subject to the tax imposed o Itemized deductions from gross estate
VIII. RATE OF THE ESTATE TAX herein, or regardless of the gross value of the estate, where allowed;
the said estate consists of registered or registrable property o The amount of tax due whether paid or
Under the TRAIN Law, there shall be levied, such as real property, motor vehicle, shares of stock or still due and outstanding.
assessed, collected and paid upon the transfer of the net other similar property for which a clearance from the  Time for Filing –For the purpose of determining
estate, whether resident or non-resident of the Philippines, Bureau of Internal Revenue is required as a condition the estate tax provided for in Section 84 of this
a tax at the rate of 6% based on the value of the net estate. precedent for the transfer of ownership thereof in the name Code, the estate tax return required under the
SKS: The TRAIN fixed the estate tax rate at 6%. Hence, of the transferee, the executor, or the administrator, or any preceding Subsection (A) shall be filed within one
the exemption of P200,000 under the old law is removed. The old of the legal heirs, as the case may be, shall file a return (1) year5 from the decedent’s death. A certified
law also provides for a variable estate tax rate ranging from 5% to under oath in duplicate, setting forth3: copy of the schedule of partition and the order of
20%.  The value of the gross estate of the decedent at the the court approving the same shall be furnished the
time of his death, or in case of a non-resident, not a Commissioner within 30 days after the
The estate tax table under the old law citizen of the Philippines, of that part of his gross promulgation of such order.
Over But not Tax base Plus Of the estate situated in the Philippines;  The Commissioner shall have authority to grant, in
over excess  The deductions allowed from the gross estate; meritorious cases, a reasonable extension not
over
- P200,000 Exempt - -
 Such part of such information as may at the time be exceeding 30 days for filing the return.
P200,000 500,000 0 5% P200,000
ascertainable and such supplemental data as may be  The return required shall be filed with an
500,000 2,000,000 15,000 8% 500,000
necessary to establish the correct taxes. authorized agent bank (AAB), or Revenue District
2,000,000 5,000,000 135,000 11% 2,000,000 Provided, however, That estate tax returns Officer, Collection Officer, or duly authorized
5,000,000 10,000,000 465,000 15% 5,000,000 showing a gross value exceeding Five million pesos Treasurer of the city or municipality in which the
10,000,000 And over 1,215,000 20% 10,000,000 decedent was domiciled at the time of his death, or

IX. PROCEDURE
3 4
TRAIN mandated the filing of the ETR where the said estate TRAIN increased CPA certification requirement from P2 million
A. Notice of Death to be Filed consists of registered or registrable property. Under the old law, to P5 million gross value of the estate.
Notice of Death is no longer required under the ETR is required if the estate exceeds P200,000 or regardless of 5
TRAIN prolonged the deadline of filing ETR from 6 months to 1
TRAIN (or after the taxable year December 31, 2017). the value, said estate is registered or registrable property. year from decedent’s death.

8
HANDOUT 2: ESTATE TAX, PART 1
if there be no legal residence in the Philippines,
with the Office of the Commissioner.
C. Payment of tax
The estate tax imposed by Section 84 shall be paid
at the time the return is filed by the executor, administrator
or the heirs.
When the Commissioner finds that the payment on
the due date of the estate tax or of 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. In such case, the amount in
respect of which the extension is granted shall be paid on or
before the date of the expiration of the period of the
extension, and the running of the Statute of Limitations for
assessment as provided in Section 203 of this Code shall be
suspended for the period of any such extension.
Where the taxes are assessed by reason of
negligence, intentional disregard of rules and regulations, or
fraud on the part of the taxpayer, no extension will be
granted by the Commissioner.
If an extension is granted, 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 and with such
sureties as the Commissioner deems necessary, conditioned
upon the payment of the said tax in accordance with the
terms of the extension.
In case the available cash of the estate is insufficient
to pay the total estate tax due, payment by instalment shall
be allowed within 2 years from the statutory date for its
payment without civil penalty and interest. SKS: This is a new
provision under the TRAIN Law.
The estate tax imposed by Section 84 shall be paid
by the executor or administrator before delivery to any
Integrative Course for Taxation Instructor: K. J-Culajara
beneficiary of his distributive share of the estate. Such
beneficiary shall to the extent of his distributive share of the
estate, be subsidiarily liable for the payment of such portion
of the estate tax as his distributive share bears to the value of
the total net estate.
For the purpose of this Chapter, the
term "executor" or "administrator" means the executor or
administrator of the decedent, or if there is no executor or
administrator appointed, qualified, and acting within the
Philippines, then any person in actual or constructive
possession of any property of the decedent.
D. Discharge of Executor or Administrator from
Personal Liability
If the executor or administrator makes a written
application to the Commissioner for determination of the
amount of the estate tax and discharge from personal
liability therefore, the Commissioner (as soon as possible,
and in any event within one (1) year after the making of
such application, or if the application is made before the
return is filed, then within one (1) year after the return is
filed, but not after the expiration of the period prescribed
for the assessment of the tax in Section 203 shall not notify
the executor or administrator of the amount of the tax. The
executor or administrator, upon payment of the amount of
which he is notified, shall be discharged from personal
liability for any deficiency in the tax thereafter found to be
due and shall be entitled to a receipt or writing showing
such discharge.