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➢ should not be construed as a direct

HISTORY tax on the property of the decedent
although the tax is based thereon.
➢ The accrual of the tax is distinct from
Act 2601 First Estate Tax (July 1, the obligation to pay the same.
1916)
Right of the State
➢ to tax the privilege to transmit the
● It imposes graduated estate tax rates estate vests instantly upon death.
computed on net inventoried property
left by a decedent.
● Then it was subsequently amended by Justification for Imposition of Estate
revised administrative code of PH tax
imposing:

“Every transmission by virtue of inheritance, 1. Benefit-Received Theory

devise, bequest, gift mortis causa, or advance
in anticipation of inheritance, devise or ● MOST DOMINANT
bequest” RATIONALIZATION
● The law considers the service
rendered by gov in the distribution of
RA 8324 TAX REFORM ACT / NIRC the estate of the decedent, either by
law or in accordance with his wishes.
● For the performance of these services
● Effective Jan 1, 1998 further and other benefits that accrue to the
restructured the tax base and rates of estate and the heirs, the State collects
both estate and donor’s taxes + to the tax.
allow deduction of medical expenses
from gross estate.
Transferor is exercising a privilege to
transfer his property under gov security of
RA 10963 Tax Reform for an effective and orderly transmission under
Acceleration and Inclusion the law
(TRAIN) Act

● Recent amendment to Estate Tax 2. Privilege or State Partnership

(Jan 1, 2018) Theory

● Getting rid of the use of graduated tax

● Inheritance is not a right, but a
rate and changed it to a single rate of
privilege granted by the State and
6% of the net taxable estate
legatees have been acquired only with
the protection of the State.
● + revising the thresholds for Standard
● Consequently, the State as a passive
Deduction, family Home, and others
silent partner in the accumulation of
(repealing funeral, judicial, and
property has the right to collect the
medical exps)
share which is properly due to it.

ESTATE TAX Government is an indirect partner

(w/ fair share → tax)
Tax imposed on the privilege that a person is
given in controlling to a certain extent, the
disposition of his property to take effect upon 3. Ability to Pay Theory
death.
● Receipts of inheritance which is in the
It is an excise tax imposed on the act of
nature of an unearned wealth or
passing the ownership of property at the
windfall, are placed assets into the
time of death and not on the value of the
hands of the heirs and beneficiaries.
property or right.
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➢ This creates an ability to pay

the gross estate of a non-resident alien if
the tax and thus contributes
there is reciprocity.
to government income.
No one could gratuitously give what
he could not afford THERE IS RECIPROCITY IF:

A. If the deceased was a resident

4. Redistribution of Wealth Theory citizen of a foreign country that did
not impose estate taxes on
intangible personal property of non-
● Imposition of estate tax reduces the resident Filipinos, the same
property received by the successor, exemption applies in the Philippines.
thus helping to promote equitable
distribution of wealth in society. B. If a foreign country grants estate
tax exemptions to non-resident
Filipino citizens for intangible
personal property, the same
exemption applies to its citizens in
CLASSIFICATION OF DECEDENTS & the Philippines.
COMPOSITION OF GROSS ESTATE

SITUS OF INTANGIBLE ASSETS

The value of the gross estate of the decedent
should be determined by including the value
at the time of his death of all property, real GEN RULE: situs of intangible personal
or personal, tangible or intangible, wherever property is the domicile of the owner, also
situated known as “mobilia sequntur personam”.

BUT ! If a Nonresident decedent who at the EXCEPT: if intangible property has situs
time of his death was not a citizen of the elsewhere / where intangible property has
Philippines: acquired a business situs in another
jurisdiction
➢ only that part of the entire gross
estate which is situated in the WHY: principle of “mobilia sequntur
Philippines shall be included in his personam” is only used for convenience.
taxable estate.
SO: must yield to the actual situs of such
property
DECEDENT GROSS ESTATE
EX: situs of Franchise should not be based on
1. Property (Real or Personal) domicile of owner but the place where such
Citizen wherever situated franchise is exercised.
&
Resident 2. Intangible personal
Alien property wherever situated INTANGIBLE ASSETS WITH SITUS
“WITHIN” PH
1. Real property situated in
PH
1. Franchise which must be exercised
in PH
Nonresiden 2. Tangible personal property
t Alien situated in the Philippines
2. Shares, obligations or bonds issued
3. Intangible personal by any corporation or sociedad
property with situs in PH, anonima org or constituted in PH in
unless excluded on the basis accordance w/ its laws.
of reciprocity.
3. Shares, obligations or bonds issued
by any foreign corporation, 85% of
NOTE: Tax-Code excludes “intangible” the business of which is located in
personal property with situs in the PH from the Philippines.
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4. Shares, obligations, or bonds issued beneficiary's expected lifespan, and

by-any foreign corporation if it has approved by the Secretary of
acquired a business situs in PH. Finance with the Insurance
Commissioner's recommendation.
5. Shares or rights in any partnership,
business/industry established in
PH. EXEMPTIONS & EXCLUSIONS FROM THE
GROSS ESTATE

PROPERTY SITUS
A. EXCLUSIONS (sec 85 & 104 of Tax
Code)
Real & Tangible Location of Property
Personal Property
Exclusive property of surviving
Where the intangible 1. spouse
Shares, Franchise, is exercised regardless
copyright, and of where the
likes corresponding The gross estate of married decedents:
certificate is stored 1. Exclusive properties of decedents
2. Common properties of decedents &
surviving spouse
Receivables Residence of debtor
Exclusive properties of the surviving spouse
Bank Deposits Location of Bank should be excluded in the gross estate
because these properties are not owned by the
decedent upon his death.
VALUATION OF GROSS ESTATE
Whether such property is exclusive or common
will depend on the type of property
relations or marriage settlement of the
GEN RULE: Fair Market Value at the time
husband and wife.
of death

EXCEPTION: NOTE: (tax purposes)

REAL PROPERTY (Higher of) Capital - exclusive properties of husband
➢ FMV determined by Commissioner Paraphernal - exclusive properties of wife
➢ FMV shown in schedule of values
fixed by provincial & city assessors
Property outside PH of Non-
SHARES OF STOCK 2. resident alien decedent
➢ Unlisted common share: Book
value per share of issuing
corporation Only his properties situated or with situs within
➢ Unlisted preference share: Par the Philippines shall be included in his gross
value per share estate.
➢ Listed shares: Average of the
highest and lowest quotes on the
Intangible personal property in PH
nearest date if none are available on
3. of Non-resident alien under
the date of death.
Reciprocity
UNITS OF PARTICIPATION (in any
association, recreation, amusement Intangible personal property in the Philippines
club) of a nonresident alien decedent shall be
➢ The bid price nearest the date of excluded from the gross estate if there is
death published in any newspaper or reciprocity.
publication for general circulation.

RIGHT TO USUFRUCT, USE OR B. EXCLUSIONS (sec 87 of Tax Code)

HABITATION & ANNUITY
➢ Based on latest Basic Standard
Mortality Table, considering The merger of usufruct in the owner
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1. of the naked title received by members of the GSIS (RA728)

2. Accruals and benefits received by

The decedent (in this case known as donee
members from the SSS by reason of death
/current decedent) only received from the
(RA1792)
prior decedent (donor / prior decedent)
usufruct over the latter's property.
3. Amounts received from. Philippines and US
The current decedent is not considered the governments for war damages (RA227).
owner of the property.
4. Amounts received from United States
SO: upon his death, the usufruct will be Veterans Administration.
merged to the owner of the naked title, the
intended beneficiary of the property.
5. Payments from PH of US gov to legal heirs
of deceased of World War II Veterans &
Transmission from first heir, deceased civilian for supplies/services
2. legatee or donee in favor of furnished to the US and PH Army (RA136).
another beneficiary, in accord w/
the desire of predecessor 6. Retirement benefits of officials/employees
of a private firm (RA4917).
Also known as Transfer under Special
Power of Appointment. 7. Personal Equity and Retirement Account
(PERA) assets of the decedent-contributor
Property transferred under a special power of (Sec. 14, RA 9505 — Personal Equity and
appointment should be excluded from the Retirement Account Act of 2008).
gross estate of the donee of the power because
the donee decedent only holds the property in 8. Compensation paid to private and public
trust. health workers who have contracted COVID-
19 in case of death, the said amount shall not
be included as part of the gross estate of the
Transmission/ delivery of decedent subject to estate tax as provided
inheritance or legacy by the under Republic Act No. 11494 or. the
3.
fiduciary (1st) heir or legatee to the "Bayanihan to Recover as One Act".
fideicommisary (2nd)

Elements of fideicommissary substitution: COMPOSITION OF GROSS ESTATE

 The substitution must not go beyond
one degree from the heir originally
instituted (i.e. father to son). GEN: gross estate consists of all the property
 Fiduciary & fideicommissary must be owned by a decedent or which the decedent
both living at the time of the testator’s had an interest at the time of death, such as:
death.  Real property
 Personal tangible property
 Intangible personal property
All bequest devises, legacies or  shares of stocks
transfers to social welfare, cultural  Bank deposit
4. and charitable institutions, no part  Dividends declared before his
of the net income of which insures death but received after death.
to the benefit of any individual  Partnership profit which has
accrued before his death,
 Usufructuary & rights
BUT! Not more than 30% of these shall be
used by such institutions for administration
purposes I. Property owned by the decedent that
are actually and physically ‘present in
C. EXCLUSIONS (special laws) his estate at the time of his death such
as land, buildings, shares of stock,
vehicles, bank deposit, and the like.
1. Proceeds of life insurance and benefits
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1. Decedent’s Interest 3. Transfer with retention or reservation of

certain rights. The decedent had transferred
his property during his lifetime, - but retained
The extent of equity or ownership participation for himself beneficial enjoyment of the thing
of the decedent on any property physically or the right to receive income from the same.
existing and present in the gross estate,
whether or not in his possession, control or
dominion. (or) Exception: There is no transfer in
contemplation of death when the transfer of
The value of any interest in property owned or property is a bonafide sale for an adequate and
possessed by the decedent at the time of his full consideration in money or money's worth.
death (interest having value or capable of
being valued or transferred).
Examples
● Investment and dividends declared on
or bef death of stockholders, &
received by estate aft death Circumstances in determining whether
● Contribution & partnership’s profit the transfer is in contemplation of death:
earned prior to death of partner,
received by estate aft partner’s death  Age of the decedent at the time the
● Principal & accrued interest & rent on transfer was made
or bef time of death, but collection  Decedent’s heath as he knew it at or
was made aft death before the time of the transfer
 Interval between the transfer and the
decedent’s death
II. Property NOT PHYSICALLY IN THE
 The amount of property transferred on
ESTATE but are still subject to payment
proportion to the amount of property
of estate tax.
retained
 The relationship of the donor & donee
Note: These properties have already been  The existence of a desire to pm the
transferred during the lifetime of the decedent, part of the decedent to escape/ avoid
however, such properties shall still form part of payment of estate tax
his gross estate because the transfers were
either intended to take effect only upon his
Note: The transfer is motivated by the
death or does not actually convey full
thought of impending death although it may
ownership over the property transferred.
not be imminent. The controlling motive is
the thought of death
2. Transfers in Contemplation of
Death
3. Revocable Transfer
A disposition of property prompted by thought
of death as a controlling motive. Included It is a transfer where the terms of enjoyment of
within this concept is donation mortis causa. the property may be altered, amended,
revoked or terminated by the decedent.
Gen Rule: The gross estate shall include the
value of property transferred by the decedent It is sufficient that the decedent had the power
during his lifetime in anticipation of his death to revoke though he did not exercise the
such as: power.

Gen Rule: Any property the decedent

1. Transfer of property in favor of another transferred but retained the power to alter,
person, but the transfer was intended to take amend, revoke, or terminate its enjoyment,
effect only upon the transferor’s death. either alone or with another person, is still part
of the gross estate, unless it was sold in good
2. Transfer by gift intended to take effect at faith for full value.
death, or after death, or under which the
donor reserved the income or the right to
designate the persons who should enjoy the Note: A decedent's power to alter, amend,
income. or revoke a transfer is considered to exist at
the time of death, even if it requires prior
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notice or takes effect after a certain period. right to the income from the property.

If the power was not exercised before death, 5. The right, either alone, or in conjunction
it is assumed to have been exercised on the with any person to designate the persons
date of death, with adjustments made for who shall possess or enjoy the property or
excluded interests. the income therefrom.

Examples
Exception: In case of a bona fide sale of
● Transfer with retention of interest (no
adequate and full consideration in money or
full conveyance of ownership of
money’s worth, it won’t pass under the general
property)
power of appointment.

5. Transfer for Insufficient

Transfers under a General Power of Consideration
4.
Appointment
If a property is sold or transferred for less than
Power of appointment its fair market value, the difference between
Right to designate the person or persons the fair market value at the time of death
who will succeed to the property of the prior and the amount received from the sale or
decedent. It may be general or special. transfer is included in the gross estate.

The following fair market values shall be used:

GENERAL SPECIAL
FMV at the time of Sale/Transfer
used to determine whether or not the
When power of Exists when the consideration was full and adequate.
appointment donee can appoint
authorizes donee of only from a restricted If amount received nearly equal to FMV at time
power to appoint or designated class of of transfer = BONA FIDE SALE not subj to
any person he persons other than estate tax
pleases. himself.
FMV at the time of death
Included in their excluded from the used to determine the amount to be
gross estate upon gross estate of the included in the gross estate.
death for estate tax donee of the power
purposes bcs donee because the donee-
has ownership-like decedent only holds
control the property in trust.

The power of appointment may be

exercised by the donor-decedent through
the following modes:
1. By will

2. By deed to take effect in possession or

enjoyment at or after his death.

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.

4. The possession or enjoyment of, or the

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of administrator/executor) provided
that the designation is not -
irrevocable

Key Notes

III. Miscellaneous Items

1. Claims against insolvent persons

Regardless of the amount the debtor is unable

to pay, the full amount of the claim against the Exclude proceeds from SSS and GSIS provided by law
insolvent person should be included in the
gross estate of the decedent.
ESTATE TAX RATE
The portion of the claim which is not collectible
should be allowed as a deduction from the  The net estate of every decedent,
gross estate.
whether resident or non-resident
of the Philippines, is subject to estate
Note: An insolvent is a person whose tax as per the Tax Code.
properties are not sufficient to satisfy,
whether fully or partially, his debt(s).  Starting January 1, 2018, under the
TRAIN Law (RA 10963), the estate tax
A judicial declaration of insolvency is not rate is a flat 6% of the net estate.
required but the inability of the debtor to pay
his obligation should be proven.
The law that Governs the imposition of
Estate Tax and Accrual of Estate Tax
2. Proceeds of Life Insurance
 Estate taxation is governed by the law
in effect at the time of the
Proceeds of life insurance taken out by the by
decedent's death.
the decedent on his own life should be included
in the gross estate if the following requisites  Estate tax accrues on the date of
are present: death, but the obligation to pay it is
separate from its accrual.
1. It must be insurance on the life of the
decedent; and
Filing of Estate Tax Return and Payment
of Estate Tax Due
2. The beneficiary must be either of the
following.
 His estate or  Estate tax shall be paid by the
executor/administrator (revocable executor/administrator or any of the
or not) legal heirs at the time the return is
 Any third person (other than’ estate filed (Pay as you file system)
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 Primary responsibility to file and pay:  Up to 2 years for

Executor or administrator. extrajudicial settlement
(out of court).
 Secondary responsibility to file and
pay: any of the heirs  The extension request must be filed
with RDO where estate is registered
for its TIN and estate tax return.
 The extension does not apply if the
delay is due to negligence, intentional
disregard of rules, or fraud.
 If granted, the Commissioner may
require a bond (up to double the tax
amount) to ensure payment within the
extension period.
 The statute of limitations for
TIME for FILING the Estate Tax Return deficiency assessment is suspended
during the extension period.
 Estate tax return must be filed within Payment of Estate Tax by installment
one (1) year from the decedent’s and partial disposition of estate
death (to avoid penalties, surcharges,
and interest) If the estate lacks sufficient cash to pay the
 The court approving the project of estate tax immediately, the estate may pay
partition must send a certified copy of through cash installments under the
its order to the BIR within 30 days following conditions:
after promulgation.
1. Cash Installments
EXTENSION of Time to File the Return Paymen It must be completed within 2
t Period years from the filing date of the
 allows the Commissioner or an estate tax return.
authorized Revenue Officer to grant a
30-day extension for filing the The initial payment is made
estate tax return in meritorious cases. through the estate tax return,
and succeeding payments are
 The request for an extension must be made using BIR Form 0605
filed with the Revenue District Office
(RDO) where the estate is registered Filing must be filed within 1 year of
for its Taxpayer Identification Number Deadlin the decedent’s death.
(TIN) and where the estate tax return e
must be filed.
 This RDO has jurisdiction over the Schedul The frequency, deadlines, and
e amounts must be indicated in
estate tax return resulting from the
the estate tax return and are
distribution of the decedent’s assets subject to BIR approval.
and liabilities.
Failure If fails to pay the full amount
EXTENSION of Time to Pay Tax to Pay within 2 years,
in 2
 The BIR may grant an extension for Years The remaining balance becomes
estate tax payment if it would cause due immediately w/ applicable
undue hardship on the estate or heirs: penalties and interest starting
from the filing deadline
 Up to 5 years for judicial
settlement (through court).
No Civil No civil penalties or interest will
Penalty be imposed
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BUT! the Commissioner can still Place of Filing the Return

enforce payment according to
the law
Resident decedent

2. Partial Disposition of Estate and 1. The administrator or executor must

register the estate and secure a new TIN
Application of Proceeds
from the Revenue District Office (RDO)
Disposal may dispose of real, personal, where the decedent was domiciled at the
of or intangible property for time of death.
Propert cash consideration to cover the
y estate tax 2. must be filed, and the tax paid to the
Accredited Agent Bank (AAB) or RDO
Filing must be filed within 1 year of where the decedent was domiciled.
Deadlin the decedent’s death.
e
Non-resident decedent (whether non-
resident citizen or non-resident alien)
Request written request for partial
with an executor or administrator in the
and disposition must be approved by
Approva the BIR + notarized undertaking Philippines
l
1. The estate tax return is filed with the
Tax allocated in proportion to the
RDO where the executor or administrator is
Alloca- value of each property being
registered.
tion disposed of.
2. If the executor or administrator is not
Paymen Must pay the proportionate
registered, the estate tax return should be
t estate tax for the property
filed with the RDO where the executor or
being disposed of.
administrator resides.

eCAR An electronic Certificate

Issuanc Authorizing Registration For non-resident decedent w/o an
e (eCAR) will be issued upon executor or administrator in PH
proof of payment for the
proportionate estate tax. 1. The estate tax return and TIN must be
Multiple eCARs will be issued if filed with the Office of the Commissioner,
there are multiple properties. through RDO No. 39-South Quezon City.

Failure remaining estate tax balance

to Pay becomes immediately due, Exception
along with penalties and
The Commissioner of Internal Revenue has
interest. eCARs will be
the authority to allow a different venue
withheld until full payment is
for filing the tax return.
made.

Request for extension of time, Liability for the payment of estate tax
installment payment and partial
disposition of estate

Request shall be filed with the Revenue District

Officer (RDO) where the estate is required to
secure its TIN and file the estate tax return.
This request shall be approved by the
Commissioner or his duly authorized
representative.
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Civil penalties and interest

Payment of Tax Antecedent to the

Transfer of Shares, Bonds or Rights