Dealing with the death of a loved one is already a difficult time—but if they left behind property, investments, or other assets, there’s one more thing you need to address: Estate Tax. In the Philippines, this tax is required before the legal heirs can transfer ownership of the deceased’s assets.
In this guide, we’ll walk you through what Estate Tax is, how it’s calculated, who should file it, and how to settle it properly to avoid delays, penalties, or legal issues.
What is Estate Tax?
Estate Tax is a tax imposed on the net estate (or total value of assets left behind) of a deceased person, before these can be lawfully transferred to their heirs.
This tax must be filed and paid to the Bureau of Internal Revenue (BIR) to secure a Certificate Authorizing Registration (CAR)—which is required for transferring titles, bank accounts, and other properties.
What is Included in an Estate?
The gross estate includes all properties, real or personal, tangible or intangible, located within or outside the Philippines:
Real estate (land, buildings, condos)
Bank accounts and investments
Vehicles, jewelry, artwork, collectibles
Shares of stock and business interests
Retirement or life insurance proceeds (in certain cases)
Who Should File and Pay the Estate Tax?
The executor, administrator, or legal heirs of the deceased are responsible for:
Filing the Estate Tax Return
Settling the tax due to the BIR
Submitting supporting documents and securing a CAR
If no one was legally appointed, the heirs may file the return jointly or individually.
Estate Tax Rate (as per TRAIN Law)
Since January 1, 2018, under the TRAIN Law (RA 10963):
Flat rate of 6% on the net taxable estate
Applies regardless of value, after allowable deductions
Allowable Deductions from the Gross Estate
Before computing the tax, the following are deductible from the gross estate:
| Deduction Type | Description |
|---|---|
| Standard Deduction | ₱5,000,000 (automatic) |
| Family Home | Up to ₱10,000,000 (if the property is the family residence) |
| Debts and Obligations | Valid claims against the estate |
| Medical Expenses | Up to ₱500,000 (incurred within 1 year prior to death) |
| Funeral Expenses | Up to 5% of the gross estate (max ₱200,000) |
| Judicial Expenses | Related to estate settlement |
| Transfers to the Government/Charities | If properly documented |
After deductions, you arrive at the net estate, which is taxed at 6%.
Example Calculation
Gross estate value: ₱20,000,000
Standard deduction: ₱5,000,000
Family home: ₱8,000,000
Debts: ₱1,000,000
Net taxable estate = ₱6,000,000
Estate Tax = ₱6,000,000 × 6% = ₱360,000
Deadline to File and Pay
Within one (1) year from the date of death
Extensions may be granted in meritorious cases upon request
How to Settle Estate Tax
Prepare and notarize all required documents
File BIR Form 1801 (Estate Tax Return) at the RDO where the decedent was registered
Pay the estate tax via BIR-accredited banks, GCash, Maya, or eFPS
Submit documentary requirements including:
Death certificate
TIN of decedent and heirs
Affidavit of self-adjudication or extra-judicial settlement
Schedule of assets and liabilities
Titles, certificates, bank statements, etc.
Claim the Certificate Authorizing Registration (CAR)—needed for transferring real properties, bank accounts, shares of stock, and more
Installment Options
The BIR allows payment of estate tax on installment, if the estate lacks liquidity. However:
First payment must be made within the 1-year deadline
Interest may apply on unpaid balance
Penalties for Late Filing
Failure to file or pay on time may result in:
25% surcharge
12% annual interest
Compromise penalties
Additionally, no legal transfer of property ownership can happen without the CAR, which won’t be issued until estate tax is paid.
Important Tips
Start the estate settlement process early
Secure all documents including titles, bank accounts, and debt records
Consult with a tax advisor or estate lawyer for complex estates
Avoid informal transfers—ownership must be officially recorded to be valid
Final Thoughts
Estate tax doesn’t have to be overwhelming. With proper guidance, planning, and timely filing, you can legally transfer your loved one’s assets and avoid unnecessary complications.
Whether you’re an heir or estate administrator, understanding how estate tax works helps you honor your loved one’s legacy—and protect the family’s future.
Post a Comment