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<div class="et_pb_text_inner">Wondering how Philippine Estate Taxes will impact your inheritance?
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<p>This post answers those questions as I explain the current 2018 Philippine TRAIN estate taxes and provide sample computations.</p>
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<div class="et_pb_text_inner">Under the 2018 TRAIN law, taxes are now 6% on an estate&rsquo;s net proceeds.
<p>&nbsp;</p>
<p>Simply computed, this is:</p>
<p>Gross estate less Allowable Deductions&nbsp;<em>equals</em></p>
<p>Net Proceeds multiplied by 6%</p>
<p>Seems simple, but the confusion lies in what makes up the gross estate and the allowable deductions.</p>
<p>Add in foreign holdings, dual citizenships, and foreigners and most people are ready to thrown in the towel.</p>
<p>While we don&rsquo;t go into complicated estate tax issues here &ndash; and trust me, every case is different &ndash; I try to provide enough information to point you in the right direction.</p>
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<div class="et_pb_text_inner">All property of citizens and residents constitute the gross estate.
<p>&nbsp;</p>
<p>For non-resident aliens however, gross estate are properties only located in the Philippines and include intangible personal property subject to the rule of reciprocity.</p>
<p>Now, here comes the hard part &ndash; how do you value the gross estate?</p>
<p>1&nbsp;Land. Higher of the Fair Market Value given by the Commissioner or the provincial and city assessors.</p>
<p>2&nbsp;Stock. As per the stock exchange but if not listed then it is the book value for unlisted common shares and the par value for unlisted preferred shares.</p>
<p>3&nbsp;Club membership. Most recent bid price near date of death published in a newspaper.</p>
<p>So, now we have half the puzzle.</p>
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<div class="et_pb_text_inner">The missing half is what allowable deductions are.
<p>&nbsp;</p>
<p>The definition of these items are a bit more involved and need to be supported by substantial documentation.</p>
<p>Below is a simple summary of the allowed deductions.</p>
<p>There are some restrictions around some of the deductions and the details are best discussed with your lawyer.</p>
<ul>
<li>Standard deduction of Php 5,000,000</li>
<li>Claims against the estate</li>
<li>Claims the estate might have against insolvent persons</li>
<li>Unpaid mortgages, taxes or casualty losses not covered by insurance or already claimed in an income tax filing</li>
<li>Previously taxed inherited property has exceptions at graduated rates if the previous decedent died within 5 years from the decedent in question. Other considerations are also applied.</li>
<li>Transfers to the Philippine Government for public use</li>
<li>Value of family home in excess of Php 10,000,000 will be taxed</li>
<li>Amount received by the heirs from the employer under R.A. 4917 Act Dealing with Retirement Benefits provided that the separation benefit is included as part of the gross estate.</li>
<li>Net share of the surviving spouse</li>
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<div class="et_pb_text_inner">While the same rules for each deduction apply, not all deductions can be used by non-resident aliens.
<p>&nbsp;</p>
<p>It&rsquo;s a shorter list.</p>
<ul>
<li>Standard deduction of Php 500,000</li>
<li>Proportion of indebtedness his Philippine Gross Estate bears in relation to his entire Estate for
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<li>Claims against the estate</li>
<li>Claims the estate might have against insolvent persons</li>
<li>Unpaid mortgages, taxes or casualty losses not covered by insurance or already claimed in an income tax filing</li>
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</li>
<li>Previously taxed inherited property has exceptions at graduated rates if the previous decedent died within 5 years from the decedent in question. Other considerations are also applied.</li>
<li>Transfers to the Philippine Government for public use</li>
<li>Net share of the surviving spouse</li>
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<p>So that&rsquo;s what the law says.</p>
<p>Remember that these are subject to considerations and you&rsquo;ll have to work out with your accountant and lawyer.</p>
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<div class="et_pb_text_inner">This is a fairly simple scenario.</div>
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<p>&nbsp;</p>
<p>Say your unmarried Filipino uncle has a family home of 30M and other property worth 14M.</p>
<p>He has some unpaid real estate taxes of 2M.</p>
<p><img src="https://haspcms-fcb-lawyer.s3.ap-southeast-1.amazonaws.com/tinyeditor_uploads/nePikDmZOCqgoJKN99vyVo9WORM1I3v2YL31ekSO.webp" width="527" height="428"></p>
<p>Simple so far.</p>
<p>Just remember that the 10M deduction is only used when for a family home and when that home is 10M and above.</p>
<p>If the family home is less than 10M, then the deduction is only up to the value of the home and not the entire 10M.</p>
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<div class="et_pb_text_inner">Say we have the exact same scenario in terms of property and cost as above.
<p>&nbsp;</p>
<p>The only difference between this and the above scenario is that there is a surviving spouse.</p>
<p>Based on the law, we need to reduce the estate by the surviving spouse&rsquo;s portion.</p>
<p>So, below is how we calculate her portion.</p>
<p>Surviving Spouse share:</p>
<p><img src="https://haspcms-fcb-lawyer.s3.ap-southeast-1.amazonaws.com/tinyeditor_uploads/t6jhwRFaAXY0PbkcZADcrPSXMFq0Bm2fiFwfNtr5.webp" width="467" height="391"></p>
<p>Estate tax is now calculated as:</p>
<p><img src="https://haspcms-fcb-lawyer.s3.ap-southeast-1.amazonaws.com/tinyeditor_uploads/ojNdhPHZoTJcaQkmmK4HrxytKEdsN3kgh4prxYlF.webp" width="461" height="522"></p>
<p>This works when the estate is composed of&nbsp;<a href="https://lawyerphilippines.org/a-simpler-way-to-divide-conjugal-property/">conjugal property</a>.</p>
<p>If there are exclusive properties, then these have to be excluded from the surviving spouse&rsquo;s calculation.</p>
<p>Exclusive properties are enumerated by the law and depend on what type of property regime governed at the time of your marriage.</p>
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Philippine Estate Taxes 2018