INTRODUCTION TO TRANSFER TAXES AND ESTATE TAX:

 TRANSFER TAX - tax imposed upon the gratuitous transfer of property ownership. It is also a
privilege tax imposed on the act of passing ownership of property.

 ESTATE TAX - tax on the right of the deceased person to transmit his/her estate to his or her
lawful heirs and beneficiaries at the time of death.
 levied upon the transfer of the net estate of a decedent to his heirs
 an excise tax because it is imposed on the exercise of the right to transfer ownership
over the property
 accrues at the moment of death of the decedent

 ELEMENTS OF SUCCESSION
 Decedent- a person who dies and left a property
 Estate- refers to the property, rights and obligations left by the decedent
 Heirs- beneficiary of the estate

 KINDS OF SUCCESSION
 TESTAMENTARY SUCCESSION-designation of heirs; executed through a last will
and testament
 LEGAL OR INTESTATE- transmission of properties where there is no will, or if there
is a will, the same is void or nobody succeeds in the will
 MIXED- transmission of properties which is affected partly by will and partly by
operation of law.

 KINDS OF SUCCESSORS
 LEGATEE – an heir to a particular personal property given by virtue of a will
 DEVISEE – an heir to a particular real property given by virtue of a will

 EXTRAJUDICIAL SETTLEMENT - the heirs themselves settled the distribution of the property
without using the rule of legitime

 COMPULSORY HEIRS
 Legitimate children and descendants with respect to their legitimate parents and
ascendants
 In default of the foregoing, legitimate parents and ascendants, with respect to
legitimate children and descendants
 Spouse
 Illegitimate children(child of unmarried couple)

 RULE OF LEGITIME
 The share of legitimate child is 50% of the estate.
 The share of wife is 25% or ¼ of the entire hereditary estate. (25%-free portion- can
be distribute through last will and testament or proportionately to forced heirs)
 The share of the wife is equivalent to the share of legitimate child. (If several children)
 The share of one illegitimate child is ½ of the share of a legitimate child

THE GROSS ESTATE:

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  The gross estate, also known as “PROBATE PROPERTY”, consists of all property owned by a
decedent at the time of death, including stocks, bonds, real estate, mortgages and any other
property that legally belonged to him.

 If the decedent is married, the gross estate shall also include all common properties (conjugal or
community) of the spouses.

 The gross estate of a resident or citizen of the Philippines consists of the following, regardless
of location:

 Real property

 Tangible personal property

 Intangible personal property

 The gross estate of a non-resident, who at the time of his death was not a citizen of the
Philippines, consists of real estate located in the Philippines, tangible personal property in the
Philippines, and as a general rule or when the reciprocity rule does not apply, intangible personal
property in the Philippines.

 The following among others, are intangible personal property located in the Philippines (statutory
enumeration):

 Franchise which must be exercised in the Philippines.

 Shares, obligations or bonds issued by any corporation or sociedad anonima

organized or constituted in the Philippines in accordance with its laws.

 Shares, obligations or bonds issued by any foreign corporation eighty-five

percent (85%) of the business of which is located in the Philippines.

 Shares, obligations or bonds issued by any foreign corporation, if such shares,

obligations or bonds have acquired a business situs in the Philippines.

 Shares or right in any partnership, business or industry in the Philippines.

 RECIPROCITY RULE applies in any of the following instances:

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  If the decedent at the time of his death was a citizen and resident of a foreign
country which at the time of death does not impose a transfer or death tax of any
character in respect of intangible personal property of citizens of the Philippines
not residing in that foreign country

 If the laws of the foreign country of which the decedent was a citizen and resident
at the time of death allows similar exception from transfer taxes or death taxes of
every character in respect of intangible personal property owned by citizens of
the Philippines not residing in that foreign country.

 SUMMARY OF PROPERTIES INCLUDED IN THE GROSS ESTATE:

INCLUDED IN THE GROSS RESIDENT/FIL NON- NON-

ESTATE IPINO RESIDENT RESIDE
ALIEN NT
(RECIPROCIT ALIEN
Y RULE DOES (RECIPR
NOT APPLY) OCITY
RULE
APPLIE
S)

1. Real or immovable
property situated:

a.) in the Philippines   

b.) outside the Philippines 

2. Tangible personal
property acquired:

a.) in the Philippines   

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 b.) outside the Philippines 

3. Intangible personal
property with situs:

a.) in the Philippines  

b.) outside the Philippines 

Franchise exercised in the  

Philippines

Shares, obligations or bonds  

issued by foreign corporations
organized under Phil. laws

Shares, obligations or bonds  

issued by foreign corporations (85%
of business located in the Phil.)

Shares, obligations or bonds  

issued by any foreign corporation
acquired business situs in the
Philippines.

Shares or rights in  
partnership business or industry
established in the Philippines

NOTE: Intangible personal property located within the Philippines of a non-resident alien is subject to
the rule of reciprocity. If there is reciprocity, it is not subject to estate tax in the Philippines.

 Notes or other claims held by the decedent should be included in the gross estate even though
they are cancelled by the decedent’s will.

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  Accrued interest and rents, dividends declared to stockholders of record on or before the date of
decedent’s death are to be included in his estate although they are not collected until after his
death.

 Various statutory provisions which exempt bonds, notes, bills and the certificates of indebtedness
of the government from taxation are not applicable to the estate tax since this tax is an excise tax
on the rights to transfer properties and not on the property transferred.

 As a general rule, the situs of a property is the domicile or residence of the owner. However,
such general rule is not applicable when a property has a situs other than the domicile or
residence of the owner, or when the rule is not consistent with the express provisions of the
estate. For example, bonds, mortgages and certificates of stock are taxable at the place where
they are physically located.

VALUATION OF THE GROSS ESTATE:

 The gross estate of the decedent shall be appraised or valued at the time of his death.

 Rules in the valuation of the Gross Estate:

 In general, the gross estate shall be valued at its fair market value at the time of
decedent’s death.

 REAL PROPERTIES: should be valued at the current fair market value (FMV) as shown
in the schedule of values fixed by the Provincial/City Assessors, or the fair market as
determined by the Commissioner of Internal Revenue, whichever is higher.

 PERSONAL PROPERTIES: should be reported t the acquisition cost for the recently
acquired properties, or the current market price for the previously acquired properties.

 STOCKS, BONDS, AND OTHER SECURITIES if listed in the local stock exchange, the
value is the mean between the highest and the lowest quoted selling prices on the date of
death or the nearest date when there was sale.

 If not listed on an exchange, the value should be the book value at the date of death.
[(Par value + Retained Earnings)/ Outstanding shares issued] * the number of shares
included in the estate.

 Unlisted preferred shares are valued at par value.

ADDITIONS TO THE GROSS ESTATE:

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  In addition to the properties and rights that are easily and physically identifiable, there are still
some rights or properties which are not physically found in the estate at the time of death, but are
still to be included as part of the gross estate of the decedent. In general, the gross estate
consists of the following:

1. Taxable Transfers: (Transfers during the lifetime of the decedent)

a. Revocable transfers

b. Transfers in contemplation of death

c. Property passing under general power of appointment

d. Transfers for insufficient consideration

2. Others:

a. Decedent’s interest accrued at the date of death

b. Proceeds of life insurance with revocable beneficiary

c. Claims against insolvent persons

d. Amount received by heirs under R.A. No. 4917

 REVOCABLE TRANSFER

 It is a transfer where the terms of enjoyment of the property may be altered,

amended, revoked or terminated by the decedent. It is sufficient that the
decedent had the power to revoke, though he did not exercise the power to
revoke.

 The donor retains the option to relinquish such power in contemplation of death.

 Revocable transfer cover the following properties:

a. Transfer with retention of interest to income or with right to designate

persons who will enjoy income or property.

b. Donation mortis-causa even without retention of interest while the

decedent still lives.

c. Conditional transfers that if the transferee predeceased the transferor,

the property shall return to the transferor.

 Exceptions:

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 a. When a transferor of a corporate stock in trust for his children reserves
the right to vote the shares during his lifetime aid his children to gradually
assume financial responsibilities.

b. If the decedent’s power could be exercised only with the consent of all
parties having an interest in the transferred property, and if the power
does not affect the rights of all parties.

c. Where the decedent has been completely stripped of the power at the
time of his death.

d. Where the exercise of the power by the decedent was subject to a

contingency beyond the decedent’s control, which did not occur before
his death.

 TRANSFER IN CONTEMPLATION OF DEATH

 It is a transfer motivated by the thought of death, although death may not be

imminent. These properties are not physically available in the estate at the time
of death because the decedent transferred them during his lifetime in anticipation
of his death.

 “Death must be contemplated, and the thought of death, as distinguished from

purposes associated with life, must be the impelling cause of transfer.”

 The main reason behind this provision is to reach schemes to evade the estate
tax liability, by the use of other forms of conveyances rather than by succession
or transfer mortis causa.

 Where a donation was made concurrently with the execution of will, or where the
time between the making of a gift and the death of the donor was relatively close,
the transfer were held to be in contemplation of death.

 There is a transfer in contemplation of death when:

a. The decedent transferred the possession or enjoyment of his property to

another, but this transfer was intended to take effect only upon his death.

b. The decedent transferred title to the property but retained for his lifetime
the right to possess or enjoy the property or the income therefrom, or the
rights to designate whom shall possess or enjoy the same.

 PROPERTY PASSING UNDER GENERAL POWER OF APPOINTMENT

 A power of appointment is a right to designate by will or deed the person or

persons who are to receive certain property from the estate of a prior decedent.

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  A power of appointment may be general or limited (special):

a. SPECIAL power of appointment – is one that authorizes the donee of

holder of the power to appoint only among a restricted class or
designated class of persons other than himself.

b. GENERAL power of appointment – the decedent must have had a

power to exercisable in favour of himself, his estate, or creditors of his
estate.

 Requisites for inclusion of property passing under a general power of

appointment:

a. Existence of a general power of appointment.

b. An exercise of such power by the decedent by will or by deed in certain

cases

c. The passing of the property by virtue of such exercise.

 If the power to consume, or appropriate property and/or income for the benefit of
the decedent is limited to an ascertainable standard of living pertinent to his
health, education support or maintenance, such favour is not general power of
appointment but if a power to use property for the comfort, welfare, or happiness
of the holder of the power is not considered limited by an ascertainable standard
ad therefore, constitutes a general power of appointment.

 TRANSFER FOR INSUFFICIENT CONSIDERATION

 A property is transferred for insufficient consideration if disposed for less than

it’s adequate and full consideration.

 If an inter-vivos transfer of the decedent is proven to be fictitious, the total value

of the property at the time of death shall be included in the gross estate.

 The value to be included in the gross estate shall be determined under the
following rules:

a. If the transfer was in the nature of a bona-fide sale for an adequate and
full consideration in money or money’s worth, no value shall be included
in the gross estate.

b. If the consideration received is less than adequate and full consideration,

the value to be included in the gross estate shall be the excess of the fair
market value of the property at the time of the decedent’s death over the
consideration received.

c. If there was no consideration received on the transfer (as in donation

mortis-causa), the value to be included in the gross estate shall be the
fair market value of the property at the time of the decedent’s death.

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 d. If the transfer is not shown to have been made in contemplation of death
or to take effect upon the decedent’s death, the donor is subject to
Donor’s Tax under Section 98 of the NIRC.

 DECEDENT’S INTEREST

 In general, decedent’s interest is commonly thought of as a person’s estate, the

wealth that he would have possessed, enjoyed and disposed, had he lived .

 It also refers to the value of any interest in property or rights accrued in favor of
the decedent on or before his death which have been received only after his death
such as:

a. Dividends declared on or before the death of the stockholder, and received

by the estate after said stockholder’s death.

b. Partnership’s profit earned prior to death of the partner, received by the

estate after the partner’s death.

c. Accrued interest and rents on or before the time of death, but collected until
after death.

d. Proceeds of life insurance policy payable to a revocable beneficiary.

e. Rights of usufruct if transferable to the heirs.

 As a rule, the interest to be included as part of the gross estate must exist at the time
of the decedent’s death. It is not sufficient that the decedent at some time during his
life had an interest. It is not sufficient that an interest might be transferred to the
decedent’s estate after his death.

 PROCEEDS OF LIFE INSURANCE WITH REVOCALBE BENEFICIARY

 Proceeds of life insurance under policies taken out by the decedent upon his life shall
constitute part of the gross estate if the beneficiary is:

a. The estate of the decedent, his executor or administrator

b. A third person (ex. person other than estate, executor, or administrator), and
the designation of the beneficiary is revocable.

 Under the Insurance Code of the Philippines, a designation of beneficiary is

revocable, unless stated expressly by the insured, and indicated in the policy, that the
designation is irrevocable.

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  The proceeds of life insurance payable to the person’s estate, on which the
premiums were paid by the conjugal partnership, constitute conjugal property, and
the other half pertains to the surviving spouse.

 If the premiums were paid partly with paraphernal and partly conjugal funds, the
proceeds are in like portion paraphernal in part and conjugal part.

 Where the insured transfers a life insurance policy in contemplation of death, the
amount included in the gross estate is the face value of the policy and not the cash
surrender value.

 Rule on taxability or non-taxability of life insurance proceeds:

Proceeds of Life Revocable Irrevocable

Insurance Designation Designation

From life Taxable Taxable

insurance with the
estate,
administrator,
executor as
beneficiary

From life Taxable Not Taxable

insurance with
wife as beneficiary

From SSS or Not Taxable Not Taxable

GSIS with wife as
beneficiary

From group Not Taxable Not Taxable

insurance with heir
as beneficiary

Case Policy Beneficiary Taxable

1 Revocable Yes Yes

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 2 Revocable No Yes

3 Irrevocable Yes Yes

4 Irrevocable No No

5 Silent No Yes

 CLAIMS AGAINST INSOLVENT PERSON

 These refer to receivables left by the decedent but the court consequently found the
related debtor insolvent.

 A claim against insolvent person must be reported as part of the gross estate in the full
amount of the receivable. The fact it is uncollectible in whole or in part will be recognized
as a deduction from the gross estate for uncollectible portion.

 This should be reported as exclusive or conjugal property depending on whether the

claim is derived from an exclusive or conjugal property.

 AMOUNT RECEIVED BY HEIRS UNDER R.A. No. 4917

 The amount received by the heirs from the decedent’s employer as a consequence of
the death of the decedent-employee shall be included in the gross estate of the
decedent. This amount is also allowed as a deduction from gross estate.

 The following items refer to the amount received by the heirs which are not subject to any
tax under R.A.4917:

a. Retirement benefits received by officials and employees of private firms, whether

individual or corporate, in accordance with a reasonable private benefit plan
maintained by the employer. Provided that:

 The retiring officials or employee has been in the service of the same
employer for at least 10 yrs. and not less than 50 yrs. at the time of his
retirement.

 The benefits granted under R.A.4917 shall availed of an official or

employee only once.

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 b. Benefits granted in case of separation of official or employee from the service of
the employer due to death, sickness or other physical disability or of any cause
beyond the control of the said official or employee.

EXEMPTIONS FROM ESTATE TAX:

 Refers to the properties, rights or transfers that are specifically declared by the law as FREE from
the burden of the estate tax.
 As a rule, properties or transfers exempt from estate tax by law, are NOT considered in the
determination of the amount of the gross estate.

 NIRC Sec. 87. EXEMPTIONS OF CERTAIN ACQUISITONS AND TRANSMISSIONS. – the

following shall not be taxed:
 The merger of usufruct in the owner of the naked title;
a. When the same person becomes a usufructuary and owner of the naked title, it
makes him/her the absolute owner of the property
b. USUFRUCT – the legal right to use and enjoy the benefits and profits of
something belonging to another.
c. Two persons involved in usufruct:
 USUFRUCTUARY – the person who has the right of enjoying the use
and the fruits of the property belonging to another.
 OWNER OF THE NAKED TITLE – the person who is vested the
ownership, dominion, or title of the property under the usufruct
agreement. He is NOT the absolute owner of the property with respect to
the right of the usufructuary.

 The transmission or delivery of the inheritance or legacy of the fiduciary heir or legatee to the
fideicommissary;
a. The transfers from fiduciary heir to the fedeicommissary
b. LEGACY – a gift or bequest by WILL of a person.
c. DEVISE – a TESTAMENTARY disposition of real estate.
d. LEGATEE – the person to whom a legacy in a will is given.
e. FIDUCIARY HEIR – the FIRST HEIR of the property.
f. FIDEICOMMISSARY – the SECOND HEIR whose relationship to the fiduciary
heir must be one degree of generation (a parent and a child)
 The transmission from the first heir , legatee or done in favor of another beneficiary, in
accordance with the desire of the predecessor;
 The second transfer as desired by the predecessor
 There is only one transfer from the testator
 All bequests, devise, legacies or transfers to social welfare, cultural, and charitable
institutions provided:
a. No part of the income of such institution inures to the benefit of any
individual
b. Not more than 30% of said bequests, devises, legacies or transfers shall
be used by the such institutions for administration purposes.
 Bequests to be used actually, directly and exclusively for educational purposes.

 EXEMPTIONS UNDER SPECIAL LAWS:

 Benefits received from SSS or GSIS;
 Benefits received from U.S.Veterans Administration;
 War benefits given by the Philippine government and U.S. government due to damages
suffered during the war; and

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  Grants and donations to the Intramuros Administration.
 A net estate with a value of P200, 000 or less; and a capital of the surviving spouse which refers
to the SEPARATE PROPERTY of the surviving spouse is also exempted from estate tax.

DEDUCTIONS FROM ESTATE TAX:

 ORDINARY DEDUCTIONS
 Expenses, loses indebtedness and taxes (ELIT)
a. FUNERAL EXPENSES – the amount deductible shall be whichever is
the lowest among the following; the actual funeral expenses incurred, 5%
of gross estate, and the P200,000.
b. JUDICIAL EXPENSES – It includes those actually and necessarily
incurred during settlement of the state but not beyond six (6) months, or
the extension thereof for the filing of the estate tax return. Expenses not
essential the proper settlement of the estate but not incurred for the
individual benefit of the heirs legatees, or devisees are not allowed as
deductions.
c. CLAIMS AGAINST THE ESTATE – this represents personal obligation of
the deceased existing at the time of his death except unpaid funeral
expenses and unpaid medical expenses. The claims may arise out of
contract, tort or operation of law. The requisites for deductibility are the
following:
 Must have been contracted in good faith and for an
adequate and full consideration in money or money’s worth;
 The debt instrument must be duly notarized except loans
granted by financial institutions where notarization is not part
of the business practice/policy of the financial institution-
lender;
 It must not have been condoned by the creditor;
 The action to collect from the decedent must not have been
prescribed.
d. UNPAID MORTGAGES – upon the properly left by the decedent. The
requisites for deductibility are the following:
 The mortgage indebtedness was contracted in good faith
and for an adequate and full consideration in money or
money’s worth; and
 The fair market value of the property mortgaged without
deducting the mortgage indebtedness has been included
in the gross estate.

e. CLAIM AGAINST INSOLVENT PERSONS (BAD DEBT). – Receivable

of the decedent which are uncollectible due to insolvency of the debtor.
Its requisites for deductibility are as follows:
 The value of the decedent’s interest therein must be
included in the gross estate.
 The debtor’s insolvency / incapacity are proven and not
merely alleged.

f. UNPAID INCOME AND PROPERTY TAXES which accrued as of the

decedent which were unpaid as of the time of death.
g. LOSSES – requisites:

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  The loss must arise during the settlement of the estate
but not beyond the deadline for the payment of the
estate tax.
 It must arise from fire, storms, shipwreck or other
casualties or from robbery, theft of embezzlement.
 Such losses have not been claimed as deduction for
income tax purposes.
 Must not be compensated by insurance or otherwise.
 Note: If the decedent is a nonresident alien, pro-rate the above expenses as follows:
Philippine Gross Estate
Total Gross Estate
× ELIT
 Transfers for public purpose.
The amount of all bequests, legacies devisees or transfers to or for the
use of the Government of the Philippines or any political subdivision thereof, for
exclusively public purposes.
 Vanishing deductions:
Requisites for deductibility:
 The property is situated in the Philippines;
 The property must have been acquired thru inheritance
or donation within five (5) years before death of present
decedent;
 Such property can be identified as the one received from
prior decedent or donor which can be identified as
having acquired in exchange for property so received.
 Prior gift tax or estate tax has been paid
 The property is included in the gross estate or gross gift
of prior decedent/ donor.

 VANISHING RATES:

More than Not More than Percentages

1 year 100%

1 year 2 years 80%

2 years 3 years 60%

3 years 4 years 40%

4 years 5 years 20%

5 years ** 0%

 SPECIAL DEDUCTIONS
 AMOUNTS RECEIVED BY HEIRS FROM EMPLOYER UNDER RA 4917 – Amounts
received by the heirs from the decedent’s employer as a consequence of the death of
the decedent-employee. Provided, that such amount is included in the gross estate of
the decedent.

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  MEDICAL EXPENSES - This includes cost of medicines, hospital bills, doctor’s fees,
etc. incurred whether paid or unpaid at the time of death of the decedent. Requisites:
a. Incurred by the decedent within one (1) year prior to his death.
b. Maximum amount deductible is P500, 000.
c. Duly substantiated with receipts.
 SHARE OF SURVIVING SPOUSE IN THE NET CONJUGAL OR COMMUNITY
PROPERTY
 FAMILY HOME – the dwelling house including the land on which it is situated, where
the husband and wife, or a head of the family and members of their family reside, as
certified by barangay captain and locality. The deductible amount is the higher
between the assessed value, FMV or zonal value, but not exceeding P1,000,000. The
total value, however, must be included as part of the gross estate of the decedent.
 STANDARD DEDUCTION of P 1,000,000.

COMPUTATION OF ESTATE TAX:

 TAX TABLE (EFFECTIVE JANUARY 1, 1998 UP TO PRESENT)

OVER BUT NOT THE TAX PL OF THE

OVER SHALL BE US EXCESS
OVER

P 200,00.00 Exempt

P200,000.00 500,000.00 0 5% P 200,000.00

500,000.00 2,000,000.00 P 15,000.00 8% 500,000.00

2,000,000.00 5,000,000.00 135,000.00 11 2,000,000.00

%

5,000,000.00 10,000,000.0 465,000.00 15 5,000,000.00

0 %

10,000,000.0 1,215,000.0 20 10,000,000.0

0 0 % 0

 IF THE DECEDENT IS SINGLE:

Gross estate xx
Less: Deductions
Ordinary xx

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 Special xx xx
Net taxable estate xx
X applicable rate xx
Estate tax due xx

 IF THE DECEDENT IS MARRIED:

Conjugal property xx
Exclusive property xx
Gross estate xx
Less: exclusive property xx
Gross conjugal property xx
Less: conjugal deductions xx
(Ordinary)
Net conjugal property xx
Less:1/2 share of surviving spouse xx
Net share from conjugal property xx
Add: exclusive property xx
Less:exclusive deduction xx xx
Net property xx
Less: special deductions:

Family home(1/2) xx
Medical exp xx
RA 4917 xx
Standard deduction xx xx
Net taxable estate xx

 SIMILARITIES BETWEEN THE REGIMES OF THE CONJUGAL PARTNERSHIP AND

ABSOLUTE COMMUNITY:

PROPERTY CONJUGAL ABSOLUTE

PARTNERSHIP COMMUNITY

Property acquired during CONJUGAL COMMUNITY

marriage(other than
inheritance)

Property acquired from CONJUGAL COMMUNITY

labor, industry,work or
profession of the spouse

Fruits received during the CONJUGAL COMMUNITY

marriage coming from the
common property

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 Property inherited or EXCLUSIVE EXCLUSIVE
donated during the
marriage

 DIFFERENCES BETWEEN THE SYSTEM OF CONJUGAL PARTNERSHIP AND ABSOLUTE

COMMUNITY OF PROPERTY

PROPERTY CONJUGAL ABSOLUTE

PARTNERSHIP COMMUNITY

Property acquired before EXCLUSIVE COMMUNITY

marriage

Fruits received during CONJUGAL EXCLUSIVE

the marriage from
exclusive property

ESTATE TAX ADMINITRATIVE PROVISIONS:

 NOTICE OF DEATH TO BE FILED

In all cases of transfers subject to tax, or where, though exempt from tax, the gross value of the
estate exceeds twenty thousand pesos (P20, 000), the executor, administrator or any of the legal heirs,
as the case may be, within two (2) months after the decedent's death, or within a like period after
qualifying as such executor or administrator, shall give a written notice thereof to the Commissioner.

 ESTATE TAX RETURNS

 REQUIREMENTS:
In all cases of transfers subject to the tax imposed herein, or where, though
exempt from tax, the gross value of the estate exceeds two hundred thousand pesos
(P200,000), or regardless of the gross value of the 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 clearance from the Bureau of Internal Revenue is
required as a condition precedent for the transfer of ownership thereof in the name of the
transferee, the executor, or the administrator, or any of the legal heirs, as the case may
be, shall file a return under oath in duplicate, setting forth:
a. The value of the gross estate of the decedent at the time of his
death, or in case of a nonresident, not a citizen of the Philippines, of that part of
his gross estate situated in the Philippines;
b. The deductions allowed from gross estate in determining the
estate as defined in Section 86; and
c. Such part of such information as may at the time be
ascertainable and such supplemental data as may be necessary to establish the
correct taxes.

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 Provided, however, That estate tax returns showing a gross value exceeding Two
million pesos (P2,000,000) shall be supported with a statement duly certified to by a
Certified Public Accountant containing the following:
a. Itemized assets of the decedent with their corresponding 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 gross estate situated in the Philippines;
b. Itemized deductions from gross estate allowed in Section 86;
and
c. The amount of tax due whether paid or still due and
outstanding.
 TIME FOR FILING:
For the purpose of determining the estate tax provided for in Section 84 of this
Code, the estate tax return required under the preceding Subsection (A) shall be filed
within six (6) months 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 within thirty (30) days after the
promulgation of such order.
 EXTENSION OF TIME:
The Commissioner shall have authority to grant, in meritorious cases, a
reasonable extension not exceeding thirty (30) days for filing the return.
 PLACE OF FILING:
Except in cases where the Commissioner otherwise permits, the return required
under Subsection (A) shall be filed with an authorized agent bank, or Revenue District
Officer, Collection Officer, or duly authorized Treasurer of the city or municipality in which
the decedent was domiciled at the time of his death or if there be no legal residence
in the Philippines, with the Office of the Commissioner.

 PAYMENT OF TAX
 TIME OF PAYMENT
The estate tax imposed by Section 84 shall be paid at the time the return is
filed by the executor, administrator or the heirs.
 EXTENSION OF TIME
When the Commissioner finds that the payment on the due date of the estate tax
or of any part thereof 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
extension is granted shall be paid on or before the date of the expiration of the period
of the extension, and the running of the Statute of Limitations for assessment as
provided in Section 203 of this Code shall be suspended for the period of any such
extension.
Where the taxes are assessed by reason of negligence, intentional disregard of
rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by
the Commissioner.
If an extension is granted, the Commissioner may require the executor, or
administrator, or beneficiary, as the case may be, to furnish a bond in such amount, not
exceeding double the amount of the tax and with such sureties as the Commissioner
deems necessary, conditioned upon the payment of the said tax in accordance with the
terms of the extension.

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  LIABILITY FOR PAYMENT
The estate tax imposed by Section 84 shall be paid by the executor or
administrator before delivery to any beneficiary of his distributive share of the
estate. Such beneficiary shall to the extent of his distributive share of the estate, be
subsidiarily liable for the payment of such portion of the estate tax as his distributive
share bears to the value of the total net estate.

 DISCHARGE OF EXECUTOR OR ADMINISTRATOR FROM PERSONAL LIABILITY

If the executor or administrator makes a written application to the Commissioner for
determination of the amount of the estate tax and discharge from personal liability therefore, the
Commissioner (as soon as possible, and in any event within one (1) year after the making of such
application, or if the application is made before the return is filed, then within one (1) year after the
return is filed, but not after the expiration of the period prescribed for the assessment of the tax in
Section 203 shall not notify the executor or administrator of the amount of the tax. The executor or
administrator, upon payment of the amount of which he is notified, shall be discharged from personal
liability for any deficiency in the tax thereafter found to be due and shall be entitled to a receipt or
writing showing such discharge.

 PAYMENT OF ESTATE TAX BY INSTALLMENT:

Provides, that in case the available cash estate is not sufficient to pay its total estate tax
obligation, the estate to pay estate tax by installment and clearance shall be released only with
respect to the property corresponding to the computed tax on which has been paid. There shall, be
therefore, be as many clearances as there as many properties released because they have been paid
for by the installment payments of the estate tax. The computation of the estate tax, however, shall
always be on cumulative amount of the net taxable estate. Any amount paid after the statutory due
date of the tax shall be imposed the corresponding penalty thereto. However, if the payment of the tax
after the due date is approved by the CIR of his duly authorized representative, the imposable penalty
thereon shall only be the interest.

 Surcharges
 SURCHARGE OF 25%:
There shall be imposed, in addition to the tax required o be paid. A penalty of surcharge
equivalent to 25% of the amount due, in any of the following:
a. Failure to file any tax return and pay the tax due thereon as required on the date
prescribed.

b. Unless otherwise authorized by the BIR Commissioner, filing a tax return with an
internal revenue officer other than those with whom the return is required to be
filed.

c. Failure to pay the deficiency tax within the time prescribed for its payment in the
notice of assessment and demand.

d. Failure to pay the full or part of the amount of tax shown on any tax return
required to be filed on the full amount of tax due for which no tax return ie
required to be filed on or before the date prescribed for its payments
 SURCHARGE OF 50%:
There shall be imposed in addition to the tax required to be paid, a penalty and surcharge
equivalent to 50% of the amount due in any of the following cases:

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 a. In case of willful neglect to file the tax return within the period prescribes by law
and regulations.

b. In case a false or fraudulent tax return is willfully made interest of 20%.

c. In General – There shall be assessed and collected on any unpaid amount of tax
interest of 20% per annum or such higher rate as may be prescribed by rules and
regulation from the date prescribed for payment until the amount is fully paid.

 DEFICIENCY INTEREST
Any deficiency in tax due, as the term I defined in the NIRC, shall be subject to the interest
therein prescribed, which interest shall assessed and collected from the date prescribed for its
payment until the full payment thereof.
 DELINQUENCY INTEREST
There shall be assessed and collected on the unpaid amount of taxes interest at the
rate prescribed hereof until the amount is fully paid which interest shall form part of the tax.
 INTEREST EXTENDED PAYMENT
There shall be assessed and collected interest at the rate herein above prescribed on
the tax or deficiency tax or any par thereof unpaid from the date of notice and demand until it
is paid in the following cases.
 If the person elects to pay the estate tax on installment payments but fails to pay the
required tax to the payment date.
 Where the commissioner has authorized a taxpayer an extension of time within which to
pay tax or a deficiency tax or any part thereof, but fails to pay said tax within the
prescribed extension periods.

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