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Amendment of the Estate Tax Rate the period for filing of estate-tax returns from six months from the decedent’s
death to one year.
Section 22 of the TRAIN law amends Section 84 of the Tax Code, which provides
for the estate-tax rate. Previously, a tax based on the value of the net estate of C. Amendment of Payment of Estate Tax by Installment
the decedent, whether resident or nonresident of the Philippines, was computed
based on a tax schedule where an estate worth P200,000 and over was taxed
Section 26 of the TRAIN law amends Section 91(c) of the Tax Code, which provides
from 5 percent to 20 percent. Under the TRAIN law, it will now be subject to a flat
for the payment of estate tax by installment.
rate of 6 percent.
Under the TRAIN law, payment by installment has been particularly simplified.
II. Amendments on Estate Tax Deductions
However, the law has provided for an implied limitation of two years for the
payment of the full estate-tax liability, which was previously not contained in the
Section 23 of the TRAIN law amends Section 86 of the Tax Code, which provides old tax rule.
for the computation of the net estate or, effectively, the deductions allowed to
the gross estate of an individual.
IV. Amendment on Withdrawals from Deceased’s Bank Account
The TRAIN law removes funeral expenses, judicial expenses and medical expenses
Section 27 of TRAIN Law amends Section 97 of the Tax Code, which concerns
as allowable deductions.
allowable withdrawals from the deceased person’s account.
Instead, the law increases the Standard Deduction to P5 million, which previously
Under the old Tax Rule, only withdrawals up to P20,000 are allowed. The
only amounted to P1 million. Only available to citizens (resident or nonresident)
administrator of the estate or any one of the heirs may, when authorized by the
and resident aliens, TRAIN law now provides that nonresident aliens can avail
commissioner, withdraw an amount not exceeding P20,000. However, the Train
themselves of a standard deduction, although only up to P500,000.
Law has increased allowable withdrawals from the deceased person’s account to
any amount, subject to a 6-percent final withholding tax.
Another TRAIN law significant change from the old tax rule is that now, family
homes that are worth up to P10 million will be exempted from estate tax.
Estate Tax - Instead of having a complicated tax schedule with different rates,
Previously, only family homes worth P1 million are exempted.
TRAIN reduces and restructures the estate tax to a low and single tax rate of 6%
based on the net value of the estate with a standard deduction of P5 million and
III. Amendments on the Procedure for Estate Tax Settlement exemption for the first P10 million for the family home.
Donor Tax - TRAIN also simplifies the payment of donor’s taxes to a single tax rate
Section 24 of the TRAIN law repeals Section 89 of the Tax Code. The repealed of 6% of net donations is imposed for gifts above P250,000 yearly regardless of
provision provides for when a notice of death should be filed and the period to relationship to the donor.
file the same.
In addition, the TRAIN Law eradicated the provision requiring the filing of an Lastly, donations of real property are now subject to documentary stamp tax
estate tax return for gross estate exceeding P200,000, which is exempt from (DST) at the same rate as deeds of sale and conveyances of real property, i.e., P15
estate tax. Further, the threshold value of an estate has been increased from P2 for each P1,000. However, donations or transfers of real property under Section
million to P5 million, where the estate tax return to be filed should be supported 101 (A) and (B), such as gifts made to the national government and to qualified
by a statement duly certified by a certified public accountant (CPA). non-stock, non-profit organizations, which are exempt from donor’s tax, will also
not be subjected to DST.
The last day for filing the estate tax return was further amended by extending the
period from six months to one year from the decedent’s death. The said law Having lowered the tax rate and imposed uniform taxation on the gratuitous
added a provision allowing the payment of estate tax by installment should the transfer of properties, the government expects to incur a loss of revenue. But the
estate have insufficient cash to pay the total tax due. Payment by installment will goal is to offset this with a more efficient land market and improved compliance
be allowed within two years from the statutory date for its payment without civil among taxpayers. By lowering the estate tax rates and relaxing the payment of
penalty and interest. The law also allowed the withdrawal of bank deposits of the estate tax, the government hopes to encourage heirs to update the
deceased, which will be subjected to 6 percent final withholding tax, and eased documentation of land ownership, paving the way for the development of idle
the rule on the amount that can be withdrawn from the said bank deposits. lands, which, in turn, should unlock their value through more efficient use that
can help foster investments and create jobs. Moreover, these changes are
expected to alleviate some of the burden that comes with losing a loved one,
Donor’s tax whereas abridging donor’s tax will give the government an equal share of the
The TRAIN Law also amended the taxation of donations by imposing a uniform tax kindness of Filipinos.
rate of 6 percent based on the value of the total gift in excess of P250,000 made
during a calendar year, regardless of the relation of the donor to the donee.
Previously, the donations were subjected to a graduated tax rate of 2 percent to With the hope that this new law will help fuel the many development projects of
15 percent on donations to relatives, and 30 percent on donations to strangers. the Philippine government, taxpayers are expected to observe keenly and work
hand in hand with the tax authorities in implementing and conforming with the
said law.