How To Compute Your Estate Tax In The Philippines

9/15/2017

Benjamin Franklin once said, "By failing to prepare, you are preparing to fail."

An Estate is the net worth of a person at any point in time alive or dead. Your Real Estate, Investments, Savings Accounts, Personal Property and Business Interests.

On the other hand, as described by the Bureau of Internal Revenue (BIR), Estate Tax is a tax on the right of the deceased person to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition. It is not a property tax. It is a tax imposed on the privilege of transmitting property upon the death of the owner. The Estate Tax is based on the laws in force at the time of death notwithstanding the postponement of the actual possession or enjoyment of the estate by the beneficiary. An estate tax is calculated by first determining the value of the deceased’s net estate or net value.

Gross Estate/Value – Allowed Deductions = Net Estate x 6% (*Estate Tax Rate) = Estate Due

*Republic Act No. 10963 (TRAIN Law)

The value of the gross estate of the decedent shall be determined by including the value, at the time of death, of all property, real or personal, tangible or intangible, wherever situated.

However, that in the case of a nonresident decedent who, at the time of death, was not a citizen of the Republic of the Philippines, only that part of the entire gross estate which is situated in the Philippines shall be included in the taxable estate.

In layman's terms, it is the tax paid to transfer your cash, bank accounts, investments, collectible items, personal possessions, and real property to your family or beneficiary.

Estate Tax 101

Here's the table Tax Rates from the Bureau of Internal Revenue (BIR)

Effective January 1, 2018 to present [Republic Act (RA) No. 10963]

There shall be an imposed rate of six percent (6%) based on the value of such NET ESTATE determined as of the time of death of decedent composed of all properties, real or personal, tangible or intangible less allowable deductions.

Effective January 1, 1998 up to December 31, 2017 (RA No. 8424)

If the Net Estate is

For Example:

Based on the table, if the net value of the estate of someone who died does not exceed Php 200,000.00 then the beneficiaries are exempted to pay the estate tax.

Another Example:

If the net value of the estate to be inherited is valued at Php 1,000,000.00, the estate tax shall be Php 15,000.00 plus Php 40,000.00 (or eight percent of Php 500,000), which totals Php 55,000.00.

Php 500,000.00 x 8% = Php 40,000.00
Total Estate Tax = Php 15,000.00 + Php 40,000.00 = Php 55,000.00

Effective July 28, 1992 up to December 31, 1997 (Section 77 of the NIRC, as amended (RA No. 7499)

If the Net Estate is

Effective January 1, 1973 to July 27, 1992 (Section 85 of the NIRC, as amended (Presidential Decree No. 69)

If the Net Estate is

Effective September 15, 1950 to December 31, 1972 (Section 85 of the NIRC, as amended (RA No. 579)

Estate and Inheritance Tax

If the Net Estate is

Effective July 1, 1939 to September 14, 1950 (Section 85 of the NIRC, as amended (Commonwealth Act No. 466)

Estate and Inheritance Tax

If the Net Estate is

20 Comments

Cherie

6/28/2019 10:00:39 am

How do we calculate the estate tax of a real estate property when there has been 5 that has been dead in the family and the title was not passed on to the heirs and is still in the name of the grandparents. Like, title is under the name of grandpa and grandma. They have 3 children, now all dead. Their children have heirs now wanting to sell the land. How do we calculate then? Is it based on each death? I hope to hear from you soon. Ty.

Ralph link

6/29/2019 05:49:10 am

Good Day!

Hi Cherie, please check this link from BIR https://www.bir.gov.ph/index.php/tax-information/estate-tax.html

It seems to be a special case, much better if you will visit your preferred BIR Branch.

Efren G. Goli Cruz

7/27/2019 01:35:12 am

If the title of the property is still in the name of the grandparents of the surviving heirs, then surviving heirs or the grandchildren have to execute an Extra-Judicial Settlement. The Estate Tax Amnesty is valid until June 14, 2021, therefore the heirs have enough time to prepare all the documents needed in order to file and pay the Estate Tax. Note that for every stage of transfer the estate tax will have to be paid i.e. if the grandmother died first then 50% of the estate is subject to estate tax. And when the grandfather died the basis is 50% of the total estate + 1/4 of the 50% of the estate. When the children of the grandparents died, each child's basis of the estate tax is 1/3 of the total estate of the grandparents of the surviving heirs. Once the documentary requirements are complete then what you need to do is visit the ONETT of the RDO where the last resident's address of the grandparents is located.

Yumie

7/25/2019 09:17:27 pm

Hi,
How to calculate the estate tax of 74sqm lot only if the donor donate her property to the donee before his death. But the donee still not transfer the title under her name.Her Father died last March 1986..

Hope to her you.Thanks

7/27/2019 06:04:14 am

Hi Yumie,

According to the BIR, check this link for more info (https://www.bir.gov.ph/index.php/tax-information/estate-tax.html)

What will be used as basis in the valuation of property?

The properties comprising the gross estate shall be valued based on their fair market value as of the time of decedent’s death.

If the property is a real property, the appraised value thereof as of the time of death shall be, whichever is the higher of –

1. The fair market value as determined by the Commissioner, or
2. The fair market value as shown in the schedule of values fixed by the provincial and city assessors.

Transfer taxes may also be owed to the Bureau of Internal Revenue. According to the BIR, if the property was/is donated, this is in the form of donor’s tax. If the property was transferred by way of inheritance, this is in the form of estate tax.

I advise you to visit your preferred BIR Branch.

Nelly

7/29/2019 06:46:02 pm

Hi Rap!

Namatay ang father ko Sept 2009 dahil sa sakit. Hindi na namin naasikaso ang pagbabayad ng kanyang estate tax because we were left financially drained at that time. At kung sakali, ano po ba ang sinasabing deductions sa pagcompute ng estate tax niya?

Thank you and more power!

7/30/2019 09:08:37 am

Hi Nelly,

Ito po ba yung nais niyong itanong Net Estate/Value = Gross Estate/Value – Deductions? Ito ay formula upang makuha ang Net Value, yung deductions po ay yung mga liabilities.

Estate tax is calculated by first determining the value of the deceased’s net estate or net value.

Ronald

8/15/2019 12:03:08 am

Kung ang lolo ko po ay namatay noong 1990, at may lupa siya na 116sqm na nagkakahalaga ng 9,600/sqm that time, ito po ba ang pagbabasihan para ma compute ang estate tax, kung babayaran ito ngayon?

Salamat po sa inyong itutugon.

8/15/2019 09:12:44 am

Hi Ronald,

As per BIR's website, The rate applicable shall be based on the law prevailing at the time of decedent’s death.

Pakibisita po ang link na ito para sa updated tax rates mula sa BIR. Maraming Salamat po!

https://www.bir.gov.ph/index.php/tax-information/estate-tax.html#et4

Ena

10/8/2019 08:50:01 pm

Hi ask ko lang po if father passed away and there are 3 children how is the tax charged is it 6% each of the heirs? In your example the total net estate tax is p55,000, so if the property will be transferred to all them equally are they going to pay p55,000 total or p55,000 each?

10/12/2019 12:06:58 pm

Hi Ena!

Under the Tax Reform for Acceleration and Inclusion (TRAIN) law, the estate tax is only 6% of the net estate (the estate tax previously ranged from 5% to 20% of the net estate).

To arrive at the net estate, taxpayers simply have to subtract all the allowable deductions from the gross estate (the value of all the properties of the decedent or the person who died).

Rodrigo Leonardo

10/10/2020 09:04:35 pm

if I am going to file for a tax amnesty and both name of my parents appears on the title.am I going to file a separate computation as they both died separately?

10/11/2020 11:20:08 pm

Good Day!

Hi Rodrigo, sorry for the late reply. You may visit this link from BIR Website (Estate Tax) for accurate and more information.

https://www.bir.gov.ph/index.php/tax-information/estate-tax.html

Thank you and stay safe!

Agatha Pace link

12/3/2020 01:30:12 am

Great ppost thanks

Philip

12/15/2020 06:06:08 am

Hello, if a decedent is a co owner of a real property that has not been subdivided amongst the co-owners and with a value of P10million (decedent owns 10% on the real property), how will the value of his estate be calculated? And how will the estate tax be calculated? Thanks.

12/17/2020 01:58:10 am

What will be used as the basis in the valuation of property?

The properties comprising the gross estate shall be valued based on their fair market value as of the time of the decedent’s death.

If the property is a real property, the appraised value thereof as of the time of death shall be, whichever is the higher of –

1.The fair market value as determined by the Commissioner, or
2.The fair market value as shown in the schedule of values fixed by the provincial and city assessors.

In the case of shares of stocks, the fair market value shall depend on whether the shares are listed or unlisted in the stock exchanges. Unlisted common shares are valued based on their book value while unlisted preferred shares are valued at par value. In determining the book value of common shares, appraisal surplus shall not be considered as well as the value assigned to preferred shares, if there are any. On this note, the valuation of unlisted shares shall be exempt from the provisions of RR No. 6-2013, as amended.

For shares that are listed in the stock exchanges, the fair market value shall be the arithmetic mean between the highest and lowest quotation at a date nearest the date of death, if none is available on the date of death itself.

The fair market value of units of participation in any association, recreation, or amusement club (such as golf, polo, or similar clubs), shall be the bid price nearest the date of death published in any newspaper or publication of general circulation.

Raphael Marcial

4/17/2021 09:32:26 am

Hi Rap,

Yung lolo ko namatay mga year 2000. Hanggang ngayon di pa rin nababayaran yung estate tax. Yung market value ng land ngayon is PHP 147,000 based dun sa Tax Declaration ng Lolo ko. During his death parang nasa mga 75,000 lang yun. However, we only have the latest tax declaration which is yung 147,000 na ang FMV. Also, yung papa ko, nagpagawa ng bahay dun sa land which is valued aroung 500,000 sa Building Tax Declaration.

Ito po yung mga question ko:

1. Kasama po ba sa ico-compute yung bahay na pinagawa ng papa ko dun sa land na yun as improvement sa real property?

2. We don't have a copy of the tax declaration at the time of his death, does that mean ba na yung pagbabasehan is yung latest na tax declaration ng land na?

Thanks po.

Michael

12/28/2021 09:43:39 pm

Grandparents died with 6 heirs, 3 have died with children. 360 sq meters total land valued at 6M at time of death. Each heir gets 60 sq meters or 1M each. EJS completed for the estate of the grandparents. So, we pay 6% of 6M minus deductions. Done. But, isn't there another stage because there are deceased heirs? 3 are deceased, so that are three estates, right? Does each have to pay 6% of 1M? Thank you.

arthur

10/11/2023 01:00:14 am

ano ba un dst na ksama sa estate na sa examiner daw ,na babayaran k daw ng 4000