ESTATE TAX • 2-5 years extension.

Estate Tax is a tax imposed on the privilege that a person • If the tax is due to carelessness, breaking the rules,
is given in controlling to a certain extent, the disposition or fraud, no extra time will be given.
of his property to take effect upon death.
C. PAYMENT BY INSTALLMENT
Since estate tax accrues as of the time of death, the • Payment by Installment: If the available cash of the
right of the State to tax the privilege to transmit the estate is insufficient to pay the total estate tax due,
estate vests instantly upon death. • Timeframe: Payment by installment shall be
allowed within two (2) years
NATURE OF ESTATE TAX • Penalty Waiver: Payment within this timeframe will
It is an excise tax imposed on the act of passing the be without civil penalty and interest.
ownership of property at the time of death and not on
the value of the property or right. D. LIABILITY FOR PAYMENT
• Before giving out any inheritance, the person in
ACCRUAL VS. DUE DATE OF ESTATE TAX charge of handling the deceased person's affairs
• Accrual: Right upon death of the decedent (executor or administrator) needs to pay the estate
• Due Date: Within one year from death tax.
• The accrual of the tax is distinct from the obligation • If they don't pay it, the people getting the
to pay the same. inheritance might have to pay a part of the tax that
matches what they're inheriting.
SECTION 90. ESTATE TAX RETURNS • If there's no appointed person in charge, whoever
A. REQUIREMENTS has the deceased person's stuff has to pay the tax.
When someone passes away and leaves property like
land, cars, or stocks, their executor or legal heirs need to WHO IS THE TAXPAYER IN ESTATE TAXATION?
file an estate tax return with the Bureau of Internal THE ESTATE AS A JURIDICAL PERSON.
Revenue in the Philippines. The return must show: The concept of the estate as a juridical person refers to
• The total value of the deceased person's estate the legal entity that comes into existence upon an
when they passed away. individual's death to manage and distribute the
• Any deductions allowed from the total estate deceased person's assets, settle debts and liabilities,
value, according to Section 86 of the law. and handle any legal matters related to the estate.
• Any other necessary information or extra details
needed to figure out the correct taxes. THE ADMINISTRATOR OR EXECUTOR
Refers to an individual or entity appointed to manage
B. TIME FOR FILING the affairs and assets of a deceased person's estate. The
The estate tax return must be filed within one year after administrator or executor is responsible for various tax-
the person's death. related duties, including filing the deceased person's
final income tax return and ensuring that any
C. EXTENSION OF TIME outstanding taxes are paid from the estate's assets.
The Commissioner shall have authority to grant, in
meritorious cases, a reasonable extension not exceeding ANY OF THE HEIR(S)
thirty (30) days for filing the return. The term "heir" typically refers to an individual who
inherits assets or property from a deceased person.
D.PLACE OF FILING Heirs may be designated by a will or determined by
Designated bank, Revenue district office, Collection intestate succession laws if there is no valid will in place.
officer, or treasurer of the city or municipality where the
deceased person lived when they passed away. If the SEC. 92. DISCHARGE OF EXECUTOR OR
deceased had no legal residence in the Philippines, the ADMINISTRATOR FROM PERSONAL LIABILITY
return should be filed directly with the Office of the If the executor or administrator makes a written
Commissioner. application to the Commissioner for determination of
SECTION 91. PAYMENT OF TAX the amount of the estate tax and discharge from
A. TIME OF PAYMENT personal liability therefor, the Commissioner (as soon as
The estate tax imposed shall be paid at the time the possible, and in any event within one (1) year after the
return is filed by the executor, administrator or the making of such application, or if the application is made
heirs. before the return is filed, then within one (1) year after
the return is filed, but not after the expiration of the
B.EXTENSION OF TIME period prescribed for the assessment of the tax in
If the estate or heirs would face too much difficulty in Section 203 shall notify the executor or administrator of
paying the estate tax by the deadline, the Commissioner the amount of the tax.
can give them more time.
The executor or administrator, upon payment of the SECTION 85. GROSS ESTATE
amount of which he is notified, shall be discharged from A. Decedent's Interest - The general rule is that all
personal liability for any deficiency in the tax there after property owned by the decedent has to be
found to be due and shall be entitled to a receipt or included in the gross estate, to the extent of the
writing showing such discharge. value of his interest in such property at the time
of his death.
No judge shall authorize the executor or judicial
B. Transfer in Contemplation of Death - Transfers
administrator to deliver a distributive share to any party
of property made by the decedent before their
interested in the estate unless a certification from the
death. Specifically those transfers made with
Commissioner that the estate tax has been paid is
the anticipation or intention that they will take
shown.
effect either during or after the decedent's
death.
PURPOSE OF ESTATE TAX
 Added income to the government C. Revocable Transfer - The transferor has
reserved the right to alter, amend or revoke
 Benefit received theory such transfer, regardless of whether or not the
power is actually exercised during his lifetime,
 Privilege theory or state partnership and whether or not the power should be
exercised by him alone or in conjunction with
 Ability to pay theory someone else.

So long as that right remains until the day of his

 Redistribution of wealth theory
death, it is still under the control of the
decedent, it is part of his properties because he
COMPUTATION FOR ESTATE TAX
actually will enjoy the income, the rights and
Gross Estate xx
the enjoyment of the property.
Less: Allowable Deduction (xx)
Taxable Net Estate xx D. Property Passing Under General Power of
Estate Tax Rate 6% Appointment - Property passing under a general
Estate Tax Due xx power of appointment exercised by the
*Effective January 1, 2018 to present (Republic Act No. 10963)
decedent is included in their taxable estate for
Example Computation:
estate tax purposes. It covers various scenarios
1,000,000 - 500,000 = 500,000
where the decedent has control over the
500,000 x 8% = 40,000
disposition of property either through a will,
40,000 + 15,000 = 55,000
deed executed in contemplation of death, or
55,000 Estate Tax Due
deed with retained interests. The exception for
bona fide sales ensures that genuine transfers
made for adequate consideration are not
subject to estate tax.

E. Proceeds of Life Insurance - Amount receivable

by the estate of the deceased, executor or
administrator under policies TAKEN OUT BY THE
DECEDENT:
COMPOSITION OF GROSS ESTATE
1. Upon his OWN LIFE - life insurance payouts

2. Receivable by ANY BENEFICIARY (Except:

designation is irrevocable).

F. Prior Interests - Apply to transfers, trusts,

estates, interests, rights, powers and
relinquishment of powers whether made,
created, arising, existing, exercised or
relinquished BEFORE or AFTER effectivity of the
code.

G. Transfers of Insufficient Consideration - This

part of the law talks about what happens if
someone gives away something for less than it's
really worth, but not as a fair sale.
 H. Capital of the Surviving Spouse - In relation to
Sec. 86 (C) of NIRC, the share of the surviving D. MISCELLANEOUS PROVISION
spouse in the conjugal partnership property is • No deduction shall be allowed in the case of a
impliedly included in the gross estate. nonresident not a citizen of the Philippines,
unless the executor, administrator, or anyone of
SECTION 86. COMPUTATION OF NET ESTATE the heirs, as the case may be, includes in the
ORDINARY DEDUCTIONS: return required to be filed under Section 90 the
Claims against the estate- these are the obligations of value at the time of his death of that part of the
the decedents incurred within 3 years prior to his death gross estate of the nonresident not situated in the
Philippines.
Claims against the insolvent person - the receivables of
the decedent that is already uncollectible
E. CREDIT OF FOREIGN ESTATE TAX PAID
Unpaid mortgages - these are the amounts owed by the Available only to estates of citizen or resident alien
decedent supported with collateral and still outstanding decedents Subject to Limits
at the time of death. LIMITATION ON CREDITS:
(a) Net Estate (per Foreign Country) ÷ Estate Tax Entire
Unpaid taxes - amount of taxes that accrued before the Net Estate × Philippine Estate Tax
decedent's death but not including: (b) Net Estate (in all Foreign Countries) ÷ Entire Net
• Income tax on income earned after death; Estate × Philippine Estate Tax
• Property taxes that accrue after death; Rules:
• Estate tax If there is only one (1) foreign country, only Limit (A) is
Transfer for public use – these are amounts of bequest, used
legacies, or devises to or for the use of the government If there are two (2) or more foreign countries, use both
of the Philippines exclusively for public purpose Limits

Previously Taxed Property or Vanishing Deduction - its RECIPROCITY CLAUSE

to minimize the effects of a double tax on the same The tax code excludes “Intangible” personal property
property within a short period of time. with situs in the Philippines from the gross estate of a
non-resident alien decedent if there is reciprocity. There
is reciprocity if the decedent at the time of his death
was a resident citizen of a foreign country which at the
time of his death did not impose an estate tax of any
character in respect of intangible personal property of
citizens of the Philippines not residing in that foreign
country; or

SPECIAL DEDUCTIONS: The law of the foreign country of which the decedent
• Standard Deduction was a resident citizen at the time of his death allow a
• Family Home similar exemption from estate taxes of every character,
• Amount Received by Heirs under RA No. 4917 in respect of intangible personal property owned by
citizens of the philippines not residing in that foreign
country
Situs Of Property
• As a general rule, the Situs of real property is the
place or country where it is situated.
• Generally, the Situs of tangible personal property is
the place or country where such is actually located
at the time of the decedent’s death.
• As a general rule, the situs of intangible personal
property is the domicile or residence of the owner.
The following test of situs apply:
• Accounts receivable - residence of debtor
C. SHARE IN THE CONJUGAL PROPERTY • Bank deposits – location of depository bank.
• Share of the surviving spouse is not subject to • Copyright, trademark, patent & franchise – place or
estate tax and must therefore be deducted from country where the intangible is used or exercised.
the gross estate of the decedent.
• Amount of deduction = [Conjugal properties less
obligations chargeable to such properties
(conjugal deductions)] divided by 2
INTANGIBLE ASSETS WITH SITUS WITHIN THE DONOR'S TAX
PHILIPPINES DONATION
Section 104 of the Tax Code enumerates the following Donation is the gratuitous transfer of property from one
intangible personal property with situs in the living person to another. The person who disposes of
Philippines, for estate tax purposes: the thing or right is called the donor while the one who
accepts it is the donee (Banggawan, 2019)
1. Franchise which must be exercised in the philippines.

2. Shared, obligations or bonds issued by any DONOR'S TAX

corporation or sociedad anonima organized or There is donation when a person gives to another a
constituted in the Philippines in accordance with its thing, or right on account of the latter's merits or on
laws. account of the services rendered by him to the donor,
provided, they do not constitute a demandable debt.
3. Shares, obligations or bonds issued by any foreign
corporation, 85% of the business of which is located in ESSENTIAL REQUISITES OF DONATION
the Philippines. CAPACITY OF THE DONOR
4. Shares, obligations, or bonds issued by ay foreign The donor must be legally competent to make a
corporation if such shares, obligations or bonds have donation. A donation made by a minor, an insane, or by
acquired a business situs in the Philippines. one under hypnotic spells, force or intimidation is
unenforceable.
5. Shares or rights in any partnership, business or
industry established in the Philippines. DONATIVE INTENT
The donation must be intentional or voluntary. There is
no such thing as an implied donation.

DONATIVE ACT OR DELIVERY

Donation is a real contract and is completed by the
delivery of the property to be donated.

ACCEPTANCE BY THE DONEE

No one shall be compelled to accept the generosity of
another. The Donee has the prerogative to accept or
reject the gratuity. The acceptance of the donee
perfects the contract of donation.

TYPES OF INTER-VIVO DONATION

DIRECT DONATION
A direct donation is one made by the donor directly to
the donee.

INDIRECT DONATION
An indirect donation involves transfer of property by the
donor in favor of the donee but under the supervision
of another party. This is called donation in trust.
Revocable & Irrevocable

TYPES OF DONORS
RESIDENT OR CITIZEN
Taxable on global donations; such as
• Resident citizen
• Non-resident citizen
• Resident alien

NON-RESIDENT ALIEN
Taxable only on Philippine donations, except intangible
personal property subject to reciprocity conditions.
 NATURE OF DONOR'S TAX deemed a gift, and shall be included in computing the
PRIVILEGE TAX amount of gifts made during the calendar year.
Donor's tax is a tax upon the privilege to transfer
property gratuitously during the lifetime of the donor. SECTION 101 EXEMPTION OF CERTAIN GIFTS
In the Case of Gifts Made by a resident
PROPORTIONAL TAX In the Case of Gifts Made by a Nonresident not a Citizen
Donor's tax is based on a fixed percentage of net gift of a Philippines
Tax Credit for Donor’s Taxes Paid to a Foreign Country
ANNUAL TAX
Donor's tax is imposed on yearly net gifts of donors in RATE OF DONOR’S TAX
excess of P250,000 Rate: The donor's tax rate is set at 6% and is calculated
on the total value of gifts exceeding Two Hundred Fifty
AD VALOREM Thousand Pesos (P250,000) in a calendar year.
Donor's tax depends upon the value of the property
donated Computation:
Gross Gift xx
NATIONAL TAX Less: Deductions from gross gift (xx)
Donor's tax is imposed by the national government Current Net Gift xx
Add: Prior Net Gifts (within the year) xx
REVENUE OR FISCAL TAX Total Net Gifts xx
Donor's tax is intended to provide the government Less: Exemption Threshold (250,000)
income Taxable Net Gifts xx
Multiplied by: Tax Rate 6%
RATIONALE OF DONOR'S TAXATION Donor’s Tax Due xx
 To control tax evasion of the estate tax Less: Donor’s Tax Paid Previously (Prior Gifts) (xx)
 To control tax evasion on income tax Donor’s Tax Due and Payable xx
 To recoup future loss of income tax revenue
SECTION 102. VALUATION OF GIFTS MADE IN
SECTION 98 IMPOSITION OF TAX PROPERTY
There shall be levied, assessed, collected and paid upon If the gift is made in property, the fair market value at
the transfer by any person, resident or nonresident, of the time of the gift shall be considered the amount of
the property by gift, a tax, computed as provided in the gift. In case of real property, the provisions of
Section 99. Section 88 (B) shall apply to the valuation thereof.

The tax shall apply whether the transfer is in trust or Section 88 (B) Properties
otherwise, whether the gift is direct or indirect, and As determined by the Commissioner or as shown in the
whether the property is real or personal, tangible or schedule of values by the Provincial and City Assessors.,
intangible. whichever is higher.

SECTION 99 RATES OF TAX PAYABLE BY DONOR SEC. 103. FILING OF RETURN AND PAYMENT OF TAX.
In General. — The tax for each calendar year shall be six Requirements. — Any individual who makes any
percent (6%) computed on the basis of the total gifts in transfer by gift shall, for the purpose of the said tax,
excess of Two hundred fifty thousand pesos (P250,000) make a return under oath in duplicate. The return shall
exempt gifts made during the calendar year. set forth:
1.Each gift made during the calendar year which is to be
Any contribution in cash or in kind to any candidate, included in computing net gifts;
political party or coalition of parties for campaign 2.The deductions claimed and allowable;
purposes shall be governed by the Election Code, as 3. Any previous net gifts made during the same calendar
amended. year;
4. The name of the donee; and
SECTION 100. TRANSFER FOR LESS THAN ADEQUATE 5. Such further information as may be required by rules
AND FULL CONSIDERATION and regulations made pursuant to law.
Where property, other than real property referred to in
Section 24(D), is transferred for less than an adequate Time and Place of Filing and Payment
and full consideration in money or money’s worth, then • The return of the donor required in this Section
the amount by which the fair market value of the shall be filed within thirty (30) days after the date
property exceeded the value of the consideration shall, the gift is made and the tax due thereon shall be
for the purpose of the tax imposed by this Chapter, be paid at the time of filing.
• In the case of gifts made by a nonresident, the
return may be filed with the Philippine Embassy or
Consulate in the country where he is domiciled at
the time of the transfer, or directly with the Office
of the Commissioner.

SECTION 104. DEFINITION

Gross Estate - It encompasses all real and personal

property, whether tangible or intangible, situated in the
Philippines, owned by the decedent at the time of
death.

Gifts - Includes real and personal property, tangible or

intangible, or mixed, wherever situated.

Intangible Personal Property - has no physical shape

but represents something else of value.

Deficiency - This refers to the difference between the

actual tax due and the amount shown on the return or
previously assessed/collected.

COMPUTATION OF THE DONORS TAX

Illustration:

Donations were made on January 30, 2018 at

P3,000,000; on April 30, 2018 at P1,800,000; and
October 30, 2018 at P750,000.