Estate Tax

Purpose of Estate Tax

The following theories have been used to justify the imposition of estate tax:

1. Benefit received theory – under this theory, the estate tax is paid on return for the
services rendered by the state in the distribution of the estate of the decedent and for
the benefits that accrue to the estate and the heirs.
2. State partnership theory – the tax is considered the share of the state as a “passive and
silent partner” in the accumulation of property.
3. Ability to pay theory – the tax is based on the fact that the receipt of inheritance creates
an ability to pay and thus the receipt of inheritance creates an ability to pay and thus to
contribute to governmental income.
4. Redistribution of wealth theory – the tax is imposed to help reduce undue concentration
of wealth in society to which the receipt of inheritance is a contributing factor.

Basic Concepts in Estate Proceeding and Estate Tax

Inheritance - Inheritance includes all the property, rights and obligations of a person which are not
extinguished by his death. (Civil Code, Art. 776)

Legitime - Is that part of the testator’s property which he cannot dispose of because the law has
reserved it for certain heirs who and therefore, called compulsory heirs.

Testate estate – An estate of a deceased person which is settled or to be settled with a valid last will
and testament.

Intestate estate – An estate of a deceased person without a will.

Will – An act whereby a person is permitted, with the formalities prescribed by law, to control to a
certain degree the disposition of his estate. (Civil Code, Art. 783)

Codicil - A supplement or an additional to a will, made after the execution of a will and annexed to be
taken as a part thereof, by any disposition made in the original will is explained, added to or altered
(Civil Code, Art. 825)

Holographic will- One entirely written, dated and signed in the very handwriting of the testator himself
and is subject to no required form, and may be made in or out of the Philippines, and may be made
without a witness. (Civil Code, Art. 810)

Notarial will - A will written in public instruments, notarized by a lawyer, signed by the testator and
witnesses. (Civil Code, Art. 805-806)

Testator – The deceased person who made a last will and testament. (Civil Code, Art. 775)

Probate – A special proceeding to establish the validity of a will. Probate is mandatory, which means
that no will passes either real or personal property unless it is proved and allowed in a proper court.

Reprobate – A special proceeding to establish the validity of a will previously proved in a foreign
country.

Legatee – One who is given personal property through a will. (Civil Code, Art. 782)
Devisee – One who is given real property in a will. (Civil Code, Art. 782)

Executor – The person named in the will who is entrusted to implement its provisions. (Rules of
Court, Rule 78)

Executrix – A female executor.

Administrator – The person entrusted with the care, custody and management of the estate of a
decedent until the estate is partitioned and distributed to the heirs, legatees and devisees, if any.
(Rules of Court, Rule 78)

Administratrix – A female administrator.

Special proceedings – A remedy by which a party seeks to establish a status, a right, or a particular
fact. (Rules of Court, Rule 1, Sec. 3 [c]). Among the subject matters of special proceedings are
escheat and settlement of estate of deceased persons. (Rules of Court, Rule 72, Sec. 1)

Escheat – A proceeding whereby the state, by virtue of its sovereignty, steps in and claims the real or
personal property of a person who dies intestate leaving no heir. In the absence of a lawful owner, a
property is claimed by the state to forestall an open “invitation to self-service by the first comers”.
(Republic vs. CA, G.R. No. 143483)

Estate tax – A tax on the transfer of the net estate of the decedent. (Tax Reform Act of 1997, Sec. 84)

Gross estate – The total value of all property belonging to the decedent at the time of death, wherever
situated. (Tax Reform Act of 1997, Secs. 85, 104)

Net estate – Gross estate less allowable deductions and exemptions. (Tax Reform Act of 1997, Secs.
84, 85 and 86)

FORMAT OF COMPUTATION (BIR form 1801)

ESTATE TAX RATES

There shall be levied, assessed, collected and paid upon the transfer of the net estate of every
decedent, whether resident or non-resident of the Philippines, a tax at the rate of six percent 6%
based on the value of such net estate.

TAXABILITY OF THE ESTATE IN GENERAL

1. Classification of a Decedent
1. Resident Citizen
2. Non-Resident Citizen
3. Resident Alien
4. Non-Resident Alien
2. Types of Properties
1. Real or immovable property
2. Tangible personal property
3. Intangible personal property Rights and claims of the decedent existing at the time of
death
3. Taxability of the estate in accordance to the classification of a decedent and type of property

4. Rule of reciprocity (Non-resident Alien) *

Properties covered by reciprocity

Intangible personal property situated in the Philippines owned by non-resident alien decedent.

Reciprocity can take place when the foreign country where the non-resident alien was a citizen and
resident:

- Does not have any kind of death taxes

- Has death tax but allows exemption to non-resident Filipinos

Basic Rules

When there is reciprocity - The intangible personal property of non-resident alien situated in the
Philippines are not included in the gross estate

When there is no reciprocity - The intangible personal property of non-resident alien situated in the
Philippines are included in the gross estate

Intangible properties considered situated in the Philippines

The following shall be considered as situated in the Philippines (among others):

1) Franchise which must be exercised in the Philippines;

2) Shares, obligations or bonds issued by any corporation or sociedad anonima organized and
constituted in the Philippines in accordance with its law;

3) Shares, obligations or bonds issued by any foreign corporation 85% of the business of which is
located in the Philippines;

4) Shares, obligations or bonds issued by any foreign corporation if such shares, obligations or bonds
have acquired a business situs in the Philippines;

5) Shares or rights in any partnership, business or industry established in the Philippines.

COMPOSITION OF THE GROSS ESTATE OF A DECEDENT

Gross estate (SEC. 85) - The value of the gross estate of the decedent shall be determined by
including the value at the time of his death of all property, real or personal, tangible or intangible,
wherever situated: Provided, however, that in the case of a non-resident decedent who at the time of
his death was not a citizen of the Philippines, only that part of the entire gross estate which is situated
in the Philippines shall be included in his taxable estate.

1. Properties owned and possessed by the decedent

2. Properties transferred (Taxable Transfers)

• These are properties which at the time of the death of the decedent are not part of the decedent’s
assets because these were already transferred by him during his lifetime.
• The values of these properties will be included in determining the value of the gross estate even
though such properties are not anymore the part of the assets of the decedent.

a. Transfer in Contemplation of Death

Transfer in contemplation of death is a transfer of property motivated by the thought of death,
although death may not be imminent.

Examples of a transfer made in contemplation of death

1) When the transferor of property is at an advanced age.
2) When the transferor of property is terminally ill or with incurable disease.
3) When a person concurrently makes a will and transfer a property.

Examples of motives that preclude a transfer from the category of one made in contemplation of
death (Motives associated with life)
1) To relieve donor from the burden of management
2) To save income or property taxes
3) To settle family litigate and un-litigated disputes
4) To provide independent income for dependents
5) To see the children enjoy the property while the donor is alive
6) To protect the family from hazards of business operations, and
7) To reward services rendered

b. Revocable Transfer.
A revocable transfer is a transfer where the enjoyment of the property maybe altered, amended or
revoked.
c. Property Passing Under General Power of Appointment

d. Transfers of Property for an Insufficient Consideration

e. Transfer with retention or reservation of certain rights (possession or enjoyment of, or the right to
the income from the property, or the right to designate a person who may exercise such right)

3. Interests
a. Proceeds of Life Insurance
1). The amount receivable by the estate of the deceased, his executor, or administrator, as insurance
under policies taken out by the decedent upon his own life, irrespective of whether or not the insured
retained the power of revocation, or to the extent of the amount receivable by any beneficiary
designated in the policy of insurance, except when it is expressly stipulated that the designation of the
beneficiary is irrevocable.
2) The following are also not taxable:
a) proceeds/benefits coming from SSS
b) proceeds/benefits coming from GSIS.
c) the proceeds coming from group insurance.
3) When the designation of the beneficiary is not stated or is not clear, the Insurance Code assumes
revocable designation.

b. Claims against insolvent persons

1) Claims of the deceased against insolvent persons where the value of decedent's interest therein is
included in the value of the gross estate
2) The full amount of the claims is included in the gross estate.
3) The uncollectible amount of the claims is deducted from the gross estate.

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

1). Any amount received by the heirs from the decedent’s employer as a consequence of the death of
the decedent-employee in accordance with Republic Act No. 4917. It shall also be allowed as
deduction from the gross estate provided, that such amount is included in the gross estate of the
decedent.
2) R.A. No. 4917 is entitled ‘An Act providing that retirement benefits of employees of private firms
shall not be subject to attachment, levy, execution, or any tax whatsoever’.

d. Family Home
The family home refers to the dwelling house, including the land on which it is situated, where the
husband and the wife, or an unmarried person who is the head of the family and members of the
family reside, as certified by the Barangay Captain of the locality.

e. Prior interest/Decedent’s Interest

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. (Sec. 85 (A) NIRC)
As a rule, the interest must exist at the time of the decedent’s death to be included as part of the
gross estate.
Examples
1. Dividends declared on or before the death of the stockholder, and received by the estate after said
stockholder’s death.
2. Partnership’s profit earned prior to death of the partner, received by the estate after the partner’s
death.
3. Accrued interest and rents on or before the time of death, but collection was made after death.

GROSS ESTATE OF MARRIED DECEDENTS

1. Properties included in the gross estate of the married decedent

2. Common types of property regimes:

a. Absolute separation of property (ASP)- All properties of the spouses are separate properties,
except those properties which they may acquire jointly.
b. Conjugal partnership of gains (CPG)- All properties that accrues as fruit of their individual or joint
labor and fruits of their properties during the marriage will be common properties of the spouses.
c. Absolute community of property (ACP)- All present properties owned by the spouses at the date of
celebration of the marriage shall become common properties of the spouses including future fruit of
their separate or joint industry or fruits of their common properties.

3. In the absence of pre-nuptial agreement - (Date of Marriage):

Before August 3, 1988 - Conjugal partnership of gains
On or after August 3, 1988 - Absolute community of properties

4. Separate property of the Husband and Wife

Capital Property - Property owned solely by the husband
Paraphernalia Property - Property owned solely by the wife

Capital/ Paraphernalia Property (exclusive property) of surviving spouse – The capital/ paraphernalia
of the surviving spouse of a decedent shall not be deemed a part of the gross estate of the decedent.

5. Conjugal partnership of gains

6. Absolute community of properties

7. Summary: Similarities between Conjugal Partnership of Gain (CPOG) and Absolute Community of
Property (ACOP)

Under ACOP, “JEWELRY” shall be considered community property even if they are for the exclusive
use of either spouse.

8. Difference between Conjugal Partnership of Gains (CPOG) and Absolute Community of Property

(ACOP)

EXCLUSIONS AND EXEMPTIONS FROM THE GROSS ESTATE

1. Exemptions
a. The merger of the usufruct in the owner of the naked title.

1. When the same person becomes a usufructuary and owner of the naked title, it makes him/her
the absolute owner of the property.
2. USUFRUCT – the legal right to use and enjoy the benefits and profits of something belonging to
another.
3. 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.

b. The transmission or delivery of the inheritance or legacy of the fiduciary heir or legatee to the
fideicommissary.

1. The transfer is from fiduciary heir to the fideicommissary

2. LEGACY– a gift or bequest by WILL of a person. (Personal Property)
3. DEVISE – a TESTAMENTARY disposition of real property.
4. LEGATEE –the person to whom a legacy in a will is given of personal property.
5. FIDUCIARY HEIR – the FIRST HEIR of the property.
6. FIDEICOMMISSARY – the SECOND HEIR whose relationship to the fiduciary heir must be one
degree of generation (a parent and a child)

c. The transmission from the first heir, legatee, or donee 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

d. All bequest, devices, legacies or transfer to social welfare, cultural and charitable institutions,

1) no part of the net income of which inures to the benefit of any individual and
Provided, however, that
2) not more than 30% of such bequest, devises, legacies or transfer shall be used for administrative
purposes.

The government agency which is empowered to determine the exemption is the BIR. To enable it to
exercise such power, the value of transfer to social welfare, cultural and charitable institutions should
be included in the gross estate. While the Tax Codes includes this item in the exempt acquisition and
transmissions, it is actually considered a deduction from the gross estate.

2. Exclusions
a. Amounts received as war damages
b. Amounts received from the United States Veterans Administration
c. Benefits received from the GSIS
d. Benefits received from the SSS
e. Retirement benefits of employees of private firm (R.A. 4917)
f. Intangible personal property of a non-resident alien decedent under the reciprocity clause
g. Grants and donations to the Intramuros Administration.
h. Proceeds of life insurance where the beneficiary is irrevocably appointed
i. Proceeds of life insurance under a group insurance taken by employer (not taken out upon his life)
j. Transfer by way of bona fide sales
k. Transfer of property to the National Government or to any of its political subdivisions
l. Separate property of the surviving spouse
m. Properties held in trust by the decedent
n. Acquisition and/or transfer expressly declared as not taxable

DETERMINATION OF THE VALUE OF THE ESTATE

1. Usufruct
Usufruct is valued in accordance with the latest Basic Standard Mortality Table, to be approved by the
Secretary of Finance, upon the recommendation of the Insurance Commissioner.
2. Property
a. Generally it is valued at its fair market value at the time of decedent’s death
b. Real property is valued at the Higher between the zonal value (BIR) vs. assessed value (Provincial
and City assessor)
c. Personal properties –
• Recently purchase – Purchase price
• Not recently purchase – Pawn value x 3
d. Securities (Shares of stock)
1. Shares of stock traded in the local stock exchange- Mean between the highest and lowest
quotations on valuation date or on a date nearest the valuation date.
2. Shares of stock not traded in the local stock exchange
a) Common (ordinary) share – book value per share of issuing corporation.
b) Preferred (preference) share – Par Value

DEDUCTIONS FROM THE GROSS ESTATE:

DEDUCTIONS AMPLIFIED

1. Indebtedness (Claims against the estate)

These are the obligations of the decedent which is enforceable against him while he is still alive and
can be enforced against his estate upon his death.

Requisites for deductibility

a. The liability represents a personal obligation of the deceased existing at the time of his death
b. The liability was contracted in good faith and for adequate and full consideration in money or
money’s worth
c. The claim must be a debt or claim which is valid in law and enforceable in court
d. The indebtedness must not have been condoned by the creditor or the action to collect from the
decedent must not have prescribed.

Claims against the estate or indebtedness in respect of property may arise out of the following
sources:
1. Contract
2. Tort
3. Operation of law

e. If the claim was based on a debt instrument, such instrument must be NOTARIZED. (Except loans
granted by financial institutions where notarization is not part of the business practice of the financial
institution lender.)
f. If a loan was incurred within 3 years before the decedent death, the administrator, or executor is
required to render a statement showing the disposition of the loan proceeds.

Amount and Item Deductible

Debts or demands of pecuniary nature which could have been enforced against the deceased in his
lifetime and could have been reduced to simple money terms

Deducted from:

● Common property if connected to common

● Exclusive property if connected to exclusive

2. Claims against insolvent persons

This shall be deductible but the full amount of the claim must first be included in the gross estate.
Only the uncollectible portion shall be allowed as deductions.

Requisites for deductibility

a. The value of the claims is included in the gross estate.

b. The debtors are incapable of paying their debts.

Amount and Item Deductible

Claims that are not collectible

Deducted from:

● Common property if connected to common

● Exclusive property if connected to exclusive

3. Unpaid mortgage

Requisites for deductibility

a. The fair market value of the mortgaged property undiminished by such mortgage or indebtedness
has been included as part of the gross estate
b. The mortgage indebtedness was contracted in good faith and for an adequate and full
consideration
Amount and Item Deductible

Amount of unpaid mortgage

Deducted from:

● Common property if connected to common

● Exclusive property if connected to exclusive

4. Transfer for Public Use

a. Amount deductible
Amount of all bequest, legacies, devises or transfer to or for the use of the Government of the
Philippines, or any political subdivision for exclusively public purpose.

b. Requisites for deduction

1. The disposition must be
a. testamentary in character (in the last will and testament) or
b. by way of donation mortis causa (should take effect after death)
c. executed by the decedent before his death.
2. In favor of the Government of the Philippines or any of its political subdivisions.
3. Exclusive for public purpose.
4. The value of the property given is included in the gross estate.

5. Property Previously Tax (Vanishing Deduction) - This is a deduction derived from a property that
was previously subjected to transfer tax.
a. Requisites for deduction
1. Death - The present decedent must have died within five (5) years from the receipt of the property
from a prior decedent or donor.
2. Identity of the Property - The property involved must have been a property transferred by a prior
decedent or donor to the present decedent or the property acquired in exchange for the original
property so received.
3. Inclusion of the Property - The property must have formed part of the prior decedent’s gross estate
situated in the Philippines or been included in the total amount of the gifts of the donor made within 5
years prior to the present decedent’s death.
4. Previous taxation of the property - The estate tax on the prior succession must have been finally
determined and paid by the prior decedent. The same applies to gifts, in that donors must have taken
care of the donor’s tax.
5. No previous vanishing deduction on the property - The vanishing deduction on the property must
not have been claimed by the previous estate involving the same property.
b. Rates of vanishing deduction – If the present decedent died within the following period after the
date of prior decedent’s death or after the date of donation:

*** Value taken is the LOWER between the fair market value of the property in the gross estate of the
prior decedent or the fair market value of the gift and the fair market value of the same property in the
gross estate of the present decedent.
Notes:
1. Under conjugal partnership of gains vanishing is a deduction from exclusive property.
2. Under absolute community of property, vanishing deduction may be deducted from exclusive
property or community property.

SPECIAL DEDUCTIONS
1. Family Home - The family home refers to the dwelling house, including the land on which it is
situated, where the husband and the wife, or an unmarried person who is the head of the family and
members of the family reside, as certified by the Barangay Captain of the locality.

Conditions for the allowance of family home deduction from the gross estate:
a. The family home must be the actual residential home of the decedent and his family at the time of
his death, as certified by the Barangay Captain of the locality the family home is situated
b. The total value of the family home must be included as part of the gross estate of the decedent,
and
c. Allowable deduction must be in an amount equivalent to the current fair market value of the family
home as declared or included in the gross estate, or to the extent of the decedent’s interest (whether
conjugal/community or exclusive), whichever is lower, but not exceeding P10,000,000.

2. Standard Deduction
Amount deductible
• The amount deductible is P5,000,000 (citizen or a resident) P500,000 (nonresident) without any
required substantiation

3. Amount Received by Heirs Under R.A. No. 4917

Amount deductible and Requisites
• Any amount received by the heirs from the decedent’s employer as a consequence of the death of
the decedent employee in accordance with Republic Act No. 4917 is allowed as deduction provided
that the amount of the separation benefit is included as part of the gross estate of the decedent

Amount Received by Heirs Under R.A. No. 4917

1. RA No. 4917 is entitled “an act providing the retirement benefits of employees of private firms shall
not be subject to attachment, levy, execution, or any tax whatsoever”
2. The amount received by heirs from decedent’s employer as a consequence of the death of the
decedent employee is included in the gross estate of the decedent
3. The amount above is also allowed as deduction from gross estate

OTHER DEDUCTIONS

DEDUCTIONS FROM THE EXCLUSIVE OR CONJUGAL/COMMUNAL RPOPERTY UNDER THE

FAMILY CODE
a. Support of spouses, their common children and legitimate children of either spouse - Conj/Comm
b. All debts and obligations contracted during the marriage by the designated administrator-spouse
for the benefit of the conjugal partnership of gain or community, or by both spouses, or by one spouse
with the consent of the other - Conj/Comm
c. Debts and obligations contracted by either spouse without the consent of the other to the extent
that the family may have been benefited - Conj/Comm
d. All taxes, liens, charges and expenses, including major and minor repairs, upon the
conjugal/community property - Conj/Comm
e. All taxes and expenses for mere preservation made during the marriage upon the separate
property of either spouse used by the family - Conj/Comm
f. Expenses to enable either spouse to commence or complete a professional or vocational course, or
other activity for self-employment - Conj/Comm
g. Ante nuptial debts of either spouse insofar as they have rebounded to the benefit of the family -
Conj/Comm
h. Value of what is donated or promised by both spouses in favor of their legitimate children for the
exclusive purpose of commencing or completing a professional or vocational course or other activity
for self-improvement - Conj/Comm
i. Expenses of litigation between the spouses unless the suit is found to be groundless - Conj/Comm
j. Ante-nuptial debts of either spouse that did not redound to the benefit of the family - Exclusive
k. Support of illegitimate children of either spouse - Exclusive
l. Liabilities incurred by either spouse by reason of crime or quasi-delict - Exclusive
m. Loss during the marriage in any game of chance, betting, Sweepstakes, or any other kind of
gambling whether permitted or prohibited by law – Exclusive

NET DISTRIBUTABLE ESTATE

1. Net distributable estate vs Net taxable estate
Net distributable estate - The result after the reduction of the gross estate by actual expenses or
payments
Net taxable estate - The result of the application of the law under estate taxation

The rules in classifying property into conjugal and exclusive property are the same for purposes of
computing the net distributable estate. For net taxable estate purposes, standard deduction is a
special deduction, which means that it is neither conjugal nor exclusive deduction. For net
distributable estate purposes, it is a conjugal deduction.
TAX CREDIT FOR ESTATE TAX PAID TO A FOREIGN COUNTRY

ADMINISTRATIVE PROVISIONS
1. Estate Tax Returns
a. Tax form - BIR Form 1801 – Estate Tax Return
b. Estate tax returns are filed

1. In all cases of transfer subject to tax;

2. Where the said estate consists of registered or registrable property (regardless of the value of the
gross estate).

a) Real Property
b) Motor Vehicle
c) Shares of Stock

c. Person/s who will file the returns

1. Executor
2. Administrator
3. Any of the legal heirs

d. Items shown in the returns

1. The value of the gross estate of the decedent at the time of his death, or in case of non-resident
alien of that part of his gross estate situated in the Philippines
2. The deductions allowed from the gross estate
3. 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

e. Period when the returns are filed

Within 12 months (1 year) after the decedent’s death

f. Returns to be supported with statements certified by a CPA

When the estate tax returns show a gross value exceeding P5,000,000

g. Contents of the statements certified by a CPA

1. Itemized assets of the decedent with their corresponding gross value at the time of his death, or in
case of non-resident alien, of that part of his estate situated in the Philippines
2. Itemized deductions
3. The amount of tax due whether paid or still due and outstanding

h. Period when a certified copy of the schedule of partition and the order of the court ordering the
same be filed - Within 30 days after the promulgation of such order

i. Extension period for filing the returns

The commissioner can, in meritorious cases, extend the filing of returns for a period not exceeding 30
days

j. Place where the returns can be filed

1) In case of resident decedent:
a) Accredited agent bank
b) Revenue district office
c) Collection officer
d) Duly authorized Treasurer of the city of municipality where the decedent was domiciled at the time
of death
2) In case of non-resident decedent:
a) Revenue District Office where the executor or administrator is registered;
b) Revenue District Office having jurisdiction over the executor or administrator’s legal residence
c) Office of the Commissioner [Office of the BIR Commissioner (RDO No. 39- South Quezon City) if
the estate does not have an executor or administrator in the Philippines]

2. Payment of Tax
a. Time of payment of estate tax
At the time the estate tax returns are filed

b. Extension of time of payment od estate tax

1) Estate is settled through the courts – not to exceed 5 years
2) Estate is settled extra-judicially – not to exceed 2 years

c. Extension of payment of estate tax not allowed

When there is:
1. Negligence
2. Intentional disregard of rules and regulations
3. Fraud on the part of the taxpayer

d. Payment by installment
In case the available cash of the estate is insufficient to pay the total estate tax due, payment by
installment shall be allowed within two (2) years from the statutory date for its payment without civil
penalty and interest.

e. Liability for payment

1. The estate tax shall be paid by the executor or administrator before the delivery of the distributive
share in the inheritance to any heir or beneficiary.
2. Where there are two or more executors or administrators, all of whom are severally liable for the
payment of tax.
3. The executor or administrator of an estate has the primary obligation to pay the estate tax but the
heir or beneficiary has subsidiary liability for the payment of that portion of the estate tax which his
distributive share bears to the value of the total net asset.

3. Acts Requiring Certification from the Commissioner that the Estate Tax has been Paid
Acts requiring certification
1. Delivery of distributive shares to the heirs.
2. Registration in the registry of Deeds of transfer of inherited real property or real rights.
3. Payments of debt by decedent’s debtor to the heirs, legatees, executor or administrator of the
creditor-decedent.
4. Transfer of inherited shares, rights or bonds.
5. Withdrawal from decedent’s bank deposit (it shall allow any withdrawal from the said deposit
account, subject to a final withholding tax of six percent (6%).

4. Civil Penalties and Interest

Subject to interest but not to surcharge - Any amount paid after the statutory due date of the tax, but
within the extension period, shall be subject to interest but not to surcharge.
25% surcharge - Penalty of 25% if there is no false or fraudulent intent on the taxpayer.
50% surcharge - Penalty of 50% if there is false, malice, fraudulent intent on the taxpayer.
Interest - Interest of double the legal interest rate per annum on the unpaid amount of tax from the
date computed until fully paid.