o Under meritorious cases (to be determined

ESTATE TAX by the BIR), filing of estate tax return may

be extended for a period of not more than
TRANSFER TAXES 30 days.
Taxpayer : The estate of the decedent as a juridical person.
Transfer taxes are taxes imposed upon gratuitous disposition Personal obligation to file and pay the applicable taxes:


of private properties or rights. Gratuitous transfer is one that o Primarily liable: Administrator or executor


neither burden nor requires consideration from transferee or o Secondarily liable: Any of the heirs
recipient. The transfer of ownership is free because of the absence Law to be applied : The law/ statute in force as of the date of
of financial consideration. Hence, gratuitous are essentially death of the decedent.


SUCCESSION
It is a mode of acquisition by virtue of which the property,
rights and obligations to the extent of the value of the inheritance,
of a person are transmitted through his death to another or others
donations. The applicable taxes on gratuitous transfers are as either by will or by operation of law.
follows: Types:
ESTATE TAX 1. Testamentary. That which results from the designation of an
Estate Tax is a tax imposed on the privilege that a person is heir, made in a will executed in the form prescribed by law.
given in controlling to a certain extent, the disposition of his 2. Legal or Intestate. That which is effected by operation of law
property to take effect upon death. As shown in the table , Estate or transmission of properties where
Tax is an excise tax imposed on the act of passing the ownership of o There is no will; or
property at the time of death and not on the value of the property o If there is a will, the same is void or lost its
or right. validity, or nobody succeeds in the will.
3. Mixed. That which is effected partly by a will or by operation
Accrual: It accrues as of the death of the decedent,
of law.
notwithstanding the postponement of the actual possession

The value of obligations that may be transferred from decedent to
or enjoyment of the estate by the beneficiary. Upon the death his/ her heir(s) should not exceed the value of the properties and
of the decedent, succession takes place and the right of the rights (inheritance) transferred.
“state” to the tax the privilege to transmit the estate vests
WILL – an act whereby a person is permitted with the formalities
instantly upon death.
prescribed by law, to control to a certain degree the disposition of
Filing of the estate tax return :
his estate, to take effect after his death from the moment of the
o Within 1 year from the death

death of the decedent, the rights to the succession are transmitted,
and the possession of the hereditary property is deemed 2. FREE PORTION – Is the part of the whole estate which the
transmitted to the heir. testator could dispose of freely through written will
irrespective of his relationship to the recipient.
Kinds of Will:
KINDS OF HEIRS:
1. Notarial or Attested Will – is one which is executed in
accordance with formalities prescribed by Art. 804 to 808 of 1. COMPULSORY HEIRS. They inherit with or without a will
the new civil code. It is a will that is created for the testator o Primary Compulsory Heirs
by a third party, usually his lawyer, follows proper form,  Legitimate children and descendants
signed and dated in front of the required number of  Illegitimate children
witnesses (3 or more witnesses) and acknowledged by the  Widow or widower
presence of a notary public. o Secondary Compulsory Heirs
2. Holographic Will – is a written will which must be entirely  In default of legitimate children and descendants,
written, dated and signed by the hand of the testator himself, legitimate parents and ascendants.
without the necessity of any witness. This kind of will does 2. VOLUNTARY HEIRS. They inherit only if they are in will.
not need formalities because many people can recognize his
handwriting and it can be verified by a penmanship expert.
o Codicil – a supplement or addition to a will, made after FORMAT OF COMPUTATION:
the execution of a will and annexed to be taken as a
part thereof, by which any disposition made in the UNMARRIED DECEDENT:
original will is explained, added to or altered. Gross Estate xxx
ELEMENTS OF SUCCESSION Less:
Ordinary deductions (xxx)
Succession takes place if the following elements are present: Special deductions (xxx)
1. DECEDENT – the person whose property is transmitted Net Taxable Estate xxx
through succession, whether or not he left a will. X Estate tax rate 6%
2. HEIR – the person called to the succession either by the Estate Tax Due xxx
provision of a will or by operation of law. Less:
3. ESTATE – refers to all property , rights and obligations of a Estate tax credit (xxx)
person which are not extinguished by his death. Estate Tax Payable xxx

DECEDENT’ ESTATE
1. LEGITIME – Is the portion of the testator’s property which
could not be disposed of freely because the law has reserved
it for the compulsory heirs.
ESTATE TAX RATE

RA 10963 (TRAIN Law) simplifies the computation of estate tax

due, from six (6) bracket schedule with rates ranging from 5% to 20%, to
a single rate of 6% based on the value of the net estate as presented in
the foregoing format of computing the estate tax due.

GROSS ESTATE

Consists of all properties and interests in properties of the

decedent at the time of his death as well as properties transferred during
lifetime (only in form), but in substance as only transferred at the time of
death.

1. Components of the gross estate

PROPERTIES EXISTING AT THE TIME OF DEATH SUCH AS:

a. Real property and other tangible personal property
b. Decedents interest and intangibles
c. Properties transferred gratuitously during lifetime, but in
substance, transferred upon death:
1. Transfer in contemplation of death
2. Transfer with retention or reservation of certain right
3. Revocable transfer
4. Property passing under General Power of Appointment
5. Transfers for insufficient consideration – sale of property
substantially below fair market value.
 Amount included in Gross Estate:
FMV at the time of death xxx
Less: Selling price (xxx)
Included in Gross Estate xxx
6. Proceeds from life insurance – the following are included
in the gross estate:
a. Whether REVOCABLE or IRREVOCABLE, when the
beneficiary is the
 Estate of the deceased  Amounts received from United States Veterans
His executor; or Administration


Administrator  Benefits received from the Philippines and US government



b. When the beneficiary is a third person, only if for damages suffered during World War II.


REVOCABLE.  Retirement benefits of officials/ employees of a private firm

2. Exemptions and Exclusions from Gross Estate  Proceeds of life insurance under a group insurance taken
a. UNDER SECTION 85 and 86 of NIRC out by employer (not taken out upon his life)
 Capital or exclusive property of the surviving spouse  Transfers by way of bona fide sales
 Properties outside the Philippines of a non- resident alien  Transfer of property to the National government or to any
decedent of its political subdivisions.
 Intangible personal property in the Philippines of a non-  Personal Equity and Retirement Account (PERA) assets of
resident alien when the rule of reciprocity applies. the decedent – contributor
b. UNDER SECTION 87 of NIRC
1. The merger of the usufruct (right to use) in the owner of
the naked title. THE COMPOSITION OF THE ESTATE TAX MAY BE SUMMARIZED AS
2. The transmission from the first heir, legatee or done in FOLLOWS:
favor of another beneficiary in accordance with the will
of the predecessor. This type of transfer is most
commonly known as “ transfer under Special Power of DECEDENT GROSS ESTATE
Appointment”  Citizen or Resident Alien 1. Property (real or personal)
3. The transmission or delivery of the inheritance or legacy wherever situated.
of the fiduciary heir or legatee to the fideicommissary. 2. Intangible personal
o This is the same with SPA above. The only difference is, in property wherever situated.
fideicommissary transfer, the relationship of the donor and done is
only one degree apart (i.e from parent to his/ her son)
4. All bequests, devices, legacies or transfers to social 1. Real property situated in
welfare, cultural and charitable institutions, provided:  Nonresident Alien the Philippines.
a. No part of the net income of said institution inure to 2. Tangible personal property
situated in the Philippines.
the benefit of any individual;
3. Intangible personal
b. Not more than 30% of such transfers shall be used for
property with situs in the
administration purposes. Philippines, unless excluded
c. UNDER SPECIAL LAWS on the basis of reciprocity.
 Proceeds of life insurance and benefits received by members
of the GSIS
 Benefits received by members from SSS by reason of death. RECIPROCITY CLAUSE – No tax shall be imposed with respect to
intangible personal properties of NRA situated in the Philippines.

 Amounts received from Philippines and United States
governments for war damages. 1. When the foreign country, where such NRA is a resident and
citizen, does not impose transfer tax with respect to intangible
 personal properties of Filipino citizens not residing in that In the absence of an agreement, the marriage settlement will
country; or depend on the date of marriage as provided under the law (new
2. When the foreign country imposes transfer taxes, but grants family code) as follows:
similar exemption with respect to intangible personal  Date : before the effectivity of the NFC (August 3, 1988),
properties of Filipino citizens in that country. apply CPG
 Date: On or after the effectivity of the NFC (August 3, 1988),
VALUATION OF GROSS ESTATE
apply ACoP
 In general – fair market value upon death. 3. BY CUSTOMS OR TRADITIONS
 Personal properties – fair market value
 Real property – the higher amount between:
Fair market value CONJUGAL PARTNERSHIP OF GAINS (CPG)
Zonal value
1. Exclusive Properties:
 Shares of stock
 that which is brought to the marriage as his or her own
a. Traded in the local stock exchange – mean between the highest
(properties before marriage).
and lowest quotation nearest the date of death, if none is
 That which each acquires during marriage by gratuitous
available on the date of death itself.
title;
b. Not traded in the local stock exchange:
 That which is acquired by right of redemption, by barter or
1. Common (ordinary ) shares – book value
by exchange with property belonging to any one of the
2. Preferred (preference) shares – par value
spouses; and
 Usufruct – based on latest basic mortality table to be approved by
 That which is purchased with exclusive money of the wife or
the Secretary of Finance, upon recommendation of the Insurance
of the husband.
Commissioner
2. Conjugal Properties:
 Those acquired by onerous title during marriage at the
expense of the common fund whether the acquisition be for
PROPERTY RELATIONSHIP BETEEN SPOUSES
the partnership, or for only one of the spouses.
The property relationship or marriage settlement of the spouses shall be  Those obtained from labor, industry work or profession of
determined as follows: either or both spouses;
 The FRUITS (or income), natural or industrial, or civil, due
1. BASED ON AGREEMENT or received during marriage from common property, as well
If there was an agreement entered into by the parties before as the net fruits from the exclusive property of each spouse.
marriage, apply the type of settlement entered into by the parties o Rules on fruits under CPG: All fruits (income) are common”
such as:
 The share of either spouse in the hidden treasure which the
 Absolute Community of Property (ACoP)
law awards to finder or owner of the property where the
 Conjugal Partnership of Gains (CPG)
treasure is found;
 Complete separation
 Those acquired through occupation such as fishing or
2. BY OPERATIONS OF LAW (New family code)
hunting;
  Livestock existing upon dissolution of the partnership in 2. As a rule, deductions from gross estate are presumed to be
excess of the number of each kind brought to the marriage common deductions unless specially identified as exclusive.
by either spouse; and 3. Refer also to the FORMAT of computation for married decedents.
 Those are acquired by chance, such as winnings from
gambling or betting. However, losses there from shall be  ORDINARY DEDUCTIONS – classified as exclusive or common
borne exclusively by the loser – spouse. deduction.

ABSOLUTE COMMUNITY OF PROPERTY (ACoP)

1. LOSSES, INDEBTEDNESS, TAXES, etc (LITe)
1. Community Properties:  Casualty losses
 All properties owned by the spouses at the time of Requisites:
celebration of the marriage (properties before  Incurred during the settlement of the estate.
marriage); or Settlement period is the period allowed by law to
 Acquired thereafter, unless proven otherwise, as well file and pay the estate tax.
s the fruits or income thereof.  Arising from fires, storms, shipwreck, or other
o Rules on fruits : “the fruit (income) will follow the source” casualties, or from robbery, theft or embezzlement.
2. Exclusive Properties:  Not compensated by insurance
 Property acquired during marriage by gratuitous  Not claimed as deduction for income tax purposes;
title by spouse, as well as the fruits or income  Incurred not later than the last day for the
thereof. payment of the estate tax.
EXCEPTION: unless it is expressly provided by the Amount deductible – the amount deductible is the value of
donor, testator, or grantor that the shall from part the property lost.
of the community property.
 Property for personal and exclusive use of either Claims against Insolvent persons
spouse. Requisites:


EXCEPTION: jewelry shall form part of the  Value of the claims is included in the gross
community property. estate; and
 Property acquired before the marriage by either  The insolvency of the debtor must be
spouse who has legitimate descendants by the established.
former marriage, and the fruits as well as the
Amount deductible : the amount of claims/ receivable that
income, if any of such property.
cannot be collected

Claims against the estate

ALLOWABLE DEDUCTIONS DEFINED


Requisites:
1. Deductions are items which the law on estate tax allows, as
 Personal debt of the decedent existing at the time of his
amended, to be subtracted from the value of the gross estate in
death;
order to arrive at the net taxable estate.
 Contracted in good faith;
  Must be valid in law and enforceable in court; Amount deductible: amount of all bequest, legacies,
 Must not have been condoned by the creditors; devises, or transfers to or for the use of government of
 Must not have prescribed; the Philippines, or any of its political subdivisions.

3. VANISHING DEDUCTION (PROPERTY PREVIOUSLY TAXED)

Requisites:
Unpaid mortgage
 The decedent died within 5 years from receipt of the


Requisites: property from a prior decedent or donor;

 The property is located in the Philippines
 The fair market value of the mortgaged property  The property must have formed part of the taxable
undiminished by the mortgage indebtedness should estate of the prior decedent or taxable gift of the
be included in the gross estate; donor and the transfer tax relative thereto had been
 Contracted in good faith paid.
 For an adequate and full consideration.  The property on which vanishing deduction is being
Amount deductible: amount of unpaid mortgage. taken must be identified as the one received from the
prior decedent, or from the donor, or something
acquired in exchange therefore;
Unpaid taxes  No vanishing deduction on the property was allowable
Requisites: to the estate of the prior decedent.


 The tax must have accrued before the death of the AMOUNT DEDUCTIBLE (PROFORMA COMPUTATION)
decedent.
Value to take (lower between FMV at the time death vs. FMV at
Amount deductible : unpaid taxes that accrued before the the time inheritance or donation)
decedent’s death but not including: xxx
a. Any income tax upon received after death. Less: mortgage paid by present decedent (on mortgaged assumed)
b. Property taxes not accrued before death; and (xxx)
c. Estate tax from the transmission of his estate. Initial basis xxx
Less proportional deduction
2. TRANSMISSION FOR PUBLIC USE (TPU) (xxx)
Requisites: Final basis xxx
 Given to the government of the Philippines (National Rate %
VANISHING DEDUCTION
or Local)
xxx
 Must be testamentary in character;
 By way of donation mortis causa executed by the
decedent before his death; RATE OF VANISHING DEDUCTION:
 Exclusively for public purpose
Interval of acquisition (inheritance or donation) and RATE
death of present decedent
 Within 1 year 100%  Include such amount in the gross estate.
More than 1 year but not more than 2 years 80%
Amount deductible: amount received by the heirs from the
More than 2 years but not more than 3 years 60%
More than 3 years but not more than 4 years 40% decedant’s employer as a consequence of the death of the
More than 4 years but not more than 5 years 20% decedent- employee.

 SPECIAL DEDUCTIONS

1. STANDARD DEDUCTIONS
The amount deductible without any required substantiation is
 SHARE OF THE SURVIVING SPOUSE
P5,000,000 if the decedent died on or after January 1, 2018. A
Applicable only to married decedents.
standard deduction of P500,000 shall also be allowed to
Amount deductible:
nonresident alien decedent beginning January 1, 2018.
Common properties
xxx
2. FAMILY HOME ALLOWANCE
Common deductions
Requisites:
(xxx)
 The decedent is married or head of the family
Net common properties before special deductions
 The family home must be the actual residential home of
xxx
the decedent and his family at the time of his death, as
Multiply by 50%
certified by the Brgy. Captain of the locality the family
Share of surviving spouse
homes is situated;
xxx
 It is located in Philippines
 The value of the family home is included in the gross
 TAX CREDIT FOR ESTATE TAX PAID TO A FOREIGN COUNTRY
estate.
 WHO CAN CLAIM?
Amount deductible – the lower between the actual interest Only resident or citizen decedents can claim tax credit.
and the limit.  AMOUNT DEDUCTIBLE:
The LOWER between the actual estate tax paid abroad and
Actual interest the limit.
Purely exclusive = 100 % FMV  LIMIT:
Purely common property 100% FMV / 2 It depends on how many foreign country involved.
o

Mixed:
o

IF only ONE FOREIGN COUNTRY involved

Exclusive property (100%) xxx
o

Net estate foreign X Philippine estate tax


Add: common property (100%/2) xxx
Net estate world
Total xxx
3. AMOUNT RECEIVED BY HEIRS UNDER R.A 4917
Requisites:
 IF MORE THAN ONE FOREIGN COUNTRIES are
involved. The limit is the lower between limit 1 and


limit 2 computed as follows:

LIMIT 1 or A (Per country where there was estate tax
paid):
Net estate foreign X Philippine estate tax
Net estate world

LIMIT 2 or B (TOTAL of all foreign countries

involved):
Net estate, all foreign countries X
Philippine estate tax
Net estate, world