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There is a popular saying by Benjamin Franklin, “In this world, nothing is certain except death and taxes.” These two words apply to the estate tax of a deceased person who has tax obligations to the government. The assets can only be transferred or given to the living heirs or beneficiaries once the estate tax is settled and cleared by the Bureau of Internal Revenue (BIR).
In the Philippines, it is rare and not customary to prepare for the estate tax. This is because it is considered culturally unacceptable to handle a morbid occurrence while the person is alive. But waiting until a person passes transfers the estate tax burden to those left behind.
Not only are they required to comply with the submission of the needed documents, but they also need to raise money for payment. They must fund the bulk amount of estate tax due to the government.
Many families get into debt while liquidating personal assets to pay the amount of estate tax. They cannot sell or mortgage or transfer any asset that belongs to the deceased. Until the estate is fully paid and cleared by the Bureau of Internal Revenue, the assets are classified as frozen assets.
The bulk of work in paying for the estate tax is in the completion of the documentation. But once this is ready, it is easier to get the net estate value, which is the basis of the estate tax. Here is a condensed guide on the requirements needed.
01 of 11What is Estate Tax?
An estate is valued on a person’s net worth by the time of death. This includes properties, financial securities, personal possessions, and other assets that the person had control of before passing away. It is enforced from the time of death of the person. It has no bearing on any postponement of the actual possession or enjoyment of the assets by the beneficiaries.
Estate Tax in the Philippines is the tax on the right of a deceased person to transfer assets to his/her lawful beneficiaries or heirs. The estate tax is a privilege given by the state to transmit or transfer assets upon the death of the rightful owner to his/her heirs.
The lawful beneficiaries must file the estate tax within one year of the deceased’s death, but a 30-day filing extension can be requested from the BIR Commissioner. An estate tax is a 6% tax on the net estate of a person upon his/her death under the Tax Reform for Acceleration and Inclusion (TRAIN) law Republic Act No. 10963.
Before Jan 1, 2018, the estate tax would range from 5-20% depending on estate tax value, so the 6% tax is considered a fair rate by many. Determine the value of allowable deductions to the gross estate, then multiply the net estate amount by 0.06% to get the estate tax.
02 of 11Allowable Deductions From Gross Estate
The estate of a person is the total amount of all his/her assets at the time of death. You are allowed by law to declare the allowable deductions to arrive at the net estate amount. Below is a list that you can deduct from the Gross estate of the deceased person, but proper documentation must be in place when you file this.
03 of 11Quick Guide Requirements of BIR
Before paying the estate tax, you need to submit the following requirements to the Bureau of Internal Revenue (BIR).
04 of 11Tips When Filing an Estate Tax Return
It is important to remember these two important tips when you begin the process of filing for the estate tax return to the BIR office where the person held residency before death.
1. Fill up the Estate Tax Return (BIR 1801) within one (1) year from the death of the person, or file a 30-day extension request. You will then be given an assigned tax identification number (TIN) for the estate.
2. Determine where the Revenue District Office (RDO) has jurisdiction on the place of residency when the deceased died. This is where you will file the estate tax return with an authorized agent bank (AAB). In the absence of a legal residency in the country, you have to file the estate tax return with the Office of the Commissioner at RDO No.39 South Quezon City or in the AAB located in the RDO where you live.
It is important to remember these two important tips when you begin the process of filing for the estate tax return to the BIR office where the person held residency before death.
1. Fill up the Estate Tax Return (BIR 1801) within one (1) year from the death of the person, or file a 30-day extension request. You will then be given an assigned tax identification number (TIN) for the estate.
2. Determine where the Revenue District Office (RDO) has jurisdiction on the place of residency when the deceased died. This is where you will file the estate tax return with an authorized agent bank (AAB).
In the absence of a legal residency in the country, you have to file the estate tax return with the Office of the Commissioner at RDO No.39 South Quezon City or in the AAB located in the RDO where you live.
05 of 11Estate Tax Return Form (BIR Form 1801)
Below are the guideline are given by the BIR which you will use to file for the estate tax return.
And this is the Estate Tax Form 1801 of BIR that you need to fill out.
06 of 11Documentary Requirements
The forms have to be affixed with a documentary stamp. If applicable, show supporting exemption under special laws and proof of payment of the documentary stamp tax paid upon the original issue of stock.
1. You need to complete the ONETT Computation Sheet of Tax Due On Estate with No Other Tax Liabilities by processing and getting the Issuance of Approved.
2. You need to process the issuance of the Electronic Certificate Authorizing Registration (eCAR) for the Estate of the Decedent. This is for simple transactions without other tax liabilities or businesses, where the applicant computed the tax due.
- Show the forms of Tax Returns filed with proof of payment from the Revenue Official Receipt or Duly Validated Bank Deposit Slip. A Certification will be issued from the Authorized Agent Bank (AAB) that received the tax payment or Certificate of Tax Exemption – 1 original copy + 2 photocopies
- ONETT Computation Sheet of Tax Due duly approved by the authorized Revenue Officer- 1 original copy + 2 photocopies
- Any of the following applicable documents if the person presenting is not among the parties to the transaction: 1 original copy + 2 photocopies
- Notarized Special Power of Attorney;
- Secretary’s Certificate or Board Resolution;
- If the documents were executed abroad, you can get a Certification from the Philippine Consulate or The Hague Apostille Convention.
07 of 11Mandatory Requirements for Estate Tax Return
Below are the general mandatory requirements to file an estate tax return. You have to complete the items below to avoid wasting time and causing further delays in your filing application:
1. A certified true copy of the Death Certificate- 1 original copy + 2 photocopies
2. Taxpayer Identification Number (TIN) of the deceased and their heir- 1 original copy for presentation only
3. Any of the following- 1 original copy + 2 photocopies
- Affidavit of Self Adjudication,
- Deed of Extrajudicial Settlement of Estate,
- Court Order – if settled judicially
- All Properties of the Estate must have a sworn declaration
4. The schedule of partition and the order of the court approving the same within thirty (30) days after the promulgation of such order, in case of judicial settlement should have a certified copy- 1 original copy + 2 photocopies
5. Proof of Claimed Tax Credit (if applicable)- 1 original copy + 2 photocopies
6. Certified Public Accountant (CPA) Statement on the itemized assets of the deceased, itemized gross estate, and the amount due if the gross value of the estate exceeds Php 5M for death after January 1, 2018, or Php 2M for death from January 1, 1998, to Dec. 31, 2017- 1 original copy + 2 photocopies
7. Certification of the Barangay Captain for the claimed Family Conjugal Home that does not exceed Php 10M, the allowable deduction is ½ of the amount only- 1 original copy + 2 photocopies
8. Duly Notarized Promissory Note for “Claims Against the Estate” arising from Contract of Loan- 1 original copy + 2 photocopies
9. Proof of the claimed Property Previously Taxed- 1 original copy + 2 photocopies
10. Proof of the claimed Transfer for Public Use- 1 original copy + 2 photocopies
11. Copy of Tax Debit Memo used as payment (if applicable) – 1 original copy + 2 photocopies
For Real Properties:
1. Certified true copies of the Transfer/Original/ Condominium Certificate/s of Title of real properties (front and back pages)- 1 original copy + 2 photocopies
2. Certified true copy of the Tax Declaration of real properties at the time of death- 1 original copy + 2 photocopies
3. Certificate of No Improvement issued by the Assessor’s Office where declared properties have no improvement- 1 original copy + 2 photocopies
For Personal Properties:
1. Certificate of Deposit/ Investment/ Indebtedness owned by the decedent and the surviving spouse- 1 original copy + 2 photocopies
2. Photocopy of Certificate of Registration of vehicles and other proofs showing the correct value of the same- 1 original copy + 2 photocopies
3. Proof of valuation of shares of stock at the time of death- 1 original copy + 2 photocopies
- For shares of stocks not listed/not traded – Get the latest audited financial statement of the issuing corporation with computation of the book value per share;
- For shares of stocks listed/traded – Price index from the PSE/latest FMV published in the newspaper at the time of the transaction;
- For club shares – you can get the updated price that is published in the newspapers on the transaction date or nearest to the transaction date.
4. Photocopy of certificate of stocks- 1 original copy + 2 photocopies
5. Proof of valuation of other types of personal property- 1 original copy + 2 photocopies
Other Additional Requirements, if applicable:
1. Present a Special Power of Attorney (SPA) if the person transacting/processing the transfer is not a party to the transaction. A SPA is needed for the Sworn Statement if one of the heirs is designated as executor/administrator- 1 original copy + 2 photocopies
2. Certification from the Philippine Consulate or Hague Apostille Convention (if executed abroad)- 1) original copy + 2 photocopies
3. Location Plan/Vicinity map of zonal value- If the property’s value cannot be readily determined from the documents submitted- 1 original copy + 2 photocopies
4. A Certificate of Exemption from the BIR Ruling issued by the Commissioner of Internal Revenue or an authorized representative if it is tax is exempt- 1) original copy + 2 photocopies
5. BIR- approved a request for installment payment of Estate tax due- 1) original copy + 2 photocopies
6. BIR- approved a request for partial disposition of Estate- 1 original copy + 2 photocopies
7. Such other documents as may be required by law/rulings/regulations/etc.- 1 original copy + 2 photocopies
08 of 11Estate Tax Checklist of Documentary Requirements (CDR)
Below is the Estate Tax checklist. You can also download the form on this link.
09 of 11Estate Tax Amnesty RA 11213
The Tax Amnesty Act of 2019 or RA 112213 gives taxpayers a chance to settle or raise funds for unpaid or outstanding tax obligations without penalties. It includes the estate tax amnesty that gives the heirs or executors a bit more time to pay for the outstanding taxes. The amnesty period covers the estate of descendants who died before Dec 31, 2017, and whose estate taxes are still unpaid as of Dec. 31, 2017.
The deadline for the estate tax amnesty is Dec. 31, 2020, but was extended by the House of Representatives to Dec. 31, 2022. This is to give economic relief during the pandemic period and affirmed by the Dept. of Finance on July 26, 2021, revenue regulations no 17-2021.
Estate Tax Amnesty Return
Below is a guide from the BIR on how to process the tax amnesty of a deceased whose death is recorded before Dec. 31, 2017, and has remained unpaid until the present time.
Acceptance Payment Form Estate Tax Amnesty (Taxable Year 2017 & Prior Years)
This form is only used by BIR to properly assess your estate tax payments. Be sure to have a copy of this when you settled. You can also download the form at this link.
Tax Amnesty Return on Delinquencies
Below are the guidelines when availing of the Tax Amnesty and Form. You can also download the form on this link.
10 of 11Acceptance Payment Form Tax Amnesty on Delinquencies
The Acceptance Payment form tax can be downloaded on this link.
11 of 11Final Notes
Losing a loved one is a painful process, but settling the estate tax does not have to be too difficult if you comply with the guidelines above. As you go through the many documents needed for submission, remember that every step brings you closer to getting the estate tax resolved and finalized.
When all is done and completed, you can sit back and reap the fruits of all your efforts. Lastly, you can fulfill the wishes of your departed loved one and give the heirs a piece of what the person worked for in his/her lifetime.
