Tags: Estate Tax Philippines, How to Compute Estate Tax, Estate Tax Example, BIR Estate Tax Computation, Estate Tax Illustration
When a loved one passes away, we not only mourn their loss but also face important legal responsibilities—one of which is the settlement of their estate, including the payment of estate tax. Understanding how to compute estate tax in the Philippines can save the heirs from legal issues and financial burdens.
In this guide, we’ll break down estate tax computation step-by-step, based on the National Internal Revenue Code (NIRC), as amended by the TRAIN Law (RA 10963). We’ll also provide practical examples and illustrations to help you see how it applies in real life.
What is Estate Tax?
Estate tax is a tax imposed on the right of a deceased person to transfer their estate to lawful heirs and beneficiaries. The estate includes all properties (real, personal, tangible, or intangible) owned by the decedent at the time of death.
The Bureau of Internal Revenue (BIR) administers estate taxes under Title III, Chapter I of the NIRC, as amended.
Estate Tax Rate Under the TRAIN Law
Thanks to the TRAIN Law, computing estate tax became much simpler. As of January 1, 2018, the estate tax rate in the Philippines is a flat rate of 6% based on the net estate of the deceased.
Step-by-Step Guide to Computing Estate Tax
Step 1: Determine the Gross Estate
The Gross Estate includes all the assets owned by the deceased at the time of death, such as:
- Real estate properties
- Bank deposits
- Investments (stocks, bonds)
- Vehicles
- Jewelry or valuable collections
- Business interests
Illustration 1: Let’s say Mr. Juan Dela Cruz passed away in 2024. His estate consists of:
- House and Lot in Davao City – PHP 5,000,000
- Bank Deposit – PHP 1,000,000
- Toyota Fortuner – PHP 1,500,000
- Business Shares – PHP 2,000,000
- Jewelry – PHP 500,000
Total Gross Estate = PHP 10,000,000
Step 2: Deduct Allowable Deductions
The Net Estate is derived by subtracting allowable deductions from the Gross Estate. These deductions are:
- Standard Deduction – PHP 5,000,000 (flat)
- Family Home – up to PHP 10,000,000 (if applicable and properly declared)
- Claims Against the Estate – debts or liabilities of the deceased
- Funeral Expenses – up to PHP 200,000
- Medical Expenses – incurred within one year prior to death, up to PHP 500,000
- Judicial Expenses – cost of estate settlement
- Transfer for Public Use
- Share of Surviving Spouse – in cases of conjugal property
Illustration 2: Assume the following deductions:
- Standard Deduction – PHP 5,000,000
- Family Home (included in House and Lot above) – PHP 3,000,000
- Medical Expenses – PHP 300,000
- Funeral Expenses – PHP 150,000
- Debts/Loans – PHP 500,000
Total Deductions = PHP 8,950,000
Step 3: Compute the Net Estate
Net Estate = Gross Estate – Allowable Deductions
= PHP 10,000,000 – PHP 8,950,000
= PHP 1,050,000
Step 4: Apply the 6% Estate Tax Rate
Estate Tax Due = Net Estate × 6%
= PHP 1,050,000 × 6%
= PHP 63,000
So, the heirs of Mr. Juan Dela Cruz will need to pay PHP 63,000 to the BIR as Estate Tax.
Important Notes and Requirements
A. File the Estate Tax Return (BIR Form 1801)
The estate tax return must be filed within one (1) year from the date of death. It must include:
- Death certificate
- Certificate of property holdings (real and personal)
- Proof of claims/deductions
- TIN of the deceased and all heirs
- Certificate of no improvement (if applicable)
- Affidavit of self-adjudication or extrajudicial settlement
B. Pay Estate Tax at Any AAB or BIR Revenue District Office
Payment may be made in cash, check, or installment, subject to BIR approval.
Sample Scenario: A Married Decedent
Illustration 3:
Mrs. Maria Santos died in 2025. Her conjugal assets with her husband are:
- House and Lot – PHP 8,000,000
- Bank Savings – PHP 2,000,000
- Vehicle – PHP 1,000,000
Total Conjugal Estate: PHP 11,000,000
Spouse’s Share: PHP 5,500,000
Gross Estate (Maria’s share): PHP 5,500,000
Allowable Deductions:
- Standard Deduction – PHP 5,000,000
- Funeral – PHP 100,000
- Medical Expenses – PHP 400,000
Total Deductions: PHP 5,500,000
Net Estate: PHP 0
Estate Tax Due = PHP 0
No estate tax is due because the deductions equal the gross estate. However, BIR filing is still required.
Penalties for Late Filing or Non-Payment
Failure to file and pay estate tax on time results in:
- Surcharge – 25% of the tax due
- Interest – 12% per annum
- Compromise Penalty – based on BIR schedule
These can significantly increase your liabilities.
Estate Tax Amnesty Update (RA 11956)
As of 2023, the Estate Tax Amnesty Act (RA 11213) was extended through RA 11956. This allows estates of decedents who died on or before May 31, 2022, to settle their estate tax at a favorable rate until June 14, 2025, with relief from penalties and interest.
Heirs must still file BIR Form 2118-EA and meet other requirements.
Tips for Heirs and Executors
- Get a Certified Public Accountant (CPA) – to help compute and file accurately.
- Start the Process Early – don't wait for the deadline.
- Secure All Documents – title deeds, bank certifications, medical bills, etc.
- Talk to the BIR – the RDO can guide you with the specific checklist.
- Avoid Delays in Property Transfer – estate tax clearance is required for title transfer.
Final Thoughts: Estate Tax is a Duty of Honor
While estate tax might seem like a burden, it’s part of our legal and civic responsibility. By settling it properly, heirs can avoid complications and honor the legacy of the deceased. As Proverbs 13:22 (KJV) says, “A good man leaveth an inheritance to his children's children.” Let’s ensure that inheritance is free from legal hindrances.
If you need help with estate tax computation or estate settlement, consult with a CPA, tax lawyer, or visit your local BIR office for guidance.
Stay informed. File right. Honor legacies.
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