Law on Business and Transfer Taxation • Transfer of ownership is free either by his will or by operation of law.

because of the absence of financial (Article 774 of the Civil Code)

Chapter 1: Succession and Transfer Taxes consideration.
• Gratuitous transfers are essentially • The inheritance incudes all the
Art. 712 (Civil Code): "Ownership is donations. property, rights, and obligations not
acquired by occupation and by intellectual extinguished by his death. (Article
creation. Ownership and other real rights Onerous Transfer – transferee gives 776 of the Civil Code)
over property are acquired and consideration in return for the property or • Rights to the succession are
transmitted by law, by donation, by testate rights received. transmitted from the moment of
and intestate succession, and in death of the decedent. (Article 777
consequence of certain contracts, by • Are subject to business taxes of the Civil Code), notwithstanding
tradition.: They may also be acquired by instead of transfer taxes. the postponement of the actual
means of prescription". possession or enjoyment of the
Transfer Taxes – are typically assessed on estate by beneficiary.
Under the Civil Code, ownership may be the net value of the taxable assets • Heirs succeed immediately to all
acquired through: transferred. the property of the deceased
ancestor at the moment of death as
1. Occupation Types of Transfer Taxes completely as if the ancestor had
2. Intellectual Creation 1. Estate Tax executed and delivered to them a
3. Law 2. Donor’s Tax deed for the same before his death.
4. Donation • The amount of obligation inherited
5. Tradition Gratuitous Transfer/Donation may take by an heir should not be more than
6. Contract eFect: the combined value of the
7. Prescription 1. At the time of death of the donor – properties and rights inherited.
8. Succession “donation mortis causa” subject to
estate tax. Nature of Transfer Taxes
Transfer taxes – taxes imposed upon 2. During the lifetime of the donor and • Transfer tax is an excise
gratuitous disposition of private properties the donee – “donation inter vivos” tax/privilege tax. As it is imposed
or rights. subject to donor’s tax. on the act of passing ownership
and not on the value of the
Gratuitous transfer – is one that neither Succession – mode of acquisition by property/right.
imposes burden nor requires virtue of which the property, rights, and • Subject matter of a transfer tax is
consideration from transferee or recipient. obligations to the extent of the value of the the privilege of the transferor to
inheritance, of a person are transmitted transfer property or rights.
through his death to another or others • Although the amount of transfer tax
is based on net estate or net gifts, it
 shall not be construed as a 3. Mixed succession – e^ected partly of annulling the
property tax. by will and partly by operation of institution of heir.
law. • Fulfillment of
“resolutory
The Law that Governs the Imposition of Causes of Legal Succession/Intestacy condition”. –
Estate Tax 1. If a person dies without a will, or Resolutory condition
with a void will, one which has refers to a condition
• Estate taxation is governed by the subsequently lost its validity. whereby, upon
statute in force at the time of death 2. When the will does not institute an fulfillment
of the decedent. heir. terminates an
• Estate tax accrues as the date of 3. Partial institution of heir. Intestacy already enforceable
the death of the decedent and the takes place as to the undisposed obligation.
accrual of the tax is distinct from portion. • Expiration of term or
the obligation to pay the same. 4. Other causes of legal period of institution.
• Upon the death of the decedent, succession/intestacy: • Non-compliance or
succession takes place and the • When the heir impossibility of
right of the state to the tax the instituted is not compliance with the
privilege to transmit the estates capable of will.
vests instantly upon the death. succeeding. • Repudiation of the
• In the PH, succession is governed • Non-fulfillment of instituted heir.
by the Civil Code. the suspensive
condition attached Elements of Succession
Kinds of Succession (Article 778 of the to the institution of
Civil Code) heir. – Suspensive 1. Decedent – person whose property
condition depends is transmitted, whether or not he
1. Testamentary or testate upon the happening left a will. If he left a will, he is called
succession – results from the of an uncertain event a testator.
designation of an heir, made in a which must be
will executed in the form prescribed fulfilled before an Executor – person designated in the
by law. obligation arises. last will to carry out the provisions
2. Legal or intestate succession - • Preterition (omission of the decedent’s will. Performs
e^ected by operations of law since in the testator’s will fiduciary duty of taking care of the
the decedent did not execute a will of one, some or all of estate prior to the disposition to the
or if the last will and testament the compulsory heirs heirs.
executed by him is void. in the direct line
which has the e^ect
 Administrator – appointed by the (legitimate children, b. Voluntary Heirs – those instituted
court and perform the same duty, if descendants) by the testator in his will to succeed
the executor refused appointment, • Secondary – those who to the inheritance of the portion
failed to qualify, or there is no succeed only in the absence thereof of which the testator can
appointment of an executor in the of the primary heirs freely dispose.
will. (legitimate parents and
ascendants) Free portion – refers to the portion
2. Inheritance (Estate) – included all • Concurring – those who or value left in the estate after
the property, rights and obligations succeed together with the deducting the legitime of the
of a person which are not primary/secondary compulsory heirs.
extinguished by death. compulsory heirs
3. Successor – an heir; a person who (illegitimate children, The share of a voluntary heir is
is called to the succession either descendants, surviving determined through the last will
the provision of a will or by spouse) and testament.
operation of law (Article 782 of the Primary Secondary
Civil Code). Compulsory Compulsory c. Legal or Intestate Heirs – those
a. Legitimate d. Legitimate who succeed to the estate of the
Devisees and legatees are persons children and parents and decedent by operation of law.
to whom gifts of real and personal their legitimate
property are respectively given by legitimate ascendants Composition of Gross Estate
virtue of a will. descendants (inherit only in
default of “A”) Divided into 2 main categories:
Successors or heirs are classified as: b. Surviving e. Illegitimate a. Legitime – portion is reserved by
spouse parents (inherits law, specifically to the compulsory
a. Compulsory Heirs – those who only in default of heirs, regardless of if there’s a will
succeed by force of law to some “A” and “C”) or not.
portion of inheritance, in an c. Illegitimate b. Free portion – in the absence of
amount predetermined by law, children and will, this portion shall be
known as legitime. They succeed their distributed to “intestate heirs”
whether the testator likes it or not. descendants, based on order of priority.
legitimate or
Kinds of Compulsory Heirs: illegitimate. Legitime is part of a testator’s property
Note: Brothers and sister are neither which he cannot dispose of because the
• Primary – have precedence compulsory heirs nor strangers. They may law has reserved it for certain heirs who
over and exclude other be voluntary heirs. are called, compulsory heirs.
compulsory heirs
Anyone may inherit from the free portion Collateral Consanguinity – subsists must prove that the testator made
(compulsory or voluntary heirs). Voluntary between persons who have the same it during a lucid interval.
heirs may only inherit if mentioned in the ancestors but does not descend or ascend • Supervening incapacity does not
will, Absence of a provision in the will, one from the other. invalidate an e^ective will nor is the
voluntary heirs will inherit nothing. will of an incapable validate by the
AFinity – connection existing in supervening of capacity.
Order of Intestate Succession consequence of a marriage between each • A married woman may make a will
1. Legitimate children or descendants of the married spouse and the kindred of without consent of husband and
2. Legitimate parents or ascendants the other. authority of court. She may dispose
3. Illegitimate children or by will all her separate property,
descendants Will – an act whereby a person is including her share of the conjugal
4. Surviving spouse permitted with the formalities prescribed partnership or absolute community
5. Brothers and sisters, nephews, and by law, to control to a certain degree the property.
nieces disposition of his estate to take e^ect after
6. Other collateral relatives within the his death. Kinds of Wills
5th degree 1. Notarial or Ordinary or Attested
7. State or the government • Document whereby a testator Wills – executed in accordance
disposes his properties/estate to with the formalities prescribed by
Distribution of free portion in intestate take upon his death. Article 804-808 of the Civil Code.
succession is based on the order of • Strictly personal act; cannot be left
priority because in every inheritance, the in whole or part of the discretion of Requisites for a Valid Notarial
relative nearest in degree excludes the a third person. Will
more distant ones, saving the right of • People below 18 years old and not a. Must be in writing and
representation when it properly takes of sound mind are prohibited by law executed in a
place. to make a will. language/dialect known to
• Law presumes every person is of the testator.
Collateral Relatives sound mind, in the absence of b. Must be subscribed at the
proof to the contrary. end thereof by the testator
Consanguinity (blood relatives) – relation • Burden of proving that testator was himself or by the testator’s
of persons descending from the same not of sound mind at the time of name written some other
stock or common ancestors. Each disposition is on the person who person in his presence and
generation forms a degree. opposes the probate of the will. by his express direction.
• If the testator, one month or less, c. Must be attested and
Lineal Consanguinity – may be before the will, was publicly known subscribed by 3 or more
descending or ascending. as insane, the person who credible witnesses in the
maintains the validity of the will
 presence of the testator and Article 815 of the Civil Code – “No Revocation of wills and testamentary
of one another. property of a testator shall pass to an heir dispositions
unless proven that all the terms in the last
Disqualified from being witnesses to a will and testament is legal and valid in • A will may be revoked by the
will. court.” testator at any time before his
• Any person not domiciled in the death any waiver of restriction of
Philippines. Probate of a will – court procedure by this right is void.
• Those who have been convicted of which a will is proved to be valid or invalid. • Revocation done outside the
falsification of a document, perjury, Philippines, by a person who does
or false testimony. In the probate of a holographic will – at not have his domicile in the
least one witness knows the handwriting Philippines is valid when it is done
Article 795 of the Civil Code – “The and signature of the testator. according to the law of the place
validity of a will as to its form depends up where the will was made.
on the observance of the law in force at the Intestate proceedings – proceedings in
time it is made." the absence of a last will and testament. Modes of Revoking a Will:
1. By implication of law
Absence of bad faith, forgery, or fraud, or Foreign wills – will of an alien who is 2. By some will, codicil, or other
undue and improper pressure and abroad produces e^ect in the Philippines writing executed as provided in
influence, defects, and imperfections in if made with the formalities prescribed by case of wills.
the language shall not render the will the law of the place in which he resides, or 3. By burning, tearing, cancelling, or
invalid. according to the formalities observed in obliterating the will with the
his country, or in conformity with those intention of revoking it, by the
2. Holographic Will – written will which the Philippine civil code prescribes. testator himself, or by some other
which must be written, dated, and person in his presence, and by his
signed by the hand of the testator A will made in the Philippines by a express direction.
himself. citizen or subject of another country shall
have the same e^ect as if executed Article 837 of the Civil Code – “If after
• Subject to no other form according to the laws of the Philippines. making a will, the testator makes a second
• May be made in or out of the will expressly revoking the first, the
Philippines. When a Filipino is in a foreign revocation of the second will does not
• Need not to be witnessed. country, he is authorized to make a will in revive the first will, which can be revived
any of the forms established by the law of only by another will or codicil.”
Codicil – a supplement or addition to a will the country in which he may be. Such will
made after the execution of a will. In order may be probated in the Philippines. Subsequent wills do not revoke the
that a codicil may be e^ective, it shall be previous ones in an express manner, annul
executed as in the case of a will. only such dispositions in the prior wills as
are inconsistent with or contrary to those Requisites for Disinheritance Common Causes for Disinheritance
contained in the latter wills. 1. E^ected only through a valid will 1. When the heir has been found
2. For a cause expressly stated by law guilty of an attempt against the life
A revocation made in a subsequent 3. Cause must be stated in the will of the testator, his
will shall take e^ect, even if the new will itself descendants/ascendants, and
should become inoperative by reason of 4. Cause must be certain and true spouse in case of children and
the incapacity of the heirs, devisees, or 5. Unconditional parents;
legatees designated therein, or by their 6. Total (there is no partial 2. When the heir has accused the
renunciation. disinheritance) testator of a crime for which the law
7. The heir disinherited must be prescribes imprisonment for 6
Institution of an Heir (Article 840 of the designated in such a manner that years or more, if the accusation has
Civil Code) there can be no doubt as to his been found groundless;
identity 3. When the heir by fraud, violence,
• Act by virtue of which a testator intimidation, or undue influence
designates in his will the person or The grounds/causes of disinheritance causes the testator to make a will
persons who are to succeed him in shall be limited to those expressly stated or to change one already made;
his property and transmissible by law. (Article 850) the burden of proving 4. Refusal without justifiable cause to
rights and obligations. the truth of the cause shall rest upon the support the testator who
• Will shall be valid in the absence of other heirs of the testator, if the disinherits such heir.
an instituted heir, denial of the disinherited heir should deny it.
person instituted, or incapacitation Peculiar Causes for Disinheritance
to succeed. It shall pass to the legal The devises and legacies and other 1. Children/Descendants
heirs. testamentary dispositions shall be valid to a. When the heir has been
• A compulsory heir, in consequence such extent as will not impair the legitime. convicted of adultery or
of disinheritance, be deprived of his The children and descendants shall take concubinage with the
legitime for causes expressly his place and shall preserve the rights of spouse of the testator.
stated by law. Disinheritance can compulsory heirs with respect to the b. Maltreatment of the testator
be e^ected only through a will legitime. by word or deed.
wherein the legal cause therefore c. When the child or
shall be specified. Article 856 of the Civil Code – “A descendant leads a
subsequent reconciliation between the dishonorable or disgraceful
Disinheritance – a testamentary o^ender and the o^ended person deprives life.
disposition by which a compulsory heir is the latter of the right to disinherit and d. When the heir is convicted
deprived of, or excluded from the render ine^ectual any disinheritance that of a crime which carries with
inheritance to which he has a right. may have been made.” it a penalty of civil
interdiction
 2. Parents/ascendants Representation may arise either the new civil code from inheriting from
a. When the parents have because of: their ascendants.
abandoned their children or 1. Death
induced their daughters to 2. Incapacity Chapter 2: Gross Estate
live a corrupt or immoral life 3. Disinheritance
or attempted against their Act 2601 (July 1, 1916) – first estate tax law
virtue. Representative shall not inherit more than in the Philippines.
b. When the parents have what the person they represent would
been convicted of adultery inherit if he were living or could inherit. • Imposes graduated estate tax rates
or concubinage with the computed on net inventoried
spouse of the testator. Representation is not available to: property left by a decedent.
c. Loss of parental authority 1. As to compulsory heirs- in case of • Amended by the Revised
for causes specified in the repudiation, the one who Administrative Code of the
civil code. repudiates their inheritance cannot Philippines imposing upon “every
d. Attempt by one of the be represented. Their own heirs transmission by virtue of
parents against the life of inherit their own right. inheritance, devise, bequest, gift
the other, unless there has 2. As to voluntary heirs mortis causa, or advance in
been reconciliation 3. Voluntary heirs, legatees, and anticipation of inheritance, devise
between them. devisees who or bequest.”
a. Predecease the testator
3. Spouse b. Renounce the inheritance RA 8424 (January 1, 1998) – “Tax Reform
a. When the spouse has given cannot be represented by Act” or the National Internal Revenue
cause for legal separation. their own heirs, with respect Code (NIRC) further restructured the tax
b. When the spouse has given to their supposed base and rates of both estate and donor’s
grounds for loss of parental inheritance. taxes in addition to allowing the deduction
authority. of medical expenses from the gross estate.
Right of representation takes place only in
Right of Representation – right created by favor of children of brother or sisters, RA 10963 (January 1, 2018) – recent
fiction of law, where the representative is whether full or half blood and only if they amendment to Estate Tax Law, “Tax
raised to the place and degree of the concur with at least one uncle or aunt. This Reform for Acceleration and Inclusion
person represented and acquires the rule applies only when the decedent does (TRAIN) Act”. It got rid of the use of
rights which the latter would have if he not have descendants. graduated tax rate and change it to a single
were living or could have inherited. rate of 6% of the net taxable estate as well
If the nephews and nieces are illegitimate, as revising the thresholds for Standard
then they are prohibited by Article 992 of Deduction, Family Home, and other
amendments such as repealing funeral
expenses, judicial expenses and medical State and legatees have 2. Resident aliens
expenses. been acquired only with the 3. Nonresident aliens
protection of the State. The
Estate Tax State as a passive silent Section 85 of the Tax Code – the value of
• Imposed on the privilege that a partner in the accumulation gross estate of the decedent should be
person is given in controlling to a of property has the right to determined by including the value at the
certain extent, the disposition of collect the share which is time of his death of all property, real or
his property to take e^ect upon properly due to it. personal, tangible or intangible, wherever
death. situated;
• Should not be construed as a direct 3. Ability to Pay Theory
tax on the property of the decedent Receipt of inheritance in Provided, however, that in the case of a
although the tax is based thereon. which is in the nature of an nonresident decedent who at the time of
• The accrual of the tax is distinct unearned wealth or his death was not a citizen of the
from the obligation to pay the windfall, are place assets Philippines, only that part of the entire
same. into the hands of the heirs gross estate which is situated in the
and beneficiaries. This Philippines shall be included in his taxable
Justification for the Imposition of Estate creates an ability to pay the estate.
Tax tax and thus contributes to
1. Benefit-Received Theory government income. Decedent Gross Estate
The law considers the • Citizen 1. Property
service rendered by the 4. Redistribution of Wealth Theory • Resident (Real or
government in the The receipt of inheritance is Alien Personal)
distribution of the estate of a contributing factor to the wherever
the decedent, either by law inequalities in wealth and situated.
or in accordance with his incomes. The imposition of 2. Intangible
wishes. For the estate tax reduces the personal
performance of these property received by the property
services and other benefits successor, thus helping wherever
that accrue to the estate promote equitable situated.
and the heirs, the State distribution of wealth in • Nonresiden 1. Real
collects the tax. society. t Alien property
situated in
2. Privilege or State Partnership Classification of Decedents and the
Theory Composition of Gross Estate Philippines
Inheritance is not a right but .
a privilege granted by the 1. Citizens
 2. Tangible • The laws of the foreign country of 2. Shares, obligations, or bonds
Personal which the decedent was a resident issued by any corporation or
Property citizen at the time of his death allow Sociedad anonima organized or
situated in a similar exemption from estate constituted in the Philippines in
the taxes of every character, in respect accordance with its laws.
Philippines of intangible personal property 3. Shares, obligations, or bonds
. owned by citizens of the Philippines issued by any foreign
3. Intangible not residing in the foreign country. corporation, 85% of the
personal business of which is located in
property Intangible Asset the Philippines.
with situs • Was not defined in the tax code. 4. Shares, obligations, or bonds
in the • Accounting standards – have acquired a business situs
Philippines “identifiable nonmonetary asset in the Philippines.
, unless without physical substance.” 5. Shares or rights in any
excluded • Derive their value from intellectual partnership, business or
on the or legal right, and from the value industry established in the
basis of they add to the other assets. Philippines.
reciprocity. • The situs of intangible personal
property is the domicile of the Situs of Tangible and Intangible Property
Reciprocity Clause (Section 104 of the owner, also known as “mobilia Property Situs
Tax Code) sequntur personam”. Such rule is Real property and Location of the
not applicable if the intangible Tangible personal property
Tax code excludes “intangible” personal property has situs elsewhere or property
property with situs in the Philippines from acquired business situs in another Shares, franchise, Where the
the gross estate of a non-resident alien jurisdiction. copyright, and the intangible is
decedent if there is reciprocity. There is like exercised
reciprocity if: Intangible Assets with Situs “Within” regardless of
the Philippines where the
• The decedent at the time of his corresponding
death was a resident citizen of a Section 104 of the Tax Code enumerate certificate is
foreign country which at the time of the following intangible personal property stored
his death did not impose an estate with situs in the Philippines, for estate tax Receivables Residence of the
tax of any character in respect of purposes: debtor
intangible personal property of 1. Franchise which must be Bank deposit Location of the
citizens of the Philippines not exercised in the Philippines. depository bank
residing in that foreign country; or
Valuation of Gross Estate (as amended 3. Personal Property • Exclusive properties of
by RA 10963;RR 12-2018) 4. Shares of stock the decedent; and
• Common properties of
Estate of the decedent shall be appraised The higher value between: the decedent and the
at its fair market value at the time of his • Fair market value at the time of surviving spouse
death. death
• Unlisted common share Exclusive properties of the surviving
Rules in Determining the Valuation of • Unlisted preference share spouse should be excluded in the gross
the Estate: estate because these properties are not
5. Units of participation in any owned by the decedent upon his death.
1. In General – Fair Market Value at the association, recreation, or
time of death amusement club – the bid price Exclusive Properties (Husband) – capital
2. Real Property nearest the date of death published Exclusive Properties (Wife) – paraphernal
in any newspaper or publication for
Fair Market Value at the time of death general circulation. 2. Property outside the Philippines
The higher value between: 6. Right to usufruct, use or habitation, of a non-resident alien
• FMV determined by the and annuity – in accordance with decedent
commissioner; the lates basic standard mortality
• FMV as shown in the schedule table taking into account the Nonresident alien decedents –
of values fixed by the provincial probable life of the beneficiary, to only properties situated or with
and city assessor (also known be approved by the secretary of situs within the Philippines
as assessed value or FMV for finance upon recommendation of shall be included in his gross
real estate tax purposes). the insurance commissioner. estate.

CIR is authorized to divide the Philippines Exemptions and Exclusions from the 3. Intangible personal property in
into di^erent zones or areas and shall, Gross Estate the Philippines of a non-
upon consultation with competent resident alien under the
appraisers, both from the private and a. Exclusions under Section 85 and Reciprocity Law.
public sectors, determine the fair market 104 of the Tax Code
value of real properties located in each 1. Exclusive property of the b. Exclusions under Section 87 of the
zone or area. If there is an improvement, surviving spouse Tax Code
the value of improvement is the 1. The merger of usufruct in the
construction cost per building permit of The gross estate in case of owner of the naked title.
the fair market value per latest tax married decedents, is 2. The transmission or delivery of
declaration. composed of: the inheritance or legacy by the
 fiduciary heir (1st heir) or legatee Thus, the current decedent is not Veterans and deceased civilian
to the fideicommissary (2nd heir) considered as the owner of the property. for supplies/services furnished
3. The transmission from the 1st Upon his death, the usufruct will be to the US and Philippine Army.
heir, legatee, done in favor of merged to the owner of the naked title, the 6. Retirement benefits of
another beneficiary, in intended beneficiary of the property. o^icials/employees of a private
accordance with the desire of firm.
the predecessor (Transfer under Special Power of Appointment – exists 7. Personal Equity and Retirement
Special Power of Appointment) when the donee-decedent can appoint Account (PERA) assets of the
4. All bequest devises, legacies, or only from a restricted or designated class decedent-contributor
transfers to social welfare, of persons other than himself. 8. Compensation paid to private
cultural and charitable and public health workers who
institutions, no part of the net Elements of a Fidelcommissary have contracted COVID-19 in
income of which inures to the substitution: case of death, the said amount
benefit of any individual: • Substitution must not go beyond shall not be included as part of
Provided, that not more than one degree from the heir originally the gross estate of the decedent
30% of the said bequest, instituted. subject to estate tax as
devises, legacies, or transfers • The fiduciary (1st heir) and the provided under RA 11494 or the
shall be used by such fideicommissary (2nd heir) must be “Bayanihan to Recover as One
institutions for administration both living at the time of the Act”.
purposes. testator’s death.
Composition of the Gross Estate
The government agency which is c. Exclusions under Special Laws
empowered to determine the exemption is 1. Proceeds of life insurance and Generally, consists of all property owned
the BIR. benefits received by members by a decedent, or which the decedent had
of the GSIS (RA 728). an interest at the time of death, such as:
The Merger of Usufruct in the Owner of 2. Accruals and benefits received
the Naked Title by members from the SSS by • Real property
reasons of death. • Personal tangible property
Decedent (done-decedent) or current 3. Amounts received from • Intangible personal property
decedent only received from prior Philippines and United States o Shares of stock
decedent (donor-decedent) usufruct over governments for war damages. o Bank deposit
the latter’s property. 4. Amounts received from United o Dividends declared before
States Veterans Administration, his death but received after
Usufruct – pertains only to the right or 5. Payments from the Philippines death
privilege to enjoy the use and advantages of US government to the legal
of another’s property. heirs of deceased of WWII
 o Partnership profit which 2. Property Not Physically in the transferred by the decedent
have accrued before his Estate but are Still Subject to during his lifetime in
death Payment of Estate Tax anticipation of his death such
o Usufructuary & rights as:
• Properties already • Transfer of property in favor
Section 85 of the Tax Code enumerates transferred during the of another person, but the
the composition of the Gross Estate lifetime of the decedent, transfer was intended to
however, shall still form part take e^ect only upon the
1. Property owned by the decedent of his gross estate because transferor’s death.
that are actually and physically the transfers were either • Transfer by gift intended to
present in his estate such land, intended to take e^ect only take e^ect at death, or after
buildings, shares of stock, vehicles, upon his death or does not death, or under which the
bank deposit, and the like. actually convey full donor reserved the income
ownership over the property or the right to designate the
Decedent’s Interest transferred. persons who should enjoy
• Tax code provides that the income.
decedent’s interest to the A. Transfers in Contemplation of • Transfer with retention or
extent of the interest of the Death reservation of certain rights.
decedent at the time of (1) The possession or The decedent had
death shall be included in enjoyment of, or the right to transferred his property
the gross estate. the income from the during his lifetime, but
• Refers to the extent of property, or retained for himself
equity, or ownership (2) The right, either alone or in beneficial enjoyment of the
participation of the conjunction with any thing or the right to receive
decedent on any property person, to designate the income from the same.
physically existing ang person who shall possess or
present in the gross estate, enjoy the property or the Section 85 of the Tax Code – there is not
whether or not in his income therefrom. transfer in contemplation of death when
possession, control or A transfer in contemplation of the transfer of property is a bonafide safe
dominion. death is a disposition of for an adequate and full consideration in
• Refer to the value of any property prompted by thought money or money’s worth.
interest in property owned of death; included in this is
by the decedent. donation mortis causa. B. Revocable Transfers - terms of
enjoyment of the property may be
Gross estate shall be included altered, amended, revoked, or
in the value of property terminated by the decedent. It is
 su^icient that the decedent had succeed to the property of the prior transfer was made for a price less
the power to revoke though he did decedent. than its fair market value at the time
not exercise the power. • General – when the power of of sale or transfer, the excess of the
appointment authorizes the fair market value of the transferred
Section 85(c) of the Tax Code donee of the power to property at the time of death over
(1) To the extent of any interest therein, appoint any person he the value of the consideration
of which the decedent has at any pleases. received should be included in the
time made a transfer by trust or • Special (SPA) – when the gross estate.
otherwise, where the enjoyment donee can appoint only The following FMV shall be used:
thereof was subject at the date of from a restricted or • FMV of property at the time of sale
his death to any change through the designated class of persons of transfer
exercise of a power by the other than himself. • FMV of the property at the time of
decedent alone or by the decedent death
in conjunction with any other The power of appointment may be
person, to alter, amend, revoke, exercised by the donor-decedent through 3. Miscellaneous Items
terminate, or where any such the following modes: a. Claims against insolvent
power is relinquished in • By will persons.
contemplation of the decedent’s • By deed to take e^ect in possession
death. or enjoyment at or after his death Insolvent Person – whose
(2) The power to alter, amend, or • By deed under which he has properties are not su^icient to
revoke shall be considered to exist retained for his life or any period not satisfy, whether fully or
on the date of the decedent’s death ascertainable without reference to partially, his debts.
even though the exercise of the his death or for any period which
power is subject to a precedent does not in fact end before his Regardless of the amount the
giving of notice… Proper death debtor is unable to pay, the full
adjustment shall be made • The possession or enjoyment of, or amount of the claim against the
representing the interests which the right to the income from the insolvent person should be
would have been excluded from the property included in the gross estate of
power if the decedent had lived. • The right, either alone, or in the decedent. Portion of the
conjunction with any person to claim that is not collectible is
C. Transfers under a General Power of designate the persons who shall allowed as a deduction from the
Appointment possess or enjoy the property or the gross estate.
income therefrom.
Power of appointment – the right to b. Proceeds of Life Insurance –
designate the person/s who will D. Transfers for Insu^icient should be included in the gross
Consideration – when a sale or
 estate if the following are 3rd Party Revocable Included An estate tax return shall be filed under
present: 3 Party
rd
Irrevocable Excluded oath if:
1. Must be an insurance on the Exclude proceeds from SSS and GSIS 1. In cases of transfer subject to
life of the decedent estate tax
2. Beneficiary must be either Estate Tax Rate 2. Where regardless of the gross
of the ^: • Transfer of the net estate of every value, the estate consists of
• Estate or decedent, whether resident or non- registered or registrable property
executor/administrat resident, should be subject to the such as real property, motor
ed estate tax. vehicle, share of stocks or other
• Any 3rd person • Beginning January 1, 2018, or upon similar property for which a
provided that the the e^ectivity of RA 10963 (TRAIN Certificate Authorizing Registration
designation is not Law) form the BIR is required as a
irrevocable • The net estate of every decedent condition precedent for the
If the policy does not expressly say that the shall be subject to an estate tax transfer of ownership.
designation of the beneficiary is rate of 6%.
irrevocable, then it is presumed to be Estate tax returns exceeding gross
revocable. The Law that Governs the Imposition of value of ₱5,000,000 shall be
Estate Tax and Accrual of Estate Tax supported with a statement duly
Philippine Insurance Code – presume • Estate taxation is governed by the certified by a CPA containing:
that the designation of a policy is statute in force at the time of death • Itemized assets with
revocable in case the designation of the of the decedent. corresponding gross value
beneficiary is not clear or silent. • Itemized deductions
Filing of Estate Tax Return and Payment allowed from the gross
Proceeds of Life Insurance (taken out by of Estate Tax Due estate under Section 86 of
the decedent) • Estate tax shall be paid by the the Tax Code
Beneficiary Designation Gross executor/administrator or any of • The amount of tax due,
Estate the legal heirs at the time the return whether paid or still due and
Estate Revocable Included is filed (Pay as you file system) outstanding
or
Irrevocable Filing and Payment Time for Filing the Estate tax Return
Executor Revocable Included • Primary responsibility to file and –
or executor or administrator Section 90(b) of the Tax Code – estate tax
Irrevocable • Secondary responsibility to file and return is required to be filed within 1 year
Administrato Revocable Included pay – any of the heirs. from the decedent’s death. The court
r or approving the project of partition shall
Irrevocable furnish the Commissioner with certified
copy thereof and its order within 30 days case the estate is settled extrajudicially 2. Partial disposition of estate and
after promulgation of such order. (extrajudicial settlement). application of its proceeds to the
estate tax due
The period allowed to file the estate tax Application of extension is filed with the a. Disposition shall refer to the
return shall be distinguished from the RDO. conveyance of property,
“accrual” date of the estate tax due. whether real, personal, or
Payment of Estate Tax by Installment intangible property, with the
Extension of Time to File the Estate Tax and Partial Disposition of Estate equivalent cash
Return consideration
1. Cash Installment b. Estate tax return shall be
Section 90(c) of the Tax Code – a. Shall be made within 2 years filed within 1 year from the
commissioner or any revenue o^icer shall from the date of the filing of date of the decedent’s
have the authority to grant, in meritorious the estate tax return. death.
cases, a reasonable extension not b. Estate tax return shall be c. Written request for the
exceeding 30 days. filed within 1 year from the partial disposition of estate
date of the decedent’s shall be approved by the
Filing for the extension of time to file the death. BIR.
estate tax return must be filed with the c. The frequency and deadline d. Computed estate tax due
Revenue District O^ice where the estate is and the amount of each shall be allocated in
required to secure its Taxpayer installment shall be proportion to the value of
Identification Number. indicated in the estate tax each property.
return, subject to BIR’s e. Estate shall pay to the BIR
Time for Payment of the Estate Tax approval. proportionate estate tax due
d. In case of lapse of 2 years of the property intended to
General rule – shall be paid at the time the without payment, the be disposed of
return is filed (Pay as File System). Estate remaining balance shall be f. An Electronic Certificate
tax due may be paid within the 1-year due and demandable Authorizing Registration
period allowed to file the estate tax return. subject to penalties and (eCAR) shall be issued upon
interest. presentation of the proof of
Extension of Time to Pay Estate Tax e. No civil penalties or interest payment.
may be imposed on the g. In case of failure to pay,
When commissioner deems the payment estates permitted to pay the estate tax due shall be
as hardship upon the estate/heirs, he may estate tax due by immediately due and
extend the time not exceeding 5 years in installment. Commissioner demandable subject to
case the estate is settled through the however is not prevented penalties and interest.
courts (judicial settlement) or 2 years in from enforcing actions.
Request for Extension of Time, • When there are two or more business or industry
Installment Payment, and Partial executors, all of them are liable for organized/established in the Philippines
Disposition of Estate the payment. RDO will serve as the any share, obligation, bond, or right by way
authority to distribute the of gift inter-vivos or mortis causa, legacy,
Filed with the Revenue District O^icer remaining properties/share in the or inheritance, unless a certification from
(RDO) where the estate is required to inheritance to the heir or the Commissioner that the applicable tax
secure its TIN and file the estate tax return. beneficiary. have been paid.
Shall be approved by the Commissioner or
his duly authorized representative. Payment by Installment If bank has knowledge of death of person,
who maintained a bank deposit account
Place of Filing the Return In case the available cash of the estate is alone, or jointly, it shall allow any
• Resident decedent – insu^icient to pay the estate tax due, withdrawal, subject to FWT of 6%. All
administrator/executor shall payment by installment shall be allowed withdrawal slips shall contain a statement
register estate and secure TIN from within two (2) years from the statutory date to the e^ect that all of the joint depositors
RDO where decedent is domiciled for its payment without civil penalty and are still living at the time of withdrawal by
at the time of death; file estate tax Interest. any one of the joint depositors and such
return and pay the corresponding statement shall be under oath by the said
estate tax with the Accredited Civil Penalties and Interest depositors.
Agent Bank, Revenue District
O^icer or Revenue Collection Any amount paid after the due date but RA 10963 (TRAIN Law) – in case the
O^icer having jurisdiction on the within extension period, is subject to available cash of the estate is insu^icient
place. interest but not to surcharge. Penalty of to pay the total estate tax due, payment by
• Non-resident decedent – same as 25% if there is no false or fraudulent intent. installment shall be allowed within 2 years
former however, if the executor is Penalty of 50% if there is false, malice, or from the statutory date for its payment
not in the Philiippines, the return fraudulent intent. Interest shall be without civil penalty and interest.
shall be filed with, and the TIN shall computed on the unpaid amount of tax
be secured from the O^ice of the from the date computed until fully paid
Commissioner through RDO No. (20% prior to TRAIN Law; 12% upon
39-n South Quezon City. e^ectivity of the TRAIN Law).

Liability for the Payment of Estate Tax Payment of Tax Antecedent to the Transfer
• Executor has the primary obligation of Shares, Bonds, or Rights
to pay the estate tax; heir has
subsidiary liability. The liability There shall not be transferred to any new
shall not exceed the value of his owner in the books of any corporation,
share in the inheritance. socdieda, anomnima, partnership,