Extrajudicial Estate Tax: 6% Computation, Deadlines, and Penalties

When heirs in the Philippines divide a deceased relative’s property out of court, the Bureau of Internal Revenue still collects an estate tax before any title can be transferred. The extrajudicial estate tax in the Philippines is a flat 6% of the net estate under the TRAIN Law (Republic Act No. 10963), filed on BIR Form 1801 within one year of the date of death at the Revenue District Office covering the decedent’s last residence.¹ Pay late and a 25% surcharge plus interest at 12% per year attach to the unpaid tax.

When Extrajudicial Settlement Is Even Available

Before worrying about the tax, confirm the estate qualifies for out-of-court settlement at all. Rule 74, Section 1 of the Rules of Court sets three conditions, and all three must be met:²

The decedent left no will.
The estate has no outstanding debts.
Every heir participates, is of legal age (or represented if a minor), and agrees to the division, which is recorded in a public instrument filed with the Register of Deeds.

If a single heir refuses the proposed split, the willing heirs can file an ordinary action for partition rather than go through full probate. Disagreement does not force administration; it just puts a judge in charge of dividing the property.

How the 6% Is Computed

The 6% rate applies to the net taxable estate, not the gross value. You reach the net figure by subtracting allowable deductions from the gross estate valued as of the date of death.

Valuing Real Property

Real estate is the piece most people get wrong. The BIR does not simply take the assessor’s figure. For each parcel, compare the BIR zonal value against the fair market value on the tax declaration issued by the provincial or city assessor, and use whichever is higher.³ Understating the property by using only the lower figure invites a deficiency assessment and stalls the transfer.

Deductions Available to Citizens and Resident Aliens

Revenue Regulations No. 12-2018 lists the deductions that bring the gross estate down to the taxable figure:¹

A standard deduction of ₱5,000,000, granted to every estate without proof of expense.
Up to ₱10,000,000 of the fair market value of the family home.
The surviving spouse’s net share in the conjugal or community property, since that share never belonged to the decedent.
Claims against the estate, supported by notarized documents.
Unpaid mortgages, taxes, and casualty losses tied to estate property.
A declining deduction for property previously taxed by gift or inheritance within five years before death.
Transfers for public use to the Philippine government or its subdivisions.
Amounts received by heirs under RA 4917 retirement benefits.

A Worked Example

Suppose the gross estate is ₱12,000,000. Subtract the ₱5,000,000 standard deduction and a ₱7,000,000 family home value, and the net taxable estate is zero. No tax is due. Now suppose the gross estate is ₱20,000,000 with only the standard deduction available. Net taxable estate is ₱15,000,000, and the tax is ₱900,000.

What to File and Where

The return is BIR Form 1801, available at any Revenue District Office or from the BIR website. File it with the RDO covering the decedent’s last place of residence, and pay through an Authorized Agent Bank within that district; electronic filing and payment channels have expanded in recent years.

Expect to gather:³

A certified true copy of the death certificate.
The decedent’s TIN and a TIN for the estate itself, which may require separate registration.
Transfer Certificates of Title or Condominium Certificates of Title for each real property, with the current tax declarations from the local assessor.
The notarized Deed of Extrajudicial Settlement signed by all heirs.
A CPA-certified statement itemizing assets, deductions, and tax due when the gross estate exceeds ₱5,000,000.¹
Documentary proof for every deduction claimed. The family home deduction typically calls for a barangay certification that the property served as such.

The One-Year Deadline and Installment Option

The return and payment are due one year from the date of death. The Commissioner of Internal Revenue can grant an extension of up to 30 days for meritorious reasons, but the request must reach the BIR before the original deadline; the extension is not automatic.¹

If paying in full would cause undue hardship, the Commissioner may allow installment payments over up to two years for extrajudicially settled estates. Interest attaches to any overdue installment, so the option softens the cash flow problem without eliminating the cost of stretching payment out.

Penalties for Missing the Deadline

Late filing or payment triggers two separate charges. A 25% surcharge is added to the unpaid tax.⁴ Interest also accrues at double the legal rate set by the Bangko Sentral ng Pilipinas, which currently works out to 12% per year, calculated daily from the original due date until the tax is fully paid.

These stack quickly. On a ₱500,000 estate tax left unpaid for two years past the deadline, the surcharge alone is ₱125,000 and two years of interest at 12% adds roughly another ₱120,000. On-time filing is the cheapest step in the whole process.

Getting the eCAR and Transferring Title

After the BIR processes the return and confirms payment, it issues an electronic Certificate Authorizing Registration (eCAR). This is the clearance the Registry of Deeds needs before it will cancel the old titles.⁵ The eCAR number, payment date, and authorized signature are stamped on the reverse side of the original copies of the Deed of Extrajudicial Settlement.

Take the eCAR, the notarized deed, and the old titles to the Registry of Deeds, pay the local transfer tax and registration fees, and the Register cancels the old titles and issues new ones in the heirs’ names. The eCAR is valid for five years from issuance, so do not let it sit unused.⁵

Two Boundaries Worth Knowing

Paying the estate tax does not by itself end every claim on the property. Rule 74 requires heirs to post a bond equal to the value of the personal property when filing the settlement, and for two years after distribution any excluded heir or unpaid creditor can go to court to challenge the arrangement. The court can execute against the bond and against real property from the estate even after titles have moved.² The settlement must also be published in a newspaper of general circulation once a week for three consecutive weeks; skipping publication or using a paper without adequate circulation can void the transfer, and publication itself does not bind heirs who never knew about the settlement.

For deaths on or before May 31, 2022, a separate estate tax amnesty under Republic Act No. 11956 offered a 6% rate with no penalties, filed on BIR Form 2118-EA, with a program deadline of June 14, 2025.⁶⁷ Congress has extended this amnesty twice, so if you are dealing with a long-unsettled estate from before that cutoff, check with the BIR for any further extension. Estates of anyone who died after May 31, 2022 follow the standard TRAIN Law rules described above with no amnesty relief.

1
Bureau of Internal Revenue. Revenue Regulations No. 12-2018
2
LawPhil. Rules of Court – Rule 74
3
Bureau of Internal Revenue. BIR Form 1801 – Estate Tax Return
4
Bureau of Internal Revenue. Bureau of Internal Revenue – Penalties
5
Bureau of Internal Revenue. Revenue Regulations No. 03-2019
6
LawPhil. Republic Act No. 11956
7
Bureau of Internal Revenue. Estate Tax Amnesty Flyer