To compute Philippine estate tax, value the gross estate at fair market value as of death, subtract allowable deductions such as the flat ₱5,000,000 standard deduction and the family home deduction (capped at ₱10,000,000), then apply the flat 6% rate to what remains. The return, BIR Form 1801, must be filed and the tax paid within one year of death, though installment payment is available if the estate is cash-short.
Computing Philippine estate tax under the TRAIN law is a five-step process: value the gross estate at fair market value as of death, subtract the allowable deductions (chiefly the flat ₱5,000,000 standard deduction and the family home deduction, capped at ₱10,000,000), apply a flat 6% rate to whatever net estate remains, then file BIR Form 1801 and pay within one year from the date of death. If the estate does not have enough cash on hand, the tax itself — not the filing — can be paid in installments within two years without penalty or interest.
Step 1: Determine the Gross Estate
The gross estate includes all property of the decedent, real or personal, tangible or intangible, wherever situated, valued at fair market value (FMV) as of the moment of death — not the date the return is eventually filed. For real property, the law requires using whichever is higher between the zonal value fixed by the BIR Commissioner and the fair market value shown in the schedule of values of the provincial or city assessor. For shares of stock, unlisted shares are valued using the book value per share from the issuing corporation’s audited financial statements nearest the date of death, while listed shares use the closing price on or nearest that date. Bank deposits already withdrawn by heirs and subjected to the 6% final withholding tax on estate bank withdrawals are excluded from the gross estate figure used in the return, since that tax has effectively already been collected on those funds.
For a resident citizen or resident alien decedent, the gross estate covers property wherever located, including abroad. For a non-resident alien decedent, only property situated in the Philippines is included in the taxable gross estate, though properties abroad still have to be disclosed for informational purposes and to compute allowable deductions correctly.
Step 2: Subtract the Allowable Deductions
The Tax Reform for Acceleration and Inclusion law (Republic Act No. 10963) simplified estate tax deductions considerably compared to the old system. The deductions that survive under TRAIN for deaths on or after January 1, 2018 are:
- Standard deduction: a flat ₱5,000,000 for citizens and resident aliens, with no need to substantiate it by receipts. Non-resident alien decedents get a reduced standard deduction of ₱500,000, applicable only to Philippine-situated property.
- Family home deduction: the current fair market value of the decedent’s family home, up to a cap of ₱10,000,000. Any value in excess of ₱10,000,000 is added back and subjected to tax. If the family home is conjugal or community property and does not exceed ₱10,000,000, only one-half of its value is deductible, since only the decedent’s share forms part of the gross estate to begin with.
- Claims against the estate (debts the decedent owed at death, such as a properly documented loan), subject to substantiation requirements such as a notarized promissory note and an accounting of how loan proceeds within three years of death were used.
- Vanishing deductions (property previously taxed) for property the decedent acquired by inheritance or gift within five years before death, where estate or donor’s tax was already paid on the earlier transfer.
- Transfers for public use, such as a bequest to the government or a political subdivision for a public purpose.
- The share of the surviving spouse in the conjugal or community property, which is excluded from the decedent’s net estate before the tax is computed, since that share was never the decedent’s to begin with.
Funeral expenses, judicial expenses, and medical expenses incurred within a year of death — all deductible under the old law — were removed under TRAIN and folded into the flat ₱5,000,000 standard deduction instead.
Step 3: Apply the 6% Rate
Whatever remains after all allowable deductions is the net taxable estate, and the tax due is simply 6% of that figure. There are no more tax brackets — TRAIN replaced the old graduated schedule (which ran up to 20%) with this single flat rate.
Worked example: Suppose a decedent’s gross estate is worth ₱15,000,000, consisting of a family home worth ₱6,000,000 and other assets worth ₱9,000,000, entirely the decedent’s exclusive property. The standard deduction of ₱5,000,000 and the full family home deduction of ₱6,000,000 (since it is below the ₱10,000,000 cap) bring total deductions to ₱11,000,000. The net taxable estate is ₱15,000,000 minus ₱11,000,000, or ₱4,000,000. The estate tax due is 6% of ₱4,000,000, or ₱240,000.
Step 4: File BIR Form 1801 and Pay
The estate tax return, BIR Form No. 1801, must be filed in triplicate by the executor, administrator, or any of the legal heirs, within one (1) year from the decedent’s death. In meritorious cases, the BIR Commissioner may grant an extension of not more than 30 days to file, though no extension is available where the delay is due to negligence, intentional disregard of the rules, or fraud. The return is generally filed and paid through an Authorized Agent Bank of the Revenue District Office that has jurisdiction over the decedent’s place of domicile at death; where the decedent had no legal residence in the Philippines, the applicable BIR office is the one designated in the return’s own instructions for that circumstance, rather than a domicile-based RDO.
If a return is filed even one day late, or filed with the wrong office, a 25% surcharge applies on top of the tax due, plus interest computed at double the applicable legal interest rate. Where the return is false or fraudulent, the surcharge rises to 50%.
Step 5: If Cash Is Short, Use the Installment or Extension Options
The estate tax due itself may be paid in installments within two years from the statutory due date, without civil penalty or interest, if the estate’s available cash is insufficient to pay the full amount at once, subject to the BIR official’s approval. Separately, where paying on the due date would impose undue hardship, the Commissioner may extend the time to pay for up to five years if the estate is being settled through the courts, or up to two years if settled extrajudicially — a different mechanism from the installment option above and one that also suspends the running of the BIR’s assessment period for the duration of the extension.
Estate Tax Is Separate From How the Estate Is Divided
It helps to keep two different processes straight. Estate tax is a tax computation and a BIR filing; how the estate is actually divided among the heirs is a separate civil law question governed by the rules on succession and, where the heirs settle the estate themselves rather than through a court proceeding, by the Deed of Extrajudicial Settlement referenced above. An extrajudicial settlement is only available where the decedent left no will, left no debts (or the debts have been paid), and all heirs are of legal age or duly represented, and it must be published once a week for three consecutive weeks in a newspaper of general circulation. None of this changes the estate tax computation itself, but the BIR will not issue an eCAR without seeing that the settlement or partition on record matches what the return claims, so the two processes have to be prepared consistently and, ideally, worked on in parallel rather than one after the other.
Documents the BIR Will Ask For
Beyond the accomplished return itself, the BIR requires a certified true copy of the death certificate, the tax identification numbers of the decedent and the heirs, and the original of whichever settlement document applies — an Affidavit of Self-Adjudication (single heir), a Deed of Extrajudicial Settlement (multiple heirs settling without court involvement), or a court order and approved project of partition if the estate is settled judicially. If the gross estate exceeds ₱5,000,000, a CPA-certified statement itemizing the estate’s assets, deductions, and the tax due is required. Real property requires certified copies of the title and the latest tax declaration; personal property such as vehicles, bank accounts, and shares of stock each has its own proof-of-value requirement. A claim for the family home deduction typically needs a barangay or local government certification confirming the property is in fact the decedent’s family home.
Once the tax is paid and the documents are complete, the BIR issues an electronic Certificate Authorizing Registration (eCAR) for each property, which is what allows the heirs to actually transfer title into their own names at the Registry of Deeds or, for vehicles and shares, with the relevant registry or transfer agent. Without the eCAR, no transfer of a titled or registrable asset can be completed, which is why the one-year filing deadline matters well beyond avoiding penalties — it is the gate to actually distributing the estate.
Frequently Asked Questions
What is the estate tax rate in the Philippines? A flat 6% applies to the net taxable estate, which is the gross estate value minus all allowable deductions. This replaced the old graduated rates that went up to 20% before the TRAIN law took effect.
How much is the standard deduction for estate tax? Citizens and resident aliens get a flat ₱5,000,000 standard deduction with no need for receipts. Non-resident alien decedents get a reduced ₱500,000 standard deduction, applicable only to their Philippine-situated property.
What happens if the estate does not have enough cash to pay the tax? The estate tax due can be paid in installments within two years from the statutory due date without penalty or interest, subject to BIR approval, or the Commissioner may separately grant a longer extension of time to pay in hardship cases.
What is an eCAR and why do I need it? The electronic Certificate Authorizing Registration is the BIR's clearance confirming the estate tax has been settled. Without it, heirs cannot transfer a titled property, vehicle, or shares of stock into their own names.
This commentary is for general informational purposes only and does not constitute legal advice. For guidance specific to your situation, please consult a licensed attorney.
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