Shiela C.

Azon
BS Accountancy IV

Taxation 2

November 14, 2014

GROSS ESTATE
These are all the real and Personal Property owned by a decedent at the time of his or her
death.
The value of the gross estate of the decedent includes the value at the time of his death of
all property, real or personal, tangible or intangible, wherever situated. In the case of a
nonresident decedent who at the time of his death was not a citizen of the Philippines, only
that part of the entire gross estate situated in the Philippines is included in the taxable
estate.
CLASSIFICATION OF DECEDENT
In relation to the computatin of estate tax, decedents are classified as follows:
1. Resident (alien or not) or citizen (resident or not) of the philippines
2. Non-resident alien
INCLUSION TO GROSS ESTATE
For resident alien decedents/citizens:
a) Real or immovable property, wherever located
b) Tangible personal property, wherever located
c) Intangible personal property, wherever located
For non-resident decedent/non-citizens:
a) Real or immovable property located in the Philippines
b) Tangible personal property located in the Philippines
c) Intangible personal property - with a situs in the Philippines such as:
Franchise which must be exercised in the Philippines
Shares, obligations or bonds issued by corporations organized or constituted
in the Philippines
Shares, obligations or bonds issued by a foreign corporation 85% of the
business of which is located in the Philippines
Shares, obligations or bonds issued by a foreign corporation if such shares,
obligations or bonds have acquired a business situs in the Philippines ( i.e.,
they are used in the furtherance of its business in the Philippines)
Shares, rights in any partnership, business or industry established in the
Philippines

Shiela C. Azon
BS Accountancy IV

Taxation 2

November 14, 2014

DISPOSITION OF TRANSFER PRIOR TO DEATH

The law considered the following transfers of properties in anticipation of death:
1. The decedent, while still alive, transferred his/her property where the transfer will
take effect only upon his/her death/
2. The decedent donated a property wherein the donation will take effect only at or
after his/her death; and
3. The decedent donated a property where while he/she is still alive, he/she will enjoy
the fruits of the donation or designated somebody to enjoy the income.
DEDUCTION FROM GROSS ESTATE
(1) In the case of citizens or residents of the Philippines
a) Expenses, losses, indebtedness, and taxes consisting of;
(i) Actual funeral expenses or five percent 5% of the gross estate, whichever
is lower, but not exceeding Two Hundred Thousand Pesos (P200,000.00);
(ii) Judicial expenses of the testamentary or intestate proceedings;
(iii) Claims against the estate;
(iv) Claims of the deceased against insolvent persons where the value of such
claim is included in the value of the gross estate;
(v) Unpaid mortgages in favor of the estate, under certain conditions.
(vi) Unpaid taxes; and
(vii) Casualty losses.
b) Value of property previously taxed (estate or donors tax),
under certain conditions.
c) Transfers to or for the use of the Philippine Government or any political
subdivision thereof, exclusively for public purposes.
d) Current fair market value of the decedents family home. If the said current fair
market value exceeds One Million Pesos (P1,000,000), the excess shall be subject
to estate tax. Also, said family home must have been the decedents family home
as certified by the barangay captain of the locality.
e) Standard deduction equivalent to One Million Pesos (P1,000,000).
f) Medical expenses not exceeding Five Hundred Thousand Pesos (P500,000.00),
incurred by the decedent within one year prior to his death, duly substantiated
with receipts.
g) Amount received by heirs under RA 4917 9(retirement benefits of employees of
private firms) provided such amount is included in the gross estate of the
deceased.
h) The net share of the surviving spouse in the conjugal partnership property.

Shiela C. Azon
BS Accountancy IV

Taxation 2

November 14, 2014

(2) In the case of a nonresident not a citizen of the Philippines

a) That portion of the funeral expenses, losses and indebtedness, and taxes
which the value of the decedents gross estate situated in the Philippines
bears to his entire gross estate wherever situated;
b) Value of property previously taxed, under certain conditions, if part of
decedents gross estate is situated in the Philippines;
c) Transfers to or for the use of the Philippine Government or any political
subdivision thereof, exclusively for public purposes; and
d) The net share of the surviving spouse in the conjugal partnership property as
diminished by the obligations properly chargeable to such property.
NET TAXABLE ESTATE
The net estate is determined by deducting from the value of gross estate the total amount
of allowable deductions.
ESTATE TAX COMPUTATION
The estate tax is computed by determining the net taxable estate, then applying the
appropriate estate tax rates.
The current estate tax rates in the Philippines range from 5% to 20% of the net estate. This
is more specifically outlined in the table below:
THE ESTATE TAX

OF EXCESS

SHALL BE

PLUS

Exempt

Below P200,000

OVER

5%

P200,000

P15,000

8%

500,000

135,000

11%

2,000,000

465,000

15%

5,000,000

1,215,000

20%

10,000,000