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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 The proportion of the total losses and indebtedness which the
FMV, or P1M value of such part bears to the value of his entire gross estate
wherever situated. This includes: (a) Claims against the estate;
3. Non- Resident Alien (b) Claims against insolvent persons; (c)Unpaid mortgages, taxes
and casualty losses;
A non-resident decedent who was not a citizen of the PH at Vanishing deductions; and
the time of death, with properties within and outside the Transfer of public use
Philippines, is subject to tax only on his estate WITHIN the
Philippines Note: Train has repealed Section 86(D), which previously required
the inclusion of properties abroad in the estate tax return of non-
resident aliens
Franchise which must be exercised in the PH HOWEVER, in a case of a bona fide sale for an adequate and full
Shares, obligations or bonds issued by any corporation or consideration in money or money’s worth, the value of the property
Sociedad anonima organized or constituted in the PH in transferred will not be considered in determining the gross estate
accordance with its laws
Shares, obligations or bonds issued by any fforeign III. Revocable Transfers
corporation 85% of the business of which is located in the
PH (C) Revocable Transfer. -
Shares, obligations or bonds issued by a foreign corporation
if such shares, obligations or bonds have acquired a (1) To the extent of any interest therein, of which the decedent
business situs in the PH 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
II. Transfers in Contemplation of Death worth) by trust or otherwise, where the enjoyment thereof was
subject at the date of his death to any change through the
(B) Transfer in Contemplation of Death. - To the extent of any exercise of a power (in whatever capacity exercisable) by the
interest therein of which the decedent has at any time made a decedent alone or by the decedent in conjunction with any other
transfer, by trust or otherwise, in contemplation of or intended to person (without regard to when or from what source the
take effect in possession or enjoyment at or after death, or of decedent acquired such power), to alter, amend, revoke, or
which he has at any time made a transfer, by trust or otherwise, terminate, or where any such power is relinquished in
under which he has retained for his life or for any period which contemplation of the decedent's death.
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) (2) For the purpose of this Subsection, the power to alter, amend
or revoke shall be considered to exist on the date of the in case of a bona fide sale for an adequate and full consideration in
decedent's death even though the exercise of the power is money or money's worth.
subject to a precedent giving of notice or even though the
alteration, amendment or revocation takes effect only on the “Power of Appointment”
expiration of a stated period after the exercise of the power, - refers to the right to designate the person or persons who
whether or not on or before the date of the decedent's death will succeed the property of a prior decedent
notice has been given or the power has been exercised. In such
cases, proper adjustment shall be made representing the a.) General Power of Appointment - is one which may be
interests which would have been excluded from the power if the exercised in favor of anybody
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 b.) Limited Power of Appointment - is one which may be
date of his death, such notice shall be considered to have been exercised only in favor of a certain person or person
given, or the power exercised, on the date of death. designated by the prior decedent
“Revocable Transfer” Note: Not included in gross estate; Bona fide sale rule applies
- is a transfer where the terms of the enjoyment of the
property may be altered, amended, revoked or terminated by the V. Proceeds of Life Insurance
decedent. It is sufficient that the decedent had the power to revoke,
though he did not exercise the power to revoke. Same rule with (E) Proceeds of Life Insurance. - To the extent of the amount
bona fide sale applies receivable by the estate of the deceased, his executor, or
administrator, as insurance under policies taken out by the
IV. Property Passing under General Appointment decedent upon his own life, irrespective of whether or not the
insured retained the power of revocation, or to the extent of the
(D) Property Passing Under General Power of Appointment. - To amount receivable by any beneficiary designated in the policy of
the extent of any property passing under a general power of insurance, except when it is expressly stipulated that the
appointment exercised by the decedent: (1) by will, or (2) by deed designation of the beneficiary is irrevocable.
executed in contemplation of, or intended to take effect in
possession or enjoyment at, or after his death, or (3) by deed under Proceeds of life insurance under policies taken out by the decedent
which he has retained for his life or any period not ascertainable upon his life shall constitute part of the gross estate if the
without reference to his death or for any period which does not in beneficiary is:
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 Note: The estate of the decedent, his executor or administrator AS
or in conjunction with any person, to designate the persons who SUCH; or a third person (not those in #1), and the designation of the
shall possess or enjoy the property or the income therefrom; except beneficiary is REVOCABLE
Irrevocable beneficiary excludes life insurance from gross estate. a.) If the transfer was in the name of a bona fide sale for an
Life insurance proceeds must be taken out by the DECEDENT; adequate and full consideration in money or money’s worth, no
value will be included in the gross estate
Note: If accident insurance, NOT included in gross estate
b.) If the consideration received on the transfer was less than
VI. Prior Interest 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
(F) Prior Interests. - Except as otherwise specifically provided over the consideration received;
therein, Subsections (B), (C) and (E) of this Section shall apply to
the transfers, trusts, estates, interests, rights, powers and c.) If there was no consideration received on the transfer (donation
relinquishment of powers, as severally enumerated and mortis causa), the value to include in the gross estate will be the fiar
described therein, whether made, created, arising, existing, market value of the property at the time of the decedent’s death
exercised or relinquished before or after the effectivity of this
Code. d.) Is the consideration insufficient?
VII. Transfer for Insufficient Consideration If YES — then add the balance of the FMV at the time of
death and the consideration
(G) Transfers for Insufficient Consideration. - If any one of the
transfers, trusts, interests, rights or powers enumerated and If NO — it was a bona fide sale (don’t add value of gross
described in Subsections (B), (C) and (D) of this Section is made, estate)
created, exercised or relinquished for a consideration in money or
money's worth, but is not a bona fide sale for an adequate and Revenue Regulations 2-82: Taxation of Shares of Stock, as
full consideration in money or money's worth, there shall be amended by RR 6-2008
included in the gross estate only the excess of the fair market
value, at the time of death, of the property otherwise to be SEC. 3. PERSONS LIABLE TO THE TAX. — The following sellers or
included on account of such transaction, over the value of the transferors of stock are liable to the tax provided for in Sec. 5 of
consideration received therefor by the decedent. these Regulations:
(a) Individual taxpayer, whether citizen or alien;
In the transfers in contemplation of death, revocable transfer or (b) Corporate taxpayer, whether domestic or foreign; and
transfers under a GPA, the value to include in the gross estate will (c) Other taxpayers not falling under (a) and (b) above, such as
be determined under the following rules: estate, trust, trust funds and pension funds, among others.
(2) Limitations on Credit. – The amount of the credit taken under Note: notice of death is no longer required under TRAIN LAW
this Section shall be subject to each of the following limitations:
DEDUCTIONS FOR A NON-RESIDENT, NOT CITIZEN of the PH
(a) The amount of the credit in respect to the tax paid to any
country shall not exceed the same proportion Section 87. Exemption of Certain Acquisitions and Transmissions.
140 National Tax Research Center – The following shall not be taxed:
of the tax against which such credit is taken, which the A. The merger of usufruct in the owner of the naked title;
decedent’s net estate situated within such country taxable under B. The transmission or delivery of the inheritance or legacy by
this Title bears to his entire net estate; and the fiduciary heir or legatee to the fideicommissary;
C. The transmission from the first heir, legatee or donee in favor
(b) The total amount of the credit shall not exceed the same of another beneficiary, in accordance with the desire of the
proportion of the tax against which such credit is taken, which predecessor; and
the decedent’s net estate situated outside the Philippines taxable D. All bequests, devises, legacies or transfers to social welfare,
under this Title bears to his entire net estate cultural and charitable institutions, no part of the net income
of which inures to the benefit of any individual: Provided, Section 90. Estate Tax Returns. –
however, That not more than thirty percent (30%) of the said (A) Requirements. – In all cases of transfers subject to the tax
bequests, devises, legacies or transfers shall be used by such imposed herein, or regardless of the gross value of the
institutions for administration purposes. 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
The following are exempt from estate tax: clearance from the Bureau of Internal Revenue is required as
a condition precedent for the transfer of ownership thereof
a.) The merger of usufruct in the owner of the naked title; in the name of the transferee, the executor, or the
b.) The transmission or delivery of the inheritance or legacy by the administrator, or any of the legal heirs, as the case may be,
fiduciary heir or legatee to the fideicommissary; shall file a return under oath in duplicate, setting forth:
c.) The transmission from the first heir, legatee or donee in favor of
(1) The value of the gross estate of the decedent at the time
another beneficiary, in accordance with the desire of the
of his death, or in case of a non-resident, not a citizen of
predecessor; and the Philippines, of that part of his gross estate situated in
d.) All bequests, devises, legacies or transfers to social welfare, the Philippines;
cultural and charitable institutions, no part of the net income of (2) The deductions allowed from gross estate in determining
which inures to the benefit of any individual: Provided, however, the estate as defined in Section 86; and
That not more than thirty percent (30%) of the said bequests, (3) Such part of such information as may at the time be
devises, legacies or transfers shall be used by such institutions for ascertainable and such supplemental data as may be
administration purposes. necessary to establish the correct taxes.
e.) Irrevocable life insurance to someone other than the state, Provided, however, That estate tax returns showing a gross value
administrator, or executor; exceeding Five million pesos (PhP5,000,000) shall be supported
with a statement duly certified to by a Certified Public Accountant
f.) GSIS/SSS;
containing the following:
g.) Retirement benefits of private firms approved by the BIR;
(a) Itemized assets of the decedent with their corresponding
h.) Separate property of the Surviving spouse. 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
TAX RETURNS gross estate situated in the Philippines;
I. Time to File and Notice (b) Itemized deductions from gross estate allowed in Section 86;
and
Note: The threshold amount for the requirement of a CPA
(c) The amount of tax due whether paid or still due and statement is now P5, 000,000.
outstanding.
Note: The time for filing of the estate tax return is 1 year from
(B) Time for filing. – For the purpose of determining the estate tax death; Approval of probate court is NOT mandatory in collection of
provided for in Section 84 of this Code, the estate tax return estate taxes; A return need not be complete in all particulars. It is
required under the preceding Subsection (A) shall be filed within
sufficient if it complies substantially with the law.
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 When is there Substantial Compliance? (CIR v Gonzales)
within thirty (30) after the promulgation of such order. 1. The return is made in good faith and is not false or
fraudulent;
(C) Extension of Time. – The Commissioner shall have authority 2. It covers the entire period involved; and
to grant, in meritorious cases, a reasonable extension not 3. It contains information as to the various items of income,
exceeding thirty (30) days for filing the return. deductions and credits with such definiteness as to permit
the computation and assessment of the tax;
(D) Place of Filing. – Except in cases where the Commissioner
otherwise permits, the return required under Subsection (A) shall 4. When the return was made in the wring form, it was held
be filed with an authorized agent bank, or Revenue District that the filing thereof did not stop the running of the period
Officer, Collection Officer, or duly authorized Treasurer of the city
of limitations, and where the return was very deficient,
or municipality in which the decedent was domiciled at the time
there was no return at all.
of his death or if there be no legal residence in the Philippines,
with the Office of the Commissioner.
PAYMENT OF TAX
Who are required to file? Section 91. Payment of Tax. –
1. Those subject to estate tax; and (A) Time of Payment. – The estate tax imposed by Section 84
2. Regardless of the amount of the gross estate, where the shall be paid at the time the return is filed by the executor,
gross estate has registered or registrable property such administrator or the heirs.
as real property, cars, shares of stock that require a (B) Extension of Time. – When the Commissioner finds that the
Certificate Authorizing Registration from the BIR as a payment on the due date of the estate tax or of any part thereof
condition precedent to the transfer. 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 (D) Liability for Payment – The estate tax imposed by Section 84
extension is granted shall be paid on or before the date of the shall be paid by the executor or administrator before delivery to
expiration of the period of the extension, and the running of the any beneficiary of his distributive share of the estate. Such
Statute of Limitations for assessment as provided in Section 203 beneficiary shall, to the extent of his distributive share of the
of this Code shall be suspended for the period of any such estate, be subsidiarily liable for the payment of such portion of
extension. the estate tax as his distributive share bears to the value of the
total net estate.
Where the taxes are assessed by reason of negligence, intentional For the purpose of this Chapter, the term ‘executor’ or
disregard of rules and regulations, or fraud on the part of the ‘administrator’ means the executor or administrator of the
taxpayer, no extension will be granted by the Commissioner. decedent, or if there is no executor or administrator appointed,
qualified, and acting within the Philippines, then any person in
If an extension is granted, the Commissioner may require the actual or constructive possession of any property of the
executor, or administrator, or beneficiary, as the case may be, to decedent.
furnish a bond in such amount, not exceeding double the amount
of the tax and with such sureties as the Commissioner deems The estate tax shall be paid by the executor or administrator
necessary, conditioned upon the payment of the said tax in before delivery to any beneficiary of his distributive share of the
accordance with the terms of the extension. estate
Where there are 2 or more executors, all of them are severally
(C) Payment by Installment. — In case the available cash of the liable for the payment of the estate tax.
estate is insufficient to pay the total estate tax due, payment by
installment shall be allowed within two (2) years from the
Note: The inheritance tax, although charged against the account of
statutory date for its payment without civil penalty and interest.
each beneficiary, should be paid by the executor or administrator.
Such beneficiary shall be subsidiary liable for the payment of such
The estate tax shall be paid at the time the return is filed. The tax to the extent of his share.
commissioner may extend the payment of such tax.
Note: Claims of income tax need not be filed with the committee on
Provided, It should not exceed 5 years in case of judicial claims and appraisals in the course of testate proceedings, and the
settlement, and 2 years if extrajudicial settlement. 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.
OBLIGATIONS OF EXECUTOR, ADMINISTRATOR, OFFICERS,
OTHERS 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
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
1. Ordinary deductions
a. Expenses, losses, indebtedness, taxes, etc.:
a.1 Funeral Expenses – removed by TRAIN