Chapter XVIII: Estate Tax (A) Decedent's Interest - To the extent of the (C) Revocable Transfer -

interest therein of the decedent at the time of

Sec. 84. Rates of Estate Tax - There shall be levied, his death; (1) To the extent of any interest therein, of which
assessed, collected and paid upon the transfer of the net the decedent has at any time made a transfer
estate as determined in accordance with Sections 85 and  Under Sec. 85(A), although ownership is not (except in case of a bona fide sale for an
86 of every decedent, whether resident or nonresident of vested in the decedent but he had interest adequate and full consideration in money or
the Philippines, a tax based on the value of such net therein at the time of his death, the interest shall money's worth) by trust or otherwise, where the
estate, as computed in accordance with the following be considered as part of the GE. enjoyment thereof was subject at the date of his
schedule: death to any change through the exercise of a
(B) Transfer in Contemplation of Death - To the power (in whatever capacity exerciseable) by the
If the net estate is: extent of any interest therein of which the decedent alone or by the decedent in
decedent has at any time made a transfer, by conjunction with any other person (without
Over But The tax Plus Of the trust or otherwise, in contemplation of or regard to when or from what source the
Not shall be Over excess intended to take effect in possession or decedent acquired such power), t o alter,
Over enjoyment at or after death, or of which he has amend, revoke, or terminate, or where any such
200K Exempt at any time made a transfer, by trust or power is relinquished in contemplation of the
200K 500K 0 5% 200K otherwise, under which he has retained for his decedent's death.
500K 2M 15K 8% 500K life or for any period which does not in fact end (2) For the purpose of this subsection, the power to
2M 5M 135K 11% 2M before his death (1) the possession or enjoyment alter, amend or revoke shall be considered to
5M 10M 465K 15% 5M of, or the right to the income from the property, exist on the date of the decedent's death even
10M And 1.215M 20% 10M or (2) the right, either alone or in conjunction though the exercise of the power is subject to a
Over with any person, to designate the person who precedent giving of notice or even though the
shall possess or enjoy the property or the alteration, amendment or revocation takes
The formula for this Estate Tax: income therefrom; effect only on the expiration of a stated period
after the exercise of the power, whether or not
Gross Estate – Deductions = Net Estate Except in case of a bonafide sale for an adequate on or before the date of the decedent's death
Net Estate x Rate = Taxable Net Estate and full consideration in money or money's notice has been given or the power has been
Taxable Net Estae – Tax Credit = Estate Tax Payable worth. exercised. In such cases, proper adjustment shall
be made representing the interests which would
A. Gross Estate (Sec. 85) Vidal de Roces v. Posadas. The BIR was correct in have been excluded from the power if the
assessing estate tax instead of donor’s tax. decedent had lived, and for such purpose if the
Sec. 85. Gross Estate - The value of the gross estate of the notice has not been given or the power has not
decedent shall be determined by including the value at the The donation was a transfer in contemplation of death been exercised on or before the date of his
time of his death of all property, real or personal, tangible since the deed of donation was executed simultaneously death, such notice shall be considered to have
or intangible, wherever situated: with the last will. been given, or the power exercised, on the date
of his death.
Provided, however, that in the case of a nonresident Further, the donees were also the heirs instituted in the
decedent who at the time of his death was not a citizen of last will. This last circumstance shows that the transfer was Q: Irrevocable transfers do not form part of the gross
the Philippines, only that part of the entire gross estate really a transfer in contemplation of death. estate. Why?
which is situated in the Philippines shall be included in
his taxable estate. Dizon v. Posadas. The donation made by the donor-father A: Revocable transfers are included in the gross estate
to his done-son was really a transfer in contemplation of because of the tremendous power and control which the
There are certain properties which although not owned by death since the donation was made a week prior to the transferor can exercise.
the decedent, still form part of the gross estate. These are death of the donor-father.
the following: The transferor can at any time revoke the transfer, hence
Such circumstance shows that the donation was made in it is as if there was no transfer made.
anticipation of the death of the decedent. Hence, estate
tax, not donor’s tax, should be paid. (D) Property Passing Under General Power of
Appointment - To the extent of any property
 passing under a general power of appointment
exercised by the decedent:
(1) by will, or
(2) by deed executed in contemplation of, or
intended to take effect in possession or
enjoyment at, or after his death, or
(3) by deed under which he has retained for his
life or any period not ascertainable without
reference to his death or for any period which
does not in fact end before his death:
(a) the possession or enjoyment of, or the right
to the income from, the property, or
(b) the right, either alone or in conjunction with
any person, to designate the persons who shall
possess or enjoy the property or the income
therefrom;
Except in case of a bona fide sale for an
adequate and full consideration in money or
money's worth.
 Similar to Sec. 86(B) Transfers in contemplation
of Death
 The only difference is that under Sec. 86(D), the
property was transferred under a general power
of appointment executed by the decedent.
(E) Proceeds of Life Insurance - To the extent of 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.
Requirements:
(1) The decedent insured himself
(2) The beneficiary is the estate, or if not the estate,
the designation of the beneficiary must be
revocable.
Note: When the beneficiary is other than the estate and
the designation is irrevocable, the proceeds of life
insurance is exempt from estate tax.
Reason: When the designation is irrevocable, the
decedent loses the power and control to revoke the
designation of the beneficiary.
(F) Prior Interests - Except as otherwise specifically
provided therein, subsections (B), (C) and (E) of
this section shall apply to the transfers, trusts,
estates, interests, rights, powers and
relinquishment of powers, as severally
enumerated and described therein, whether
made, created, arising, existing, exercised or
relinquished before or after the effectivity of this
Code.
(G) Transfers of Insufficient Consideration - If any
one of the transfers, trusts, interests, rights or
powers enumerated and described in
subsections (B), (C) and (D) of this Sec. is made,
created, exercised or relinquished for a
consideration in money or money's worth, but is
not a bona fide sale for an adequate and full
consideration in money or money's worth, there
shall be included in the gross estate only the
excess of the fair market value, at the time of
death, of the property otherwise to be included
on account of such transaction, over the value of
the consideration received therefor by the
decedent.
 Sec. 86(G) should be applied when the transfer
was due to an impending death, say, due to a
terminal illness.
 However, the Code provides that in case of a
bonafide sale of an adequate and full
consideration in money or money’s worth, the
same shall not be considered as a transfer for
inadequate consideration.
(H) Capital of the Surviving Spouse - The capital of
the surviving spouse of a decedent shall NOT, for
the purpose of this Chapter, be deemed a part of
his or her gross estate.
 This is an EXCLUSION to the GE
 Applicable ONLY to spouses who are legally
married
 The term “capital” is used in its generic sense so
as to include the paraphernal property of the
wife in case the husband is the decedent.
B. Computation of the Net Estate (Sec. 86)
Sec. 86. Computation of Net Estate - For the purpose of
the tax imposed in this Chapter, the value of the net estate
shall be determined:
(A) Deductions Allowed to the Estate of Citizen or a
Resident - In the case of a citizen or resident of
the Philippines, by deducting from the value of
the gross estate -
(1) Expenses, Losses, Indebtedness, and taxes (ELIT)
- Such amounts -
(a) For actual funeral expenses OR in an amount
equal to five percent (5%) of the gross estate,
whichever is lower, but in no case to exceed Two
hundred thousand pesos (P200,000);
Q: Suppose the funeral expenses incurred is only
P155,000, is the whole amount deductible?
A: It depends. If the 155K, is more than 5% of the GE, the
whole amount is NOT deductible.
The amount allowed to be deducted is only up to 5% of
the GE.
Q: What does “funeral expenses” include?
A: RR 2-2003 provides that the term funeral expenses
include:
a. The mourning apparel of the surviving spouse
and unmarried minor children of the deceased
bought and used on the occasion of the burial.
b. Expenses for the deceased’s wake, including
food and drinks
c. Publication charges for death notices
 d. Telecommunication expenses incurred in
informing relatives of the deceased
e. Cost of burial plot, tombstones, monument or
mausoleum but not their upkeep (in case the
deceased owns a family estate or several burial
lots only the value corresponding to the plot
where he is buried)
f. Interment and/or cremation fees and charges
g. All other expenses incurred for the performance
of the rites and ceremonies incident to
interment
Q: Are expenses for the death anniversary included?
A: No The expenses included in RR No. 2-2003 refer to
those incurred BEFORE and DURING the burial.
(b) For judicial expenses of the testamentary or
intestate proceedings;
Expenses allowed as deduction under this category are
those incurred in the inventory-taking of assets comprising
the gross estate, their administration, the payment of
debts of the estate, as well as the distribution of the estate
among the heirs.
In short, these deductible items are expenses incurred
during the settlement of the estate but not beyond the
last day prescribed by law, or the extension thereof, for
the filing of the estate tax return.
Judicial expenses may include:
a. Fees of executor or administrator;
b. Attorney’s fees;
c. Court fees;
d. Accountant’s fees;
e. Appraiser’s fees;
f. Clerk hire;
g. Costs of preserving and distributing the estate;
h. Costs of storing or maintaining property of the
estate; and
i. Brokerage fees for selling property of the estate.
Q: Are extrajudicial expenses deductible?
A: Yes. Although the NIRC and RR 2-2003 are silent on the
matter, the SC in Pajunar v. Commissioner considered
extrajudicial expenses as deductible to the gross estate.
Reason: Since the provision of the NIRC are copied from
the U.S., where extrajudicial expenses are considered as
deduction from the gross estate, it is only proper for
extrajudicial expenses to be considered as deductions in
this jurisdiction.
Hence, extrajudicial expenses shall be allowed as
deduction from the GE provided that these are incurred
for the settlement of the estate of the deceased
(c) For claims against the estate: Provided, That at
the time the indebtedness was incurred the debt
instrument was duly notarized and, if the loan
was contracted within three (3) years before the
death of the decedent, the administrator or
executor shall submit a statement showing the
disposition of the proceeds of the loan;
The word “claims” is generally construed to mean debts or
demands of a pecuniary nature which could have been
enforced against the deceased in his lifetime and could
have been reduced to simple money judgments.
Claims against the estate or indebtedness in respect of
property may arise out of:
(1) Contract;
(2) Tort; or
(3) Operation of Law
Requisites of Sec. 86(A)(c):
1. The amount of indebtedness must be included in
the gross estate
2. The debt instrument or the contract of loan must
be duly notarized at the time of the
indebtedness was incurred;
3. If the loan was contracted within 3 years before
the death of the decedent, the administrator or
executor shall submit a statement showing the
disposition of the proceeds of the loan
4. A duly notarized certification as to the unpaid
balance of the debt from the creditor, if the
creditor is a corporation, such sworn certification
shall be signed by the President or Vice-
President, or other principal officer of the
corporation.
(d) For claims of the deceased against insolvent
persons where the value of decedent's interest
therein is included in the value of the gross
estate; and
 Unlike Sec. 86(A)(c) where the deceased is the
debtor, in Sec. 86(A)(d) the deceased the credtor
 Requisite: The indebtedness must be included in
the GE.
(e) For unpaid mortgages upon, or any indebtedness
in respect to, property where the value of
decedent's interest therein, undiminished by
such mortgage or indebtedness, is included in
the value of the gross estate, but not including
any income tax upon income received after the
death of the decedent, or property taxes not
accrued before his death, or any estate tax.
The deduction herein allowed in the case of
claims against the estate, unpaid mortgages or
any indebtedness shall, when founded upon a
promise or agreement, be limited to the extent
that they were contracted bona fide and for an
adequate and full consideration in money or
money's worth.
There shall also be deducted losses incurred
during the settlement of the estate arising from
fires, storms, shipwreck, or other casualties, or
from robbery, theft or embezzlement, when
such losses are not compensated for by
insurance or otherwise, and if at the time of the
filing of the return such losses have not been
claimed as a deduction for the income tax
purposes in an income tax return, and provided
that such losses were incurred not later than the
last day for the payment of the estate tax as
prescribed in subsection (A) of Sec. 91.
Expenses under Sec. 86(A)(e):
1. Mortgage indebtedness
2. Taxes which accrued before the death of the
decedent
3. Loss by virtue of natural calamities
RR 2-2003. In case the loan of the decedent is only an
accommodation loan, it is required that the value of the
loan must be included as a receivable of the estate.
Q: The tax referred to in Sec. 86(A)(e). Is estate tax
included?
A: No. The taxes accrued prior to the death of the
decedent. Estate tax accrues upon the death of the
decedent, this it is not included in this section.
Requisites of Losses by virtue of Natural Calamities:
a. Such losses are not compensated by insurance
b. At the time of the filing of the return, such losses
have not been claimed as a deduction for
income tax purposes
c. Such losses were incurred not later than the last
day for the payment of the estate tax as
provided in Sec. 91(A), 6 months after the death
of the decedent
(2) Property Previously Taxed (Vanishing
Deduction) - An amount equal to the value
specified below of any property forming a part of
the gross estate situated in the Philippines of any
person who died within five (5) years prior to the
death of the decedent, or transferred to the
decedent by gift within five (5) years prior to his
death, where such property can be identified as
having been received by the decedent from the
donor by gift, or from such prior decedent by
gift, bequest, devise or inheritance, or which can
be identified as having been acquired in
exchange for property so received:
One hundred percent (100%) of the value, if the prior
decedent died within one (1) year prior to the death of the
decedent, or if the property was transferred to him by gift
within the same period prior to his death;
Eighty percent (80%) of the value, if the prior decedent
died more than one (1) year but not more than two (2)
years prior to the death of the decedent, or if the property
was transferred to him by gift within the same period prior
to his death;
Sixty percent (60%) of the value, if the prior decedent died
more than two (2) years but not more than three (3) years
prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death;
Forty percent (40%) of the value, if the prior decedent died
more than three (3) years but not more than four (4) years
prior to the death of the decedent, or if the property was
transferred to him by gift within the same period prior to
his death;
Twenty percent (20%) of the value, if the prior decedent
died more than four (4) years but not more than five (5)
years prior to the death of the decedent, or if the property
was transferred to him by gift within the same period prior
to his death;
These deductions shall be allowed only where a donor's
tax or estate tax imposed under this Title was finally
determined and paid by or on behalf of such donor, or the
estate of such prior decedent, as the case may be, and
only in the amount finally determined as the value of such
property in determining the value of the gift, or the gross
estate of such prior decedent, and only to the extent that
the value of such property is included in the decedent's
gross estate, and only if in determining the value of the
estate of the prior decedent, no deduction was allowable
under paragraph (2) in respect of the property or
properties given in exchange therefor.
Where a deduction was allowed of any mortgage or other
lien in determining the donor's tax, or the estate tax of the
prior decedent, which was paid in whole or in part prior to
the decedent's death, then the deduction allowable under
said SubSec. shall be reduced by the amount so paid. Such
deduction allowable shall be reduced by an amount which
bears the same ratio to the amounts allowed as
deductions under paragraphs (1) and (3) of this SubSec. as
the amount otherwise deductible under said paragraph (2)
bears to the value of the decedent's estate. Where the
property referred to consists of two or more items, the
aggregate value of such items shall be used for the
purpose of computing the deduction.
 Vanishing Deduction is applicable to both estate
and donor’s tax
 Vanishing deduction refers to a property which
forms part of the GE situated in the Philippines
of any person who died within 5 years prior to
his death
Within 1 year 100%
More than 1 year but not 80%
more than 2 years
More than 2 years but not 60%
more than 3 years
More than 3 years but not 40%
more than 4 years
More than 4 years but not 20%
more than 5 years
(3) Transfers for Public Use - The amount of all the
bequests, legacies, devises or transfers to or for
the use of the Government of the Republic of
the Philippines, or any political subdivision
thereof, for exclusively public purposes.
(4) The Family Home - An amount equivalent to the
current fair market value of the decedent's
family home: Provided, however, That if the said
current fair market value exceeds One million
pesos (P1,000,000), the excess shall be subject
to estate tax. As a sine qua non condition for the
exemption or deduction, said family home must
have been the decedent's family home as
certified by the barangay captain of the locality.
Requisites for Family Home to be Deductible:
1. The amount to be deducted should not exceed 1
Million, the excess shall be subject to estate tax
2. There must be a certification from the Barangay
Captain that the said family home is the actual
residence of the decedent
3. The estate of the decedent claiming the
deduction must be legally married individual or a
head of the family
4. The amount of the family home must be
included in the GE
(5) Standard Deduction - An amount equivalent to
One million pesos (P1,000,000).
 Automatic, there is no conditions for claiming
this deduction
(6) Medical Expenses - Medical Expenses incurred
by the decedent within one (1) year prior to his
 death which shall be duly substantiated with
receipts: Provided, That in no case shall the
deductible medical expenses exceed Five
Hundred Thousand Pesos (P500,000).
(7) Amount Received by Heirs under R.A. 4917 - Any
amount received by the heirs from the decedent
- employee as a consequence of the death of the
decedent-employee in accordance with R.A.
4917: Provided, That such amount is included in
the gross estate of the decedent.
 The retirement pay referred to is the one
granted by the private sector to its employees.
 The private retirement plan must be duly
approved by the BIR, the retiree must have
rendered at least 10 years of service and must
be at least 50 years old at the time of his
retirement.
(B) Deductions Allowed to Nonresident Estates - In
the case of a nonresident not a citizen of the
Philippines, by deducting from the value of that
part of his gross estate which at the time of his
death is situated in the Philippines:
(1) Expenses, Losses, Indebtedness and Taxes. - That
proportion of the deductions specified in
paragraph (1) of SubSec. (A) of this Sec. which
the value of such part bears to the value of his
entire gross estate wherever situated;
(2) Property Previously Taxed. - An amount equal to
the value specified below of any property
forming part of the gross estate situated in the
Philippines of any person who died within five
(5) years prior to the death of the decedent, or
transferred to the decedent by gift within five (5)
years prior to his death, where such property
can be identified as having been received by the
decedent from the donor by gift, or from such
prior decedent by gift, bequest, devise or
inheritance, or which can be identified as having
been acquired in exchange for property so
received:
One hundred percent (100%) of the value if the
prior decedent died within one (1) year prior to
the death of the decedent, or if the property was
transferred to him by gift, within the same
period prior to his death;
Eighty percent (80%) of the value, if the prior
decedent died more than one (1) year but not
more than two (2) years prior to the death of the
decedent, or if the property was transferred to
him by gift within the same period prior to his
death;
Sixty percent (60%) of the value, if the prior
decedent died more than two (2) years but not
more than three (3) years prior to the death of
the decedent, or if the property was transferred
to him by gift within the same period prior to his
death;
Forty percent (40%) of the value, if the prior
decedent died more than three (3) years but not
more than four (4) years prior to the death of
the decedent, or if the property was transferred
to him by gift within the same period prior to his
death; and
Twenty percent (20%) of the value, if the prior
decedent died more than four (4) years but not
more than five (5) years prior to the death of the
decedent, or if the property was transferred to
him by gift within the same period prior to his
death.
These deductions shall be allowed only where a
donor's tax, or estate tax imposed under this
Title is finally determined and paid by or on
behalf of such donor, or the estate of such prior
decedent, as the case may be, and only in the
amount finally determined as the value of such
property in determining the value of the gift, or
the gross estate of such prior decedent, and only
to the extent that the value of such property is
included in that part of the decedent's gross
estate which at the time of his death is situated
in the Philippines; and only if, in determining the
value of the net estate of the prior decedent, no
deduction is allowable under paragraph (2) of
SubSec. (B) of this Sec., in respect of the
property or properties given in exchange
therefore. Where a deduction was allowed of
any mortgage or other lien in determining the
donor's tax, or the estate tax of the prior
decedent, which was paid in whole or in part
prior to the decedent's death, then the
deduction allowable under said paragraph shall
be reduced by the amount so paid. Such
deduction allowable shall be reduced by an
amount which bears the same ratio to the
amounts allowed as deductions under
paragraphs (1) and (3) of this SubSec. as the
amount otherwise deductible under paragraph
(2) bears to the value of that part of the
decedent's gross estate which at the time of his
death is situated in the Philippines. Where the
property referred to consists of two (2) or more
items, the aggregate value of such items shall be
used for the purpose of computing the
deduction.
(3) Transfers for Public Use - The amount of all
bequests, legacies, devises or transfers to or for
the use of the Government of the Republic of
the Philippines or any political subdivision
thereof, for exclusively public purposes.
Expenses allowed for Nonresident Aliens:
1. Expenses, Loses, Indebtedness and Taxes
2. Vanishing Deductions
3. Transfers for Public Use
Expenses NOT ALLOWED to Nonresident Aliens
1. Family home
2. Standard Deduction
3. Hospitalization Expenses
4. Retirement Pay
(C) Share in the Conjugal Property - The net share
of the surviving spouse in the conjugal
partnership property as diminished by the
obligations properly chargeable to such property
shall, for the purpose of this section, be
deducted from the net estate of the decedent.
Sec. 85(H) Sec. 86(C)
The capital of the surviving The share of the surviving
spouse is considered an spouse in the conjugal
exclusion partnership is considered as
a deduction
Q: If the share of the surviving spouse is considered as a
deduction from the gross estate, why should it be
included then deducted from the gross estate?
A: The relevance lies with the requirements under Sec. 89
and 90: (1) written notice to the Commissioner; (2) Filing
an Estate Tax Return, and (3) a statement duly certified by
a CPA.
(D) Miscellaneous Provisions - No deduction shall
be allowed in the case of a nonresident not a
citizen of the Philippines, unless the executor,
administrator, or anyone of the heirs, as the case
may be, includes in the return required to be
filed under Sec. 90 the value at the time of his
death of that part of the gross estate of the
nonresident not situated in the Philippines.
(E) Tax Credit for Estate Taxes paid to a Foreign
Country. -
(1) In General - The tax imposed by this Title shall
be credited with the amounts of any estate tax
imposed by the authority of a foreign country.
(2) Limitations on Credit - The amount of the credit
taken under this section shall be subject to each
of the following limitations:
(a) The amount of the credit in respect to the tax
paid to any country shall not exceed the same
proportion of the tax against which such credit is
taken, which the decedent's net estate situated
within such country taxable under this Title
bears to his entire net estate; and
(b) The total amount of the credit shall not exceed
the same proportion of the tax against which
such credit is taken, which the decedent's net
estate situated outside the Philippines taxable
under this Title bears to his entire net estate.
C. Exemption of Certain Acquisitions and
Transmissions
Sec. 87. Exemption of Certain Acquisitions and
Transmissions - The following shall not be taxed:
(A) The merger of usufruct in the owner of the
naked title;
 In Sec. 87(A), the usufruct is one without a fixed
period such that upon the death of the
usufructuary, the usufruct is then transferred to
the naked owner.
 The decedent is the usufructuary, hence no
property is included in his estate since upon his
death, the usufruct is merged with the naked
owner.
(B) The transmission or delivery of the inheritance
or legacy by the fiduciary heir or legatee to the
fideicommissary;
 The decedent is the fiduciary heir
 Upon his death, the inheritance received by him
during his lifetime is transferred to the
fideicommissary heir, thus no property is
transferred to his estate.
(C) The transmission from the first heir, legatee or
donee in favor of another beneficiary, in
accordance with the desire of the predecessor;
and
 Same as fideicommissary substitution
(D) All bequests, devises, legacies or transfers to
social welfare, cultural and charitable
institutions, no part of the net income of which
insures to the benefit of any individual:
Provided, however, That not more than thirty
percent (30%) of the said bequests, devises,
legacies or transfers shall be used by such
institutions for administration purposes.
Requisites of Sec. 87(D):
1. No part of the income of such institution inures
to the benefit of any individual
2. Not more than 30% of said bequest, devise,
legacy, or transfer shall be used by such
institution for administration purposes.
D. Determination of the Value of the Estate (Sec.
88)
Sec. 88. Determination of the Value of the Estate -
(A) Usufruct - To determine the value of the right of
usufruct, use or habitation, as well as that of
annuity, there shall be taken into account the
probable life of the beneficiary in accordance
with the latest Basic Standard Mortality Table, to
be approved by the Secretary of Finance, upon
recommendation of the Insurance
Commissioner.
Sec. 87(A) Sec. 88(A)
The usufruct referred to is Contemplates a situation
one without a fixed period where the usufruct is for a
such that upon death of the fixed period such that upon
usufructuary, the usufruct the death of the
is extinguished usufructuary, the usufruct
forms part of his estate
since the period has not yet
lapsed. Hence, it is material
to determine the value of
the usufruct
(B) Properties - The estate shall be appraised at its
fair market value as of the time of death.
However, the appraised value of real property as
of the time of death shall be, whichever is higher
of -
(1) The fair market value as determined by the
Commissioner, or
(2) he fair market value as shown in the schedule of
values fixed by the Provincial and City Assessors.
GR: With respect to personal property, the value to be
considered shall be the FMV of the property at the time of
death of the decedent.
XPN: RR 2-2003. Shares of stocks should be classified
whether listed or unlisted in the local stock exchange.
If listed, the book value shall be the highest value
immediately before death of the decedent.
If unlisted, it must be determined if the shares are
preferred or common.
If preferred, the value to be used shall be its par value
If common, the book value shall be relevant.

GR: With respect to real property:
1. FMV or the zonal value
2. FMV as shown in the schedule of values fixed by
the Provincial and City Assessors.
E. Notice of Death to be Filed (Sec. 89)
Sec. 89. Notice of Death to be Filed - In all cases of
transfers subject to tax, or where, though exempt from
tax, the gross value of the estate exceeds Twenty
thousand pesos (P20,000), the executor, administrator or
any of the legal heirs, as the case may be, within two (2)
months after the decedent's death, or within a like period
after qualifying as such executor or administrator, shall
give a written notice thereof to the Commissioner.
Instances when transfer mortis causa requires a written
notice to be filed:
1. When the transfer is subject to tax
2. When the GE exceeds 20,000
F. Estate Tax Returns (Sec. 90)
Sec. 90. Estate Tax Returns -
(A) Requirements - In all cases of transfers subject
to the tax imposed herein, or where, though
exempt from tax, the gross value of the estate
exceeds Two hundred thousand pesos
(P200,000), or regardless of the gross value of
the estate, where the said estate consists of
registered or registrable property such as real
property, motor vehicle, shares of stock or other
similar property for which a clearance from the
Bureau of Internal Revenue is required as a
condition precedent for the transfer of
ownership thereof in the name of the transferee,
the executor, or the administrator, or any of the
legal heirs, as the case may be, shall file a return
under oath in duplicate, setting forth:
(1) The value of the gross estate of the decedent at
the time of his death, or in case of a nonresident,
not a citizen of the Philippines, of that part of his
gross estate situated in the Philippines;
(2) The deductions allowed from gross estate in
determining the estate as defined in Sec. 86; and
(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.
Provided, however, That estate tax returns
showing a gross value exceeding Two million
pesos (P2,000,000) shall be supported with a
statement duly certified to by a Certified Public
Accountant containing the following:
(a) Itemized assets of the decedent with their
corresponding gross value at the time of his
death, or in the case of a nonresident, not a
citizen of the Philippines, of that part of his gross
estate situated in the Philippines;
(b) Itemized deductions from gross estate allowed in
Sec. 86; and
(c) The amount of tax due whether paid or still due
and outstanding.
(B) Time for filing - For the purpose of determining
the estate tax provided for in Sec. 84 of this
Code, the estate tax return required under the
preceding SubSec. (A) shall be filed within six (6)
months from the decedent's death.
A certified copy of the schedule of partition and
the order of the court approving the same shall
be furnished the Commissioner within thirty (30)
after the promulgation of such order.
(C) Extension of Time - The Commissioner shall have
authority to grant, in meritorious cases, a
reasonable extension not exceeding thirty (30)
days for filing the return.
(D) Place of Filing - Except in cases where the
Commissioner otherwise permits, the return
required under SubSec. (A) shall be filed with an
authorized agent bank, or Revenue District
Officer, Collection Officer, or duly authorized
Treasurer of the city or municipality in which the
decedent was domiciled at the time of his death
or if there be no legal residence in the
Philippines, with the Office of the Commissioner.
G. Payment of Tax (Sec. 91)
Sec. 91. Payment of Tax -
(A) Time of Payment.- The estate tax imposed by
Sec. 84 shall be paid at the time the return is
filed by the executor, administrator or the heirs.
(B) Extension of Time - When the Commissioner
finds that the payment on the due date of the
estate tax or of any part thereof would impose
undue hardship upon the estate or any of the
heirs, he may extend the time for payment of
such tax or any part thereof not to exceed five
(5) years, in case the estate is settled through
the courts, or two (2) years in case the estate is
settled extrajudicially. In such case, the amount
in respect of which the extension is granted shall
be paid on or before the date of the expiration
of the period of the extension, and the running
of the Statute of Limitations for assessment as
provided in Sec. 203 of this Code shall be
suspended for the period of any such extension.
Where the taxes are assessed by reason of
negligence, intentional disregard of rules and
regulations, or fraud on the part of the taxpayer,
no extension will be granted by the
Commissioner.
If an extension is granted, the Commissioner
may require the executor, or administrator, or
beneficiary, as the case may be, to furnish a
bond in such amount, not exceeding double the
amount of the tax and with such sureties as the
Commissioner deems necessary, conditioned
upon the payment of the said tax in accordance
with the terms of the extension.
(C) Liability for Payment - The estate tax imposed
by Sec. 84 shall be paid by the executor or
administrator before delivery to any beneficiary
of his distributive share of the estate. Such
beneficiary shall to the extent of his distributive
share of the estate, be subsidiarily liable for the
payment of such portion of the estate tax as his
distributive share bears to the value of the total
net estate.
For the purpose of this Chapter, the term
'executor' or 'administrator' means the executor
or administrator of the decedent, or if there is
 no executor or administrator appointed,
qualified, and acting within the Philippines, then
any person in actual or constructive possession
of any property of the decedent.
GR: “Pay-as-you-file system” The time of paying the
estate tax is at the time the return is filed.
XPN: Extension of time by the Commissioner.
H. Discharge of Executor or Administrator from
Personal Liability (Sec. 92)
Sec. 92. Discharge of Executor or Administrator from
Personal Liability - If the executor or administrator makes
a written application to the Commissioner for
determination of the amount of the estate tax and
discharge from personal liability therefore, the
Commissioner (as soon as possible, and in any event
within one (1) year after the making of such application, or
if the application is made before the return is filed, then
within one (1) year after the return is filed, but not after
the expiration of the period prescribed for the assessment
of the tax in Sec. 203 shall not notify the executor or
administrator of the amount of the tax. The executor or
administrator, upon payment of the amount of which he is
notified, shall be discharged from personal liability for any
deficiency in the tax thereafter found to be due and shall
be entitled to a receipt or writing showing such discharge.
I. Definition of Deficiency (Sec. 93)
Sec. 93. Definition of Deficiency - As used in this Chapter,
the term 'deficiency' means:
(a) The amount by which the tax imposed by this
Chapter exceeds the amount shown as the tax
by the executor, administrator or any of the
heirs upon his return; but the amounts so shown
on the return shall first be increased by the
amounts previously assessed (or collected
without assessment) as a deficiency and
decreased by the amount previously abated,
refunded or otherwise repaid in respect of such
tax; or
(b) If no amount is shown as the tax by the
executor, administrator or any of the heirs upon
his return, or if no return is made by the
executor, administrator, or any heir, then the
amount by which the tax exceeds the amounts
previously assessed (or collected without
assessment) as a deficiency; but such amounts
previously assessed or collected without
assessment shall first be decreased by the
amounts previously abated, refunded or
otherwise repaid in respect of such tax.
J. Payment Before Delivery by Executor or
Administrator (Sec. 94)
Sec. 94. Payment before Delivery by Executor or
Administrator - No judge shall authorize the executor or
judicial administrator to deliver a distributive share to any
party interested in the estate unless a certification from
the Commissioner that the estate tax has been paid is
shown.
K. Duties of Certain Officers and Debtors (Sec. 95)
Sec. 95. Duties of Certain Officers and Debtors - Registers
of Deeds shall not register in the Registry of Property any
document transferring real property or real rights therein
or any chattel mortgage, by way of gifts inter vivos or
mortis causa, legacy or inheritance, unless a certification
from the Commissioner that the tax fixed in this Title and
actually due thereon had been paid is show, and they shall
immediately notify the Commissioner, Regional Director,
Revenue District Officer, or Revenue Collection Officer or
Treasurer of the city or municipality where their offices are
located, of the non payment of the tax discovered by
them. Any lawyer, notary public, or any government
officer who, by reason of his official duties, intervenes in
the preparation or acknowledgment of documents
regarding partition or disposal of donation intervivos or
mortis causa, legacy or inheritance, shall have the duty of
furnishing the Commissioner, Regional Director, Revenue
District Officer or Revenue Collection Officer of the place
where he may have his principal office, with copies of such
documents and any information whatsoever which may
facilitate the collection of the aforementioned tax. Neither
shall a debtor of the deceased pay his debts to the heirs,
legatee, executor or administrator of his creditor, unless
the certification of the Commissioner that the tax fixed in
this Chapter had been paid is shown; but he may pay the
executor or judicial administrator without said certification
if the credit is included in the inventory of the estate of the
deceased.
L. Restitution of Tax Upon Satisfaction of
Outstanding Obligations (Sec. 96)
Sec. 96. Restitution of Tax Upon Satisfaction of
Outstanding Obligations - If after the payment of the
estate tax, new obligations of the decedent shall appear,
and the persons interested shall have satisfied them by
order of the court, they shall have a right to the restitution
of the proportional part of the tax paid.
M. Payment of Tax Antecedent to the Transfer of
Shares, Bonds or Rights
Sec. 97. Payment of Tax Antecedent to the Transfer of
Shares, Bonds or Rights - There shall not be transferred to
any new owner in the books of any corporation, sociedad
anonima, partnership, business, or industry organized or
established in the Philippines any share, obligation, bond
or right by way of gift inter vivos or mortis causa, legacy or
inheritance, unless a certification from the Commissioner
that the taxes fixed in this Title and due thereon have been
paid is shown.
If a bank has knowledge of the death of a person, who
maintained a bank deposit account alone, or jointly with
another, it shall not allow any withdrawal from the said
deposit account, unless the Commissioner has certified
that the taxes imposed thereon by this Title have been
paid: Provided, however, That the administrator of the
estate or any one (1) of the heirs of the decedent may,
upon authorization by the Commissioner, withdraw an
amount not exceeding Twenty thousand pesos (P20,000)
without the said certification. For this purpose, all
withdrawal slips shall contain a statement to the effect
that all of the joint depositors are still living at the time of
withdrawal by any one of the joint depositors and such
statement shall be under oath by the said depositors.