RR No. 12-2018: Consolidates Revenue Regulations on Estate Tax and Donor’s Tax incorporating the amendments introduced by RA No. 10963 (TRAIN Law)

Key points

1. Estate Tax rate and coverage. The net estate of every decedent, resident or non-resident, is taxed at 6%. These rules govern the estate of a decedent who died on or after the effectivity date of the TRAIN Law. The gross estate of residents and citizens covers all properties wherever situated, while non-resident aliens are taxed only on properties in the Philippines.
2. Valuation and deductions. Property is valued at fair market value at the time of death, and real property uses the higher of the Commissioner’s value or the assessors’ schedule value. Unlisted common shares use book value and unlisted preferred shares use par value. Deductions for citizens and resident aliens include the standard deduction, claims against the estate, the Family Home and the net share of the surviving spouse.
3. Filing and payment. The Estate Tax return is filed within one (1) year from death, and returns showing a gross value above P5,000,000.00 need a CPA-certified statement. A reasonable extension not exceeding thirty (30) days may be granted in meritorious cases. The tax is paid when the return is filed, with possible extension of payment up to five (5) years if settled through the courts or two (2) years if extrajudicially.
4. Bank deposits of the decedent. Withdrawals from a decedent’s account within one (1) year from death are subject to a 6% Final Withholding Tax, which is not refunded or credited. The withdrawing party provides the estate’s TIN and BIR Form No. 1904. Amounts so taxed are excluded from the gross estate.
5. Donor’s Tax. The tax is 6% on total gifts in excess of P250,000.00 made during the calendar year, computed cumulatively, and applies to donations made on or after January 1, 2018. The return and payment are due within thirty (30) days after the gift is made or completed.
6. Exempt gifts and notice of donation. Gifts to the National Government, or to qualified educational, charitable, religious, cultural or social welfare institutions, are exempt. For institutions, not more than 30% may be used for administration. A donor engaged in business gives a notice of donation to the RDO within thirty (30) days after receiving the donee’s Certificate of Donation, for each donation worth at least P50,000.00.

Who is affected

• Executors, administrators and heirs of decedents
• Donors
• Banks holding deposits of decedents

Deadlines and effectivity

• Estate Tax return: within one (1) year from death
• Donor’s Tax return and payment: within thirty (30) days after the gift is made or completed
• Applies to donations on or after January 1, 2018