TRAIN on ESTATE TAXATION
QUICK GLANCE FOR ALLOWABLE DEDUCTIONS FROM GROSS ESTATE
Ordinary Deductions (Resident /
Citizen)
(1) Expenses, Losses,
Indebtedness and Taxes (ELIT)
a. Funeral Expenses
b. Judicial Expenses of the
Testamentary / Intestate
Proceedings
c. Claims Against the Estate
d. Claims against insolvent persons
e. Unpaid Mortgages or
Indebtedness on Property
OLD TRAIN
ELIT LIT
Deductible Removed / Not deductible
 Actual funeral expenses or
an amount equal to 5% of
Gross Estate, whichever is
LOWER, but in no case to
exceed P 200,000.00
 Not deductible: Expenses
incurred AFTER interment
and expenses borne or
defrayed by relatives and
friends.
Deductible Removed / Not deductible
Expenses incurred during the
settlement of the estate, BUT not
beyond the last day prescribed by
law for the filing of the estate tax
return.
Deductible Deductible
Provided that at the time the
indebtedness was incurred the debt
instrument was duly notarized ad if
the loan was contracted 3 years
before the death of the decedent,
the administrator or executor shall
submit a statement showing the
disposition of the proceeds of loan.
See the requisites in the book.
Deductible Deductible
Note: The value of the decedent’s
interest therein (or the full amounts
of the receivables) are first included
in the gross estate.
The deduction from the GE shall be
the uncollectible amount
Deductible Deductible
Provided that the property where
the value of decedent’s interest

f. Taxes
g. Losses
2. Property Previously Taxed /
Vanishing Deductions
3. Transfers for Public Use
4. Family Home
5. Standard Deduction
6. Medical Expenses
therein, undiminished by such
mortgage or indebtedness, is
included in the value of the gross
estate.
Deductible Deductible
Provided such taxes accrued prior
to the decedent’s death.
Hence, the following are not
deductible:
a. Income tax on income received
after death
b. Property tax not accrued before
the death
c. Estate tax
Deductible if: Deductible
a. Arising from fire, storm,
shipwreck, or other casualty,
robbery, theft, or embezzlement,
b. Not compensated by insurance or
otherwise
c. Not claimed as deduction in an
income tax return of the estate
subject to income tax
d. Occurring during the settlement
of the estate, and
e. Occurring before the last day for
the payment of the estate tax (six
months after the decedent’s death
or the allowed extension)
Deductible Deductible
Deductible Deductible
This refers to all bequests, legacies,
devised or transfers to or for the use
of the Government of the RP, or
any subdivision thereof, for
exclusively public purpose.
Deductible Deductible
An amount equivalent to the current Php 10,000,000
FMV but not to exceed Php
1,000,000.00.
Must be certified by the barangay
captain of the locality.
Deductible Deductible
1,000,000.00 Php 5,000,000.00
Deductible Removed / Not deductible

7. Amounts Received by Heirs
Under RA 4917
Medical expenses incurred by the
decedent within one year prior to
the death up to P 500,000.00
Deductible Deductible
Provided that the amount is
included in the Gross Estate

Ordinary Deductions (Not a OLD TRAIN

Resident Not a Citizen)
(1) Expenses, Losses, Here: Apply the Formula Same Formula
Indebtedness and Taxes (ELIT)
GE, Phils x World ELIT, etc
GE World
a. Funeral Expenses Deductible Removed / Not deductible
b. Judicial Expenses of the Deductible Removed / Not deductible
Testamentary / Intestate
Proceedings
c. Claims Against the Estate Deductible Deductible

d. Claims against insolvent persons Deductible Deductible

e. Unpaid Mortgages or Deductible Deductible

Indebtedness on Property

f. Taxes Deductible Deductible

g. Losses Deductible Deductible

2. Property Previously Taxed / Deductible Deductible
Vanishing Deductions
3. Transfers for Public Use Deductible Deductible
4. Family Home Not Allowed Not Allowed

5. Standard Deduction Not Allowed Deductible

Php 500,000.00
6. Medical Expenses Not Allowed Not Allowed

7. Amounts Received by Heirs Not Allowed Not Allowed

Under RA 4917
Estate-tax changes under TRAIN law
By
Atty. Lorna Patajo-Kapunan
-
January 14, 2018
ON December 19, 2017, package 1 of the Tax Reform for Acceleration and Inclusion
(TRAIN), otherwise known as Republic Act (RA) 10963, was signed into law.

The law made several amendments to the National Internal Revenue Code of 1997
(Tax Code), specifically on personal-income taxation, passive income, estate tax,
donor’s tax, value-added tax, excise tax and documentary stamp tax. The law took
effect on January 1, following its complete publication in the official gazette. Below is
a brief discussion of the changes under estate taxation under the Train law.

I. Amendment of the Estate Tax Rate

Section 22 of the TRAIN law amends Section 84 of the Tax Code, which provides for
the estate-tax rate. Previously, a tax based on the value of the net estate of the
decedent, whether resident or nonresident of the Philippines, was computed based on
a tax schedule where an estate worth P200,000 and over was taxed from 5 percent to
20 percent. Under the TRAIN law, it will now be subject to a flat rate of 6 percent.

II. Amendments on Estate Tax Deductions

Section 23 of the TRAIN law amends Section 86 of the Tax Code, which provides for
the computation of the net estate or, effectively, the deductions allowed to the gross
estate of an individual.

The TRAIN law removes funeral expenses, judicial expenses and medical expenses as
allowable deductions.
Instead, the law increases the Standard Deduction to P5 million, which previously
only amounted to P1 million. Only available to citizens (resident or nonresident) and
resident aliens, TRAIN law now provides that nonresident aliens can avail themselves
of a standard deduction, although only up to P500,000.

Another TRAIN law significant change from the old tax rule is that now, family
homes that are worth up to P10 million will be exempted from estate tax. Previously,
only family homes worth P1 million are exempted.

III. Amendments on the Procedure for Estate Tax Settlement

A. Repeal of Filing of Notice of Death provision

Section 24 of the TRAIN law repeals Section 89 of the Tax Code. The repealed
provision provides for when a notice of death should be filed and the period to file
the same.

B. Amendment on Filing of Estate Tax Return

Section 25 of the TRAIN law amends Section 90 of the Tax Code, which provides for
the procedural requirements for the estate-tax return.

The TRAIN law requires that estate-tax returns showing a gross value exceeding P5
million must be certified by a certified public accountant. This is P3 million higher
than the old tax rule, which only required CPA certifications for estate-tax returns that
exceed a gross value of P2 million. The TRAIN law has also increased the period for
filing of estate-tax returns from six months from the decedent’s death to one year.

C. Amendment of Payment of Estate Tax by Installment

Section 26 of the TRAIN law amends Section 91(c) of the Tax Code, which provides
for the payment of estate tax by installment.
Under the TRAIN law, payment by installment has been particularly simplified.
However, the law has provided for an implied limitation of two years for the payment
of the full estate-tax liability, which was previously not contained in the old tax rule.

IV. Amendment on Withdrawals from Deceased’s Bank Account

Section 27 of TRAIN Law amends Section 97 of the Tax Code, which concerns
allowable withdrawals from the deceased person’s account.

Under the old Tax Rule, only withdrawals up to P20,000 are allowed. The
administrator of the estate or any one of the heirs may, when authorized by the
commissioner, withdraw an amount not exceeding P20,000. However, the Train Law
has increased allowable withdrawals from the deceased person’s account to any
amount, subject to a 6-percent final withholding tax.

The amendments on estate taxes were enacted with the end in view of enticing the
heirs to declare the real value of their deceased kin’s estate and to pay the proper
estate tax. Filing requirements have also been made simpler and filer-friendly. It
remains to be seen whether collection of estate taxes will improve.

But, as the saying goes, “You can bring the horse to the water, but you cannot force
the horse to drink!”