How to Compute Estate Tax in the Philippines (with Real-Life Examples)

Computing the estate tax in the Philippines can feel complicated, especially with all the paperwork, deductions, and BIR requirements. This guide simplifies everything — complete with real-life examples — so you’ll understand exactly how to handle estate tax computation Philippines under the TRAIN Law. When a loved one passes away, their assets — like land, a house, vehicles, or even bank accounts — don’t automatically transfer to the heirs. Before ownership changes hands, the family must first settle something crucial with the government: the Estate Tax.

Now, don’t panic — estate tax sounds intimidating, but it’s actually straightforward once you understand how it works. Let’s break it down in a way that’s simple, human, and practical.

What Is Estate Tax?

The Estate Tax is a tax imposed on the right to transfer the estate of a deceased person to their heirs. It’s not a tax on the property itself — it’s a tax on the transfer of ownership from the deceased to the living.

Under the TRAIN Law (Republic Act No. 10963),

which took effect in 2018, the estate tax rate was simplified to 6% of the net estate.

Step 1: Identify the Gross Estate

The gross estate is the total value of everything the deceased owned at the time of death, including:

• Real properties (land, house, condominium, etc.)

• Personal properties (vehicles, jewelry, collectibles)

• Cash, bank deposits, investments

• Shares of stock

• Business interests

Example: Let’s say Juan Dela Cruz passed away leaving the following:

Asset	Value
Family house and lot	₱3,000,000
Farmland	₱2,000,000
Car	₱800,000
Bank savings	₱200,000
Total Gross Estate	₱6,000,000

Step 2: Deduct Allowable Deductions

The TRAIN Law allows several deductions to lessen the taxable amount of the estate. These include:

1. Standard Deduction – ₱5,000,000

2. Family Home Deduction – up to ₱10,000,000

3. Funeral Expenses – actual cost or up to ₱200,000 (whichever is lower)

4. Medical Expenses – up to ₱500,000 (for expenses incurred within 1 year before death)

5. Claims Against the Estate – unpaid debts or obligations of the deceased (must be proven with documents)

6. Transfer for Public Use – donations or bequests to the government

7. Other Valid Deductions – e.g., mortgage, casualty losses, unpaid taxes

Example Computation of Deductions

Let’s continue with Juan Dela Cruz’s case.

Deduction Type	Amount
Standard Deduction	₱5,000,000
Family Home (Qualified)	₱3,000,000
Funeral Expenses	₱200,000
Medical Expenses	₱300,000
Total Deductions	₱8,500,000

Step 3: Compute the Net Estate

Now, compute the Net Estate using this formula:

Net Estate = Gross Estate – Total Deductions

Example:₱6,000,000 (Gross Estate) – ₱8,500,000 (Deductions) = ₱0 Net Estate

In this case, because the deductions exceed the gross estate, no estate tax is due.

But let’s see another scenario where the estate is larger.

Example 2: Bigger Estate

Asset	Value
House and Lot	₱12,000,000
Commercial Lot	₱5,000,000
Bank Savings	₱3,000,000
Total Gross Estate	₱20,000,000

Deductions:

• Standard Deduction – ₱5,000,000

• Family Home – ₱10,000,000

• Funeral & Medical Expenses – ₱500,000

• Total Deductions: ₱15,500,000

Net Estate = ₱20,000,000 – ₱15,500,000 = ₱4,500,000

Estate Tax = 6% × ₱4,500,000 = ₱270,000

✅ Final Estate Tax Payable: ₱270,000

Step 4: File and Pay the Estate Tax

The heirs must file BIR Form 1801 (Estate Tax Return) within one year from the date of death.

Payments can be made at:

• Any Authorized Agent Bank (AAB) of the BIR,

• Or directly at the BIR Revenue District Office (RDO) where the decedent was domiciled at the time of death.

If the heirs can’t pay the full amount immediately, the BIR allows installment payments under certain conditions.

Step 5: Get the Certificate Authorizing Registration (CAR)

Once the estate tax is paid, the BIR will issue the Certificate Authorizing Registration (CAR).

This document is required before you can:

• Transfer the title of any real property under the heirs’ names, and

• Withdraw or transfer the deceased’s bank deposits.

No CAR = No transfer. It’s that simple.

Step 6: Common Pitfalls to Avoid

1. Late Filing – Results in 25% surcharge plus 12% annual interest.

2. Unreported Assets – BIR can impose penalties for omission.

3. Disagreement Among Heirs – Can delay processing indefinitely.

4. Unverified Property Values – Always use the higher of zonal value or fair market value.

Final Thoughts

Paying the estate tax is not just a legal obligation — it’s a sign of respect for the legacy left behind. Settling it properly ensures that the property, business, or land your loved one worked for can continue to benefit the family for generations.

Remember: “An estate unclaimed is a story unfinished. Settle it — and keep the story alive.”

Author’s Note

Written by Cris Rosales Jr., founder of A Little Bit of Everything in Life — guiding Filipinos in real estate, investing, and everyday living with clarity and heart.