QuestionsQuestions (Republic Act No. 579)
The estate tax is computed as a progressive tax on the value of the net estate: the tax is equal to the sum of specified percentages applied to bracketed portions of the net estate (e.g., 1% for the amount over ₱5,000 but not exceeding ₱12,000, up to 15% for the amount exceeding ₱1,000,000).
Both are covered: the estate tax applies whether the decedent is a resident or a nonresident of the Philippines.
Under the schedule, the tax applies to the amount by which the net estate exceeds ₱5,000; therefore, if it does not exceed ₱5,000, there is no tax under that bracket.
The inheritance tax is imposed in addition to the estate tax under Section 85. It is computed on the individual share of each heir/beneficiary in the net estate, after deducting the amount of the estate tax.
The portion of the share (for qualifying surviving spouse or qualifying child) that is not in excess of ₱5,000 is exempt from the inheritance tax.
Under subsection (b), the same tax fixed in subsection (a) is applied with an increase of 75%.
Under subsection (c), the same tax fixed in subsection (a) is applied with an increase of 150%.
Under subsection (d), the same tax fixed in subsection (a) is applied with an increase of 225%.
Under subsection (e), the same tax fixed in subsection (a) is applied with an increase of 400%, but if the share exceeds ₱500,000, the excess is subject to tax at 95%.
Strangers include: (i) relatives by consanguinity in the collateral line not within the degree of relationship recognized by law in intestate succession, and (ii) all relatives by affinity except the spouse and those mentioned in subsection (d).
For domestic servants: apply the tax fixed in subsection (a) on the first ₱2,000. For trusted employees: apply the tax fixed in subsection (a) on the first ₱5,000. The tax on the excess follows subsection (e) (strangers rates).
The tax is based on the value of the inventoried property less the value of the usufruct, use, habitation, or annuity, as determined under the Act’s later valuation provisions.
Deduct unpaid mortgages or indebtedness in respect of property where the value of the decedent’s interest (undiminished by the mortgage/indebtedness) is included in the gross estate, subject to limits such as excluding certain taxes (e.g., income taxes after death; property taxes not accrued before death; estate/inheritance taxes) and limiting deductions for claims founded on promise/agreement to amounts contracted bona fide and for adequate consideration.
Yes, losses during settlement arising from specified casualties/acts are deductible when not compensated by insurance/otherwise, and if at filing of return they have not been claimed as deductions for income tax purposes, and when incurred no later than the last day for payment of the estate tax as prescribed.
For each calendar year, tax equals the excess of (1) a tax computed on the aggregate net gifts for that year plus preceding years, over (2) a tax computed on the aggregate net gifts for the preceding years only.
The gift tax provided in the section does not apply in every case where the donor makes the gift in favor of an educational institution.
It is computed similarly to the donor’s gift tax but on a per-donee basis: the tax is the excess of (a) a tax computed using the rate schedule on the aggregate net gifts received by each donee for that year plus preceding years, over (b) a tax computed on the aggregate net gifts received by that donee for preceding years.
For strangers, apply the same tax fixed for the closest class (subsection (a)) with an increase of 400%; if the gifts received exceed ₱500,000, the excess is taxed at 95%.