Did you know that when you inherit a property, you’d need to pay the estate tax (or inheritance tax) to transfer the property from the (deceased) owner’s name to yours? If you do not pay the estate tax, the property will not be transferred to your name and a certificate of title cannot be issued to you. Penalties will also be imposed if the estate tax remains unpaid six months from the date of the owner’s death.
The estate tax is not tax on the property; it is tax imposed on the privilege of transferring the property to the heir upon the death of the owner.
Is estate tax only applicable to real estate inheritances?
No. The estate tax does not only apply to real estate property inheritances. It can also be applied to personal properties such as stock investments, club shares, houses, cars, etc. Basically, anything and everything that a person owns is part of his estate.
If the person who died is married, the conjugal share of the widow or the widower should be deducted from the computation of the estate’s total value.
How is the estate tax computed?
Estate tax is computed based on the Net Estate of the deceased. The Net Estate is the remaining estate value after all debts and financial obligations of the deceased (hospital and funeral costs, lawyer’s fees, etc.) have been subtracted from the total assets.
Formula: Net Estate x (Applicable Tax Rate) = Estate Tax Due
You must refer to the Tax Rates of the BIR to get the most accurate rates for the computation of the estate tax.
What is the procedure in filing and paying for estate taxes?
The following are lifted from the BIR’s website:
Who shall file?
The Estate Tax Return (BIR Form 1801) shall be filed in triplicate by:
- The executor, or administrator, or any of the legal heirs of the decedent, whether residing in the Philippines or elsewhere under any of the following situations:
- In all cases of transfers subject to estate tax;
- 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 BIR is required as a condition precedent for the transfer of ownership thereof in the name of the transferee.
- 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.
When should the tax be filed and paid?
- The Estate Tax Return shall be filed within one year from the decedent’s death.
- The Commissioner also has the authority to grant a reasonable extension of not more than 30 days for filing the return.
- The return must be filed at any Authorized Agent Bank (AAB) of the Revenue District Office (RDO) having jurisdiction over the place of domicile of the decedent at the time of his or her death.
- If the decedent has no legal residence in the Philippines, the return shall be filed with the Office of the Commissioner in Quezon City (RDO No. 39, South QC).
- If the decedent has no legal residence in the Philippines but has an executor or administrator in the Philippines, the return shall be filed with the AAB of the RDO where such executor/administrator is registered or is domiciled, if not yet registered with the BIR.
- Payments may also be made through the epayment channels of AABs through either their online facility, credit/debit/prepaid cards, and mobile payments.
Can the estate tax be paid in staggered basis?
Yes. In case the available cash of the estate is insufficient to pay the total estate tax due, payment by installment shall be allowed within two years from the statutory date for its payment without civil penalty and interest upon approval by the concerned BIR official.
The due date on filing and payment of the return/tax shall depend on the applicable law at the time of the decedent’s death.
Is there an ongoing Estate Tax Amnesty from the BIR?
Yes! The estate tax amnesty is extended until June 14, 2023. Here are the details you need to know:
- The estate tax amnesty shall cover the estate of decedents who died on or before December 31, 2017, with or without assessments duly issued.
- The estate tax amnesty tax rate is 6% of the decedent’s total net estate at the time of death, or 6% of the decedent’s undeclared estate if an estate tax return was previously filed with the BIR>
- If the allowable deductions applicable at the time of death exceed the value of the gross estate, a minimum estate amnesty tax of Php 5,000 shall be paid.
- Taxpayers can avail of the estate tax amnesty within two years from the effectivity of the implementing rules and regulations by filing an Estate Tax Amnesty Tax Return and paying the tax in the BIR Revenue District Office which has jurisdiction over the last residence of the decedent.
For more information on estate tax, visit the website of the Bureau of Internal Revenue or follow their Facebook page at www.facebook.com/birgovph.