ESTATE TAX

b) Claims against estate or indebtedness in respect of property

GROSS ESTATE – RULE ON IMPOSITION may also arise out of contract, tort, or operation of law (RR 12-
18)
1. Resident, Non-Resident Alien
b.1 For loans, debt instrument must be notarized at the
The net estate of every decedent, whether resident or time the indebtedness was incurred EXCEPT for loans granted
non-resident of the PH, as determined in accordance by financial institutions where notarization is not part of the
with the NIRC, shall be subject to an estate tax at the business practice.
rate of 6% (Section 2, RR 12-18)
Further, there must be a duly notarized certification from
creditor as to the unpaid balance of the debt, including interest
as of the time of death, proof of financial capacity of creditor to
2. Resident and Citizens lend amount at the time the loan was granted; and statement
under oath by administrator or executor of estate reflecting the
For residents and citizens, gross estate includes ALL disposition of the proceeds of the loan if said loan was
properties, real or personal, tangible or intangible, contracted within 3 years prior to the death of the decedent
WHEREVER situated (Sec 4, RR 12-18)
b.2 For unpaid obligations from purchase of goods or
service, document evidencing purchase of goods or service (like
official receipts) or contracts of service, a duly notarized
Deductions: certification from the creditor as to the unpaid balance of the
 Standard deduction debt, including interest as of the time of death; and certified
 Claims against estate true copy of the latest audited balance sheet of the creditor
 Claims against insolvent persons with a detailed schedule of its receivable showing the unpaid
 Unpaid mortgages or indebtedness on property balance.
 Accrued taxes and losses
 Vanishing deductions b.3 For settlements made through court, the documents
 Transfers for public use filed in court and the court order approving such claims, in
 Family Home addition to the documents above
 Amounts received by heirs under RA 4917
c) Insolvent persons are those defined under FRIA and other
a) P5,000,000 standard deduction (no need to substantiate) (Sec 6, existing laws (RR 12-18)
RR 12-18)
d) For losses, the losses must have occurred before the last day for
the payment of the estate tax which is now one year after the
decedent’s death (not six months)
The mortgage or indebtedness will be claimed as a
deduction from the gross. If the loan is merely an
accommodation loan, where the proceeds of the loan went to
another person, the value of the unpaid loan must be include in
the receivable of the estate
In the cases of claims against insolvent persons and unpaid
mortgage/indebtedness on property, it is imperative that the
value of each are first added to the gross estate They are called
zero-sum computations. They do not really benefit the heirs
because these transaction were not supposed to be part of the
gross estate anyway
e) Taxes are deductions from the gross estate if such taxes accrued
PRIOR to the decedent’s death (RR 2-2003)
Note: These taxes CANNOT be deducted:
 Income tax on income received after death
 Property taxes not accrued before death
 Estate taxes
Note: Losses are deductible from the gross estate if:
 Arising from fire, storm, shipwreck, or other
casualty, robbery, theft or embezzlement;
 Not compensated by insurance or otherwise
 Not claimed as a deduction in an income tax return
of the estate subject to income tax;
 Occurring before the last day for the payment of the
estate tax (6 months after the decedent’s death, or
the allowed extension).
f) Property may change hands within a very short period of time
by reason of the early death of the owner who received it by
inheritance or by donation (gift)
Note: Vanishing deductions are allowed when
 The present decedent died within 5 years from
receipt of the property from a prior decedent or
donor;
 The property on which the vanishing deduction is
being claimed must be located in the Philippines
 The property must have formed part of the taxable
estate of the prior decedent, or of the taxable gift of
the donor;
 The estate tax on the prior succession or the
donor’s tax on the gift must have been finally
determined and paid;
 The property must be identified as the one received
from the prior decedent or donor, or something
acquired in exchange therefore
 No vanishing deduction on the property was
allowable to the estate of the prior decedent
g) Transfers for public use means dispositions in a last will and
testament, or a transfer to take effect after death, in favor of
the Government of the Philippines, or any political subdivision
thereof, for exclusively public purposes
h) The allowable deduction is the amount equivalent to the
current FMV of the family home (subject to max amount of
P10,000,000)
Note: Family home follows definition of Family Code.
However, actual occupancy shall not be considered
 interrupted or abandoned in such cases as the temporary
absence from the constituted family home due to travel or (Step 2 value/Gross Estate) x Expenses, losses,
studies or work abroad. indebtedness, taxes and transfers for public use

The family home is generally characterized by Step 4: Multiply with chart below to get value:
permanency; A person may only constitute only one family
home (RR 12-18) % If received by inheritance or gift
100 Within 1 year prior to death of the decedent
Requisites for deducting family home: 80 >1 year to 2 years
60 >2 years to 3 years
 Must be the actual home of the decedent and his 40 >3 years to 4 years
family at the time of his death, as certified by the 20 >4 years to 5 years
Barangay captain of the locality
 Total value of the family home must be included as i) Retirement benefits received by employees of private firms in
part of the gross estate; and accordance with a reasonable benefit plan maintained by the
 Deduction equivalent to current FMV, or the extent employer are EXEMPT from all taxes, provided that the retiring
of the decedent’s interest (whether employee has been in the services of the same employer for AT
conjugal/community or exclusive property), LEAST 10 years and is not less than 50 years old at the time of
whichever is lower, but not exceeding P10M (RR 12- his retirement
18)
Note: The amount must
 Have been received by their s of the decedent-
Note: How to compute? employee as a consequence of the latter’s death,
and
Step 1: Get basis. Either value of property in prior estate/  Included in the gross estate of the decedent
value used for donor’s tax purposes OR value of property in
present estate, whichever is lower Deductions from the gross estate with ceilings
Funeral expenses Whichever is the
Step 2: Step 1 value will be reduced by any payment made Actual funeral expenses, or LOWEST
by the present decedent on any mortgage or lien on the 5% of the gross estate; or
property (when such mortgage/lien was used as a P200K
deduction on the prior dead guy’s estate, or gift of the donor) Medical expenses Whichever is LOWER
Actual medical expenses, or
Step 3: Step 2 value shall be further reduced by: P500K
 Family home Whichever is LOWER
FMV, or P1M
3. Non- Resident Alien
A non-resident decedent who was not a citizen of the PH at
the time of death, with properties within and outside the
Philippines, is subject to tax only on his estate WITHIN the
Philippines
Except with respect to INTANGIBLE personal property, its
inclusion to the gross estate is the subject to the rule of reciprocity.
If the foreign country of the NRA does NOT impose a transfer tax of
any character on the PIP of Filipinos not residents of that foreign
country;
The foreign country of the non-resident alien allows a
similar exemption from transfer tax in respect of IPP owned by
Filipinos not residents of that foreign country. Then the IPPs of the
non-resident alien here are exempt from the estate tax
Note: Reciprocity must be total. If any of the two states or
countries collects or imposes and does NOT exempt any
transfer, death, legacy or succession tax of any character,
reciprocity does not apply (CIR v. Fisher)
Note: Reciprocity in exemption does NOT require the
“foreign country” to possess international personality (CIR
v. Campos Rueda)
A non-resident alien may use the ff deductions:
 Standard deduction (P500k)
 The proportion of the total losses and indebtedness which the
value of such part bears to the value of his entire gross estate
wherever situated. This includes: (a) Claims against the estate;
(b) Claims against insolvent persons; (c)Unpaid mortgages, taxes
and casualty losses;
 Vanishing deductions; and
 Transfer of public use
Note: Train has repealed Section 86(D), which previously required
the inclusion of properties abroad in the estate tax return of non-
resident aliens
RECIPROCITY OF EXEMPTION
Collector of Internal Revenue vs. Fisher
GR. No. L-11622
January 28, 1961
DOCTRINE:
“Reciprocity must be total. If any of the two states collects or
imposes or does not exempt any transfer, death, legacy or
succession tax of any character, the reciprocity does not work.”
FACTS:
Walter G. Stevenson was born in the Philippines of British
parents, married in Manila to another British subject, Beatrice. He
died in 1951 in California where he and his wife moved to
.
In his will, he instituted Beatrice as his sole heiress to certain real
and personal properties, among which are 210,000 shares of
stocks in Mindanao Mother Lode Mines (Mines).
Ian Murray Statt (Statt), the appointed ancillary administrator of
his estate filed an estate and inheritance tax return. He made a
preliminary return to secure the waiver of the CIR on the
inheritance of the Mines shares of stock.
In 1952, Beatrice assigned all her rights and interests in the estate
to the spouses Fisher.
Statt filed an amended estate and inheritance tax return claiming
ADDITIOANL EXEMPTIONS, one of which is the estate and
inheritance tax on the Mines’ shares of stock pursuant to a
reciprocity proviso in the NIRC, hence, warranting a refund from
what he initially paid. The collector denied the claim. He then
filed in the CFI of Manila for the said amount.
CFI ruled that (a) the ½ share of Beatrice should be deducted
from the net estate of Walter, (b) the intangible personal
property belonging to the estate of Walter is exempt from
inheritance tax pursuant to the reciprocity proviso in NIRC.
ISSUE/S:
Whether or not the estate can avail itself of the reciprocity
proviso in the NIRC granting exemption from the payment of
taxes for the Mines shares of stock.
RULING: NO.
Reciprocity must be total. If any of the two states collects or
imposes or does not exempt any transfer, death, legacy or
succession tax of any character, the reciprocity does not work.
In the Philippines, upon the death of any citizen or resident, or
non-resident with properties, there are imposed upon his estate,
both an estate and an inheritance tax.
But, under the laws of California, only inheritance tax is imposed.
Also, although the Federal Internal Revenue Code imposes an
estate tax, it does not grant exemption on the basis of reciprocity.
Thus, a Filipino citizen shall always be at a disadvantage. This is
not what the legislators intended.
SPECIFICALLY:
Section122 of the NIRC provides that “No tax shall be collected
under this Title in respect of intangible personal property
(a) if the decedent at the time of his death was a resident of a
foreign country which at the time of his death did not impose a
transfer of tax or death tax of any character in respect of
intangible personal property of citizens of the Philippines not
residing in that foreign country, or
(b) if the laws of the foreign country of which the decedent was a
resident at the time of his death allow a similar exemption from
transfer taxes or death taxes of every character in respect of
intangible personal property owned by citizens of the Philippines
not residing in that foreign country."
On the other hand, Section 13851 of the California Inheritance
Tax Law provides that intangible personal property is exempt
from tax if the decedent at the time of his death was a resident of
a territory or another State of the United States or of a foreign
state or country which then imposed a legacy, succession, or
death tax in respect to intangible personal property of its own
residents, but either:.
Did not impose a legacy, succession, or death tax of any character
in respect to intangible personal property of residents of this
State, or

Had in its laws a reciprocal provision under which intangible
personal property of a non-resident was exempt from legacy,
succession, or death taxes of every character if the Territory or
other State of the United States or foreign state or country in
which the nonresident resided allowed a similar exemption in
respect to intangible personal property of residents of the
Territory or State of the United States or foreign state or country
of residence of the decedent."
VALUATION OF GROSS ESTATE
I. Decedent’s interest
SEC. 85. Gross Estate. - the value of the gross estate of the
decedent shall be determined by including the value at the time
of his death of all property, real or personal, tangible or
intangible, wherever situated: Provided, however, that 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 which is situated in the Philippines shall be included in his
taxable estate.
(A) Decedent's Interest. - To the extent of the interest therein of
the decedent at the time of his death;
SEC. 104. Definitions. - For purposes of this Title, the terms 'gross
estate' and 'gifts' include real and personal property, whether
tangible or intangible, or mixed, wherever situated: Provided,
however, That where the decedent or donor was a nonresident
alien at the time of his death or donation, as the case may be, his
real and personal property so transferred but which are situated
outside the Philippines shall not be included as part of his 'gross
estate' or 'gross gift': Provided, further, That franchise which
must be exercised in the Philippines; shares, obligations or bonds
issued by any corporation or sociedad anonima organized or
constituted in the Philippines in accordance with its laws; shares,
obligations or bonds by any foreign corporation eighty-five
percent (85%) of the business of which is located in the
Philippines; shares, obligations or bonds issued by any foreign
corporation if such shares, obligations or bonds have acquired a
business situs in the Philippines; shares or rights in any
partnership, business or industry established in the Philippines,
shall be considered as situated in the Philippines: Provided, still
further, that no tax shall be collected under this Title in respect of
intangible personal property:
(a) if the decedent at the time of his death or the donor at the
time of the donation was a citizen and resident of a foreign
country which at the time of his death or donation did not
impose a transfer tax of any character, in respect of intangible
personal property of citizens of the Philippines not residing in
that foreign country, or
(b) if the laws of the foreign country of which the decedent or
donor was a citizen and resident at the time of his death or
donation allows a similar exemption from transfer or death taxes
of every character or description in respect of intangible personal
property owned by citizens of the Philippines not residing in that
foreign country
Note: Residence, for purposes of tax, refers to the domicile of the
person
Note: Gross estate includes any interest or right in the nature of
property, but less than title, having value or capable of having value,
like
 dividends declared, but paid after death
 Partnership profits
 Right of usufruct
Note: The following, among others, are intangible personal
properties located in the PH
 Franchise which must be exercised in the PH
 Shares, obligations or bonds issued by any corporation or
Sociedad anonima organized or constituted in the PH in
accordance with its laws
 Shares, obligations or bonds issued by any fforeign
corporation 85% of the business of which is located in the
PH
 Shares, obligations or bonds issued by a foreign corporation
if such shares, obligations or bonds have acquired a
business situs in the PH
II. Transfers in Contemplation of Death
(B) Transfer in Contemplation of Death. - To the extent of any
interest therein of which the decedent has at any time made a
transfer, by trust or otherwise, in contemplation of or intended to
take effect in possession or enjoyment at or after death, or of
which he has at any time made a transfer, by trust or otherwise,
under which he has retained for his life or for any period which
does not in fact end before his death (1) the possession or
enjoyment of, or the right to the income from the property, or (2)
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; except in case of a bona fide sale for an
adequate and full consideration in money or money's worth.
A transfer in contemplation of death is a transfer motivated by the
thought of death, although death may not be imminent.
Circumstances which may be taken into consideration as to the:
 Age or state of health
 Length of time between transfer and date of death
 Concurrent making of will or making of a will within a short
time after transfer
HOWEVER, in a case of a bona fide sale for an adequate and full
consideration in money or money’s worth, the value of the property
transferred will not be considered in determining the gross estate
III. Revocable Transfers
(C) Revocable Transfer. -
(1) To the extent of any interest therein, of which the decedent
has at any time made a transfer (except in case of a bona fide sale
for an adequate and full consideration in money or money's
worth) by trust or otherwise, where the enjoyment thereof was
subject at the date of his death to any change through the
exercise of a power (in whatever capacity exercisable) by the
decedent alone or by the decedent in conjunction with any other
person (without regard to when or from what source the
decedent acquired such power), to alter, amend, revoke, or
terminate, or where any such power is relinquished in
contemplation of the decedent's death.
(2) For the purpose of this Subsection, the power to alter, amend
or revoke shall be considered to exist on the date of the
decedent's death even though the exercise of the power is
subject to a precedent giving of notice or even though the
alteration, amendment or revocation takes effect only on the
expiration of a stated period after the exercise of the power,
whether or not on or before the date of the decedent's death
notice has been given or the power has been exercised. In such
cases, proper adjustment shall be made representing the
interests which would have been excluded from the power if the
decedent had lived, and for such purpose if the notice has not
been given or the power has not been exercised on or before the
date of his death, such notice shall be considered to have been
given, or the power exercised, on the date of death.
“Revocable Transfer”
- is a transfer where the terms of the enjoyment of the
property may be altered, amended, revoked or terminated by the
decedent. It is sufficient that the decedent had the power to revoke,
though he did not exercise the power to revoke. Same rule with
bona fide sale applies
IV. Property Passing under General Appointment
(D) Property Passing Under General Power of Appointment. - To
the extent of any property passing under a general power of
appointment exercised by the decedent: (1) by will, or (2) by deed
executed in contemplation of, or intended to take effect in
possession or enjoyment at, or after his death, or (3) by deed under
which he has retained for his life or any period not ascertainable
without reference to his death or for any period which does not in
fact end before his 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 persons who
shall possess or enjoy the property or the income therefrom; except
in case of a bona fide sale for an adequate and full consideration in
money or money's worth.
“Power of Appointment”
- refers to the right to designate the person or persons who
will succeed the property of a prior decedent
a.) General Power of Appointment - is one which may be
exercised in favor of anybody
b.) Limited Power of Appointment - is one which may be
exercised only in favor of a certain person or person
designated by the prior decedent
Note: Not included in gross estate; Bona fide sale rule applies
V. Proceeds of Life Insurance
(E) Proceeds of Life Insurance. - To the extent of the amount
receivable by the estate of the deceased, his executor, or
administrator, as insurance under policies taken out by the
decedent upon his own life, irrespective of whether or not the
insured retained the power of revocation, or to the extent of the
amount receivable by any beneficiary designated in the policy of
insurance, except when it is expressly stipulated that the
designation of the beneficiary is irrevocable.
Proceeds of life insurance under policies taken out by the decedent
upon his life shall constitute part of the gross estate if the
beneficiary is:
Note: The estate of the decedent, his executor or administrator AS
SUCH; or a third person (not those in #1), and the designation of the
beneficiary is REVOCABLE
Irrevocable beneficiary excludes life insurance from gross estate.
Life insurance proceeds must be taken out by the DECEDENT;
Note: If accident insurance, NOT included in gross estate
VI. Prior Interest
(F) Prior Interests. - Except as otherwise specifically provided
therein, Subsections (B), (C) and (E) of this Section shall apply to
the transfers, trusts, estates, interests, rights, powers and
relinquishment of powers, as severally enumerated and
described therein, whether made, created, arising, existing,
exercised or relinquished before or after the effectivity of this
Code.
VII. Transfer for Insufficient Consideration
(G) Transfers for Insufficient Consideration. - If any one of the
transfers, trusts, interests, rights or powers enumerated and
described in Subsections (B), (C) and (D) of this Section is made,
created, exercised or relinquished for a consideration in money or
money's worth, but 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 only the excess of the fair market
value, at the time of death, of the property otherwise to be
included on account of such transaction, over the value of the
consideration received therefor by the decedent.
In the transfers in contemplation of death, revocable transfer or
transfers under a GPA, the value to include in the gross estate will
be determined under the following rules:
a.) If the transfer was in the name of a bona fide sale for an
adequate and full consideration in money or money’s worth, no
value will be included in the gross estate
b.) If the consideration received on the transfer was less than
adequate and full, the value to include in the gross estate will be the
excess of the fair market value at the time of the decedent’s death
over the consideration received;
c.) If there was no consideration received on the transfer (donation
mortis causa), the value to include in the gross estate will be the fiar
market value of the property at the time of the decedent’s death
d.) Is the consideration insufficient?
If YES — then add the balance of the FMV at the time of
death and the consideration
If NO — it was a bona fide sale (don’t add value of gross
estate)
Revenue Regulations 2-82: Taxation of Shares of Stock, as
amended by RR 6-2008
SEC. 3. PERSONS LIABLE TO THE TAX. — The following sellers or
transferors of stock are liable to the tax provided for in Sec. 5 of
these Regulations:
(a) Individual taxpayer, whether citizen or alien;
(b) Corporate taxpayer, whether domestic or foreign; and
(c) Other taxpayers not falling under (a) and (b) above, such as
estate, trust, trust funds and pension funds, among others.
SEC. 7. SALE, BARTER OR EXCHANGE OF SHARES OF STOCK NOT
TRADED THROUGH A LOCAL STOCK EXCHANGE PURSUANT TO
SECS. 24(C), 25(A)(3), 25(B), 27(D)(2), 28(A)(7)(c), 28(B)(5)(c) OF CASE TITLE Was the Time Was there What did
THE TAX CODE, AS AMENDED. — transferee between a will? the SC say?
a voluntary transfer
(c.3.1.2) Acquired by Devise, Bequest or Inheritance. — If the or and death
property was acquired by devise, bequest or inheritance, the compulsory
basis shall be the fair market value of such property at the time of heir?
death of the decedent. Zapanta v. Compulsory None Yes Not
Posadas considered
advances.
EXCLUSION FROM GROSS ESTATE: CAPITAL OF Not part of
SURVIVING SPOUSE gross
estate
(H) Capital of the Surviving Spouse. - The capital of the surviving Tuason v. Voluntary 3 years Yes Considered
spouse of a decedent shall not, for the purpose of this Chapter, Posadas as
be deemed a part of his or her gross estate. advances,
because
When it comes to transfers done during the lifetime of a the donees
decedent, there is a disputable presumption that the transfers are become
in contemplation of death if the recipients are compulsory heirs legatees in
the will.
The government presumes that one is transferring property Part of the
beforehand to escape the escape tax, and instead pay the lower gross
donor’s tax. estate,
include it.
Note: In the case of Zapanta, the Court considered the gifts as NOT Dizon v. Compulsory 1 day No Considered
advances even if the recipients were compulsory heirs Posadas as
advances.
Note: In Tuason and Vidal de Roces, the Court considered the The donee
transfers as advances because a will was made making the is a
transferees legatees compulsory
heir.
Include it in
the gross
estate.
Vidal de Voluntary 9 months Yes Considered
Roces v. advances. To minimize the onerous effect of taxing the same property
Posadas Donees are twice, a tax credit against Philippine estate tax is allowed for estate
legatees in taxes paid to foreign countries.
the will.
Include it in Tax credit limit = Net foreign estate X Tax here in the
the gross Entire net estate Philippines
estate.
Between what you paid to the foreign country and the tax
credit limit here, you chose whatever is lower as what you can
credit.

TAX CREDIT FOR ESTATE TAX

Example: If tax is paid to 2 or more foreign countries:
(D) Tax Credit for Estate Taxes Paid to a Foreign Country. – Limitation A: see above.
(1) In General. – The tax imposed by this Title shall be credited Limitation B:
with the amounts of any estate tax imposed by the authority of a Tax Credit Limit = Total Foreign Net Estate X Tax here in the PH
foreign country. Entire Net Estate

(2) Limitations on Credit. – The amount of the credit taken under
this Section shall be subject to each of the following limitations:
(a) The amount of the credit in respect to the tax paid to any
country shall not exceed the same proportion
140 National Tax Research Center
of the tax against which such credit is taken, which the
decedent’s net estate situated within such country taxable under
this Title bears to his entire net estate; and
(b) The total amount of the credit shall not exceed the same
proportion of the tax against which such credit is taken, which
the decedent’s net estate situated outside the Philippines taxable
under this Title bears to his entire net estate
Note: notice of death is no longer required under TRAIN LAW
DEDUCTIONS FOR A NON-RESIDENT, NOT CITIZEN of the PH
Section 87. Exemption of Certain Acquisitions and Transmissions.
– The following shall not be taxed:
A. The merger of usufruct in the owner of the naked title;
B. The transmission or delivery of the inheritance or legacy by
the fiduciary heir or legatee to the fideicommissary;
C. The transmission from the first heir, legatee or donee in favor
of another beneficiary, in accordance with the desire of the
predecessor; and
D. All 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: Provided,
however, That not more than thirty percent (30%) of the said
bequests, devises, legacies or transfers shall be used by such
institutions for administration purposes.
The following are exempt from estate tax:
a.) The merger of usufruct in the owner of the naked title;
b.) The transmission or delivery of the inheritance or legacy by the
fiduciary heir or legatee to the fideicommissary;
c.) The transmission from the first heir, legatee or donee in favor of
another beneficiary, in accordance with the desire of the
predecessor; and
d.) All 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: Provided, however,
That not more than thirty percent (30%) of the said bequests,
devises, legacies or transfers shall be used by such institutions for
administration purposes.
e.) Irrevocable life insurance to someone other than the state,
administrator, or executor;
f.) GSIS/SSS;
g.) Retirement benefits of private firms approved by the BIR;
h.) Separate property of the Surviving spouse.
TAX RETURNS
I. Time to File and Notice
Section 90. Estate Tax Returns. –
(A) Requirements. – In all cases of transfers subject to the tax
imposed herein, or regardless of the gross value of the
estate, where the said estate consists of registered or
registrable property such as real property, motor vehicle,
shares of stock or other similar property for which a
clearance from the Bureau of Internal Revenue is required as
a condition precedent for the transfer of ownership thereof
in the name of the transferee, the executor, or the
administrator, or any of the legal heirs, as the case may be,
shall file a return under oath in duplicate, setting forth:
(1) The value of the gross estate of the decedent at the time
of his death, or in case of a non-resident, not a citizen of
the Philippines, of that part of his gross estate situated in
the Philippines;
(2) The deductions allowed from gross estate in determining
the estate as defined in Section 86; and
(3) Such part of such information as may at the time be
ascertainable and such supplemental data as may be
necessary to establish the correct taxes.
Provided, however, That estate tax returns showing a gross value
exceeding Five million pesos (PhP5,000,000) shall be supported
with a statement duly certified to by a Certified Public Accountant
containing the following:
(a) Itemized assets of the decedent with their corresponding
gross value at the time of his death, or in the case of a
nonresident, not a citizen of the Philippines, of that part of his
gross estate situated in the Philippines;
(b) Itemized deductions from gross estate allowed in Section 86;
and

(c) The amount of tax due whether paid or still due and
outstanding.
(B) Time for filing. – For the purpose of determining the estate tax
provided for in Section 84 of this Code, the estate tax return
required under the preceding Subsection (A) shall be filed within
one (1) year from the decedent’s death.
A certified copy of the schedule of partition and the order of the
court approving the same shall be furnished the Commissioner
within thirty (30) after the promulgation of such order.
(C) Extension of Time. – The Commissioner shall have authority
to grant, in meritorious cases, a reasonable extension not
exceeding thirty (30) days for filing the return.
(D) Place of Filing. – Except in cases where the Commissioner
otherwise permits, the return required under Subsection (A) shall
be filed with an authorized agent bank, or Revenue District
Officer, Collection Officer, or duly authorized Treasurer of the city
or municipality in which the decedent was domiciled at the time
of his death or if there be no legal residence in the Philippines,
with the Office of the Commissioner.
 Who are required to file?
1. Those subject to estate tax; and
2. Regardless of the amount of the gross estate, where the
gross estate has registered or registrable property such
as real property, cars, shares of stock that require a
Certificate Authorizing Registration from the BIR as a
condition precedent to the transfer.
Note: The threshold amount for the requirement of a CPA
statement is now P5, 000,000.
Note: The time for filing of the estate tax return is 1 year from
death; Approval of probate court is NOT mandatory in collection of
estate taxes; A return need not be complete in all particulars. It is
sufficient if it complies substantially with the law.
 When is there Substantial Compliance? (CIR v Gonzales)
1. The return is made in good faith and is not false or
fraudulent;
2. It covers the entire period involved; and
3. It contains information as to the various items of income,
deductions and credits with such definiteness as to permit
the computation and assessment of the tax;
4. When the return was made in the wring form, it was held
that the filing thereof did not stop the running of the period
of limitations, and where the return was very deficient,
there was no return at all.
PAYMENT OF TAX
Section 91. Payment of Tax. –
(A) Time of Payment. – The estate tax imposed by Section 84
shall be paid at the time the return is filed by the executor,
administrator or the heirs.
(B) Extension of Time. – 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.
(C) Payment by Installment. — 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.
The estate tax shall be paid at the time the return is filed. The
commissioner may extend the payment of such tax.
Provided, It should not exceed 5 years in case of judicial
settlement, and 2 years if extrajudicial settlement.
OBLIGATIONS OF EXECUTOR, ADMINISTRATOR, OFFICERS,
OTHERS
(D) Liability for Payment – The estate tax imposed by Section 84
shall be paid by the executor or administrator before delivery to
any 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.
 The estate tax shall be paid by the executor or administrator
before delivery to any beneficiary of his distributive share of the
estate
Where there are 2 or more executors, all of them are severally
liable for the payment of the estate tax.
Note: The inheritance tax, although charged against the account of
each beneficiary, should be paid by the executor or administrator.
Such beneficiary shall be subsidiary liable for the payment of such
tax to the extent of his share.
Note: Claims of income tax need not be filed with the committee on
claims and appraisals in the course of testate proceedings, and the
amount thereof may be collected after the distribution of the
decedent’s estate among his heirs, who shall be liable in proportion
to their share in the inheritance.
The Government in collecting unpaid taxes accruing before the
death of the decedent has 2 ways of collecting the said taxes:
1. By going after the heirs and collecting from each one of a.2 Judicial Expenses – removed by TRAIN
them the amount of the tax proportionate to the a.3 Claims against the estate
inheritance received; or a.4 Claims against the insolvent persons
2. By subjecting said property of the estate which is in the a.5 Unpaid mortgage and losses
hands of an heir or transferee to the payment of the tax due a.6 Taxes paid
the estate. (or, go against one heir for the entire tax, subject a.7 Losses.
to the heirs right of contribution form hi co-heirs.) b. Transfer for public use
c. Vanishing deductions

In summary, Gross estate is made up of: 2. Special deductions

a. Family home
1. The decedent’s interests at the time of his death b. Standard deductions – P5,000,000
2. Transfers made during his lifetime (in contemplation of c. Medical expenses
death, revocable, and under a GPA) d. Amount received by heirs under RA 4917

3. Life insurance proceeds. Note: These deductions are allowed for citizen or resident of
4. Some other stuff required by law to be included in the the PH; Non-residents aliens are not entitled to special
gross estate in order to allow deductions (claims against deductions.
insolvent persons, unpaid mortgage, value of the family
home, and the retirement benefits under RA 4917)
5.
COMPUTATION FOR THE NET ESTATE
The basic equation to determine the net taxable estate is
Gross estate – deductions

The complication arises when the decedent is marries at the

time of his death.

DEDUCTIONS FROM GROSS ESTATE

1. Ordinary deductions
a. Expenses, losses, indebtedness, taxes, etc.:
a.1 Funeral Expenses – removed by TRAIN