Estate Tax in the Philippines Explained — 6% and the TRAIN Deductions

When a Filipino dies, everything they owned passes through one final tax before their heirs can take title: the estate tax. Since the TRAIN Law took effect on January 1, 2018, it is deliberately simple — a flat 6% on the net estate, after two generous deductions. But the questions that trip families up are rarely the rate. They are about what counts, how it is valued, and whose share is taxed — especially when the estate includes a vacant lot or property with a living co-owner. This guide answers all of them, with worked examples you can verify in our estate tax calculator.

The computation in one picture

The Tax Code (Section 84, as amended by TRAIN) imposes 6% on the net estate. For a resident decedent:

TRAIN replaced the old graduated 5–20% schedule with this single rate, and replaced the receipt-heavy itemized deductions (funeral, judicial, medical expenses) with an automatic ₱5,000,000 standard deduction. If the deductions exceed the gross estate, the tax is simply zero — the excess generates no refund.

Does it apply to vacant or unused property?

Yes — and this surprises many families. Estate tax covers everything the decedent owned at death, whether anyone lived in it or not. An idle provincial lot, a rental condo, a farm, an empty house: all of it enters the gross estate at fair market value. There is no “primary residence only” rule for taxation.

Where living in the property matters is the family-home deduction — the extra shield of up to ₱10,000,000. It applies only to the decedent’s actual family home as understood in the Family Code: the dwelling where the decedent and their family resided. A vacant lot never qualifies; a rental unit never qualifies; a house the decedent owned but rented out never qualifies.

The practical difference is large. A decedent leaving an ₱8M family home owes zero estate tax (₱5M standard + ₱8M home = ₱13M of shield). A decedent leaving an ₱8M vacant lot owes 6% × ₱3M = ₱180,000 — same value, different tax, purely because one was lived in.

How the value of each asset is determined

Everything is valued as of the date of death — Philippine law has no alternative valuation date. The rules by asset type (NIRC Section 85 and RR 12-2018):

• Real property — the BIR zonal value for its location; where no zonal schedule exists, the market value in the tax declaration (the assessor’s value). The BIR cross-checks declarations against zonal tables, so undervaluing land invites a deficiency assessment plus the 25% surcharge.
• Listed shares — the mean between the highest and lowest quoted prices on the date of death (nearest trading day if the market was closed).
• Unlisted shares — book value: net assets per the corporation’s latest audited financial statement before death.
• Bank deposits and cash — the balance at death, with foreign currency converted at the exchange rate on that date.
• Vehicles, jewelry, and other personal property — fair market value at death; businesses are appraised as going concerns or on their net assets.

For families, the zonal value is usually the safe anchor for land: it is public, the BIR uses it to check your return, and over-valuing merely wastes deductions while under-valuing costs penalties.

The deductions: once per estate, not per property

A recurring misunderstanding: the ₱5M standard deduction is per estate — one death, one deduction — regardless of how many properties, bank accounts, or vehicles are involved. A decedent leaving five lots gets one ₱5M shield across all of them, not ₱5M each.

The same goes for the family-home deduction: one home per estate, up to ₱10,000,000 of its fair market value. If the home is worth more, the excess remains taxable. If the home is conjugal or community property, only the decedent’s share of its value counts — both for inclusion in the gross estate and for the deduction itself.

What if one of the owners is still living?

Co-owned property is taxed only to the extent of the decedent’s share. The surviving co-owner’s share was never the decedent’s property, so it never enters the gross estate — it is excluded outright, not deducted.

• Surviving spouse (conjugal or absolute community property): the cleanest case — the spouse’s half is excluded; only the decedent’s half enters the estate. The classic error is declaring the entire conjugal estate as the gross estate, which doubles the tax.
• Siblings or other co-owners (title in several names): the decedent’s proportional share is included. If the title is silent on shares, equal shares are presumed unless the estate proves otherwise.
• The BIR follows the title. If the property is registered solely in the decedent’s name but someone claims true co-ownership, the estate carries the burden of proof — contribution receipts, deeds of trust, or admissions from the other claimants. Joint bank accounts are likewise presumed part of the estate unless proven otherwise.
• Later deaths are separate events. When the surviving co-owner eventually dies, their share passes through their own estate with its own ₱5M and ₱10M shields.

Filing: one year, then the titles can move

The estate tax return (BIR Form 1801) must be filed within one year from the decedent’s death under the consolidated estate-tax regulations (RR 12-2018) — note that some older BIR social-media posts still say six months; the regulation controls. The executor, administrator, or heirs file and pay, and only then can the BIR issue the electronic Certificate Authorizing Registration (eCAR) that registries of deeds and banks require to transfer titles and release funds.

Missing the deadline costs a 25% surcharge plus interest (12% per year under Section 249), and unsettled estates compound quietly: heirs who try to sell inherited property years later discover the unpaid estate tax, penalties, and then a capital gains tax on top for the sale itself.

Estate tax vs. the other transfer taxes

• Estate tax (6% of net estate) — triggered by death; paid once by the estate.
• Donor’s tax (6% over ₱250k/year) — triggered by gifts while alive; see our donor’s tax calculator for the annual-aggregation mechanics.
• Capital gains tax (6% of sale price/zonal) — triggered when an heir sells the inherited property later; it does not reduce estate tax, it follows it.

Families often plan around the ₱250,000 annual donor’s-tax exemption to shrink a future estate — a legitimate strategy, as long as each year’s gifts are aggregated correctly and actually declared.

Frequently Asked Questions

Sources: National Internal Revenue Code Sections 84–91 as amended by the TRAIN Law (RA 10963); consolidated estate- and donor’s-tax regulations (RR 12-2018); BIR zonal valuation schedules. This guide is general information, not legal advice — estate settlement involves succession-law questions; consult the BIR or a qualified professional.