The estate tax is a tax on the right of the decedent to transmit his/her estate to his/her lawful heirs and beneficiaries at the time of death and on certain transfers, which are made by law as equivalent to testamentary disposition. This is not a tax on the properties inherited, but a tax on the privilege of transmitting property upon the death of the owner. The tax rate depends on the prevailing law at the time of death; if the decedent dies before January 1, 2018, there is a schedule of tax rates on different periods going backwards, otherwise there is a flat rate of 6% of the net estate.
Before the estate of the decedent is transferred to his/her heirs, the estate tax must be paid to the Bureau of Internal Revenue (BIR), the taxing authority in the Philippines. Upon payment, the BIR will issue what is known as Certificate Authorizing Registration (CAR), which is the document that can be presented to the Register of Deeds by the heirs to secure title to real estate properties under their names.
This tax must be paid within six months from the time of death of the decedent if death occurred prior to January 1, 2018 and within one year if death occurred thereafter, otherwise penalties and interests will accrue. Also, if the gross estate has a value of more than P20,000 and the death occurred after January 1, 1998, the heirs or administrator must file a notice of death with the BIR within two months after the decedent’s death.
The following are the estate tax rates if death occurred prior to January 1, 2018: