Rates of estate tax.
SEC. 85. Rates of estate tax. — There shall be levied, assessed, collected, and paid upon the transfer of the net estate of every decedent, whether a resident or non-resident of the Philippines, a tax equal to the sum of the following percentages of the value of the net estate determined as provided in sections 88 and 89:
One per centum of the amount by which the net estate exceeds three thousand pesos and does not exceed ten thousand pesos;
One and one-half per centum of the amount by which the net estate exceeds ten thousand pesos and does not exceed thirty thousand pesos;
Two per centum of the amount by which the net estate exceeds thirty thousand pesos and does not exceed fifty thousand pesos;
Two and one-half per centum of the amount by which the net estate exceeds fifty thousand pesos and does not exceed eighty thousand pesos;
Three per centum of the amount by which the net estate exceeds eighty thousand pesos and does not exceed one-hundred and ten thousand pesos;
Three and one-half per centum of the amount by which the net estate exceeds one hundred and ten thousand pesos and does not exceed one hundred and fifty thousand pesos;
Four per centum of the amount by which the net estate exceeds one hundred and fifty thousand pesos and does not exceed one hundred and ninety thousand pesos;
Four and one-half per centum of the amount by which the net estate exceeds one hundred and ninety thousand pesos and does not exceed two hundred and forty thousand pesos:
Five per centum of the amount by which the net estate exceeds two hundred and forty thousand pesos and does not exceed two hundred and ninety thousand pesos:
Five and one-half per centum of the amount by which the estate exceeds two hundred and ninety thousand pesos and does not exceed three hundred and fifty thousand pesos;
Six per centum of the amount by which the net estate exceeds three hundred and fifty thousand pesos and does not exceed four hundred and twenty thousand pesos;
Six and one-half per centum of the amount by which the net estate exceeds four hundred and twenty thousand pesos and does not exceed five hundred thousand pesos,
Seven per centum of the amount by which the net estate exceeds five hundred thousand pesos and does not exceed six hundred thousand pesos;
Seven and one-half per centum of the amount by which the net estate exceeds six hundred thousand pesos and does not exceed seven hundred and twenty thousand pesos;
Eight per centum of the amount by which the net estate exceeds seven hundred and twenty thousand pesos and does not exceed eight hundred and fifty thousand pesos;
Eight and one half per centum of the amount by which the net estate exceeds eight hundred pesos does not exceed one million pesos;
Nine per centum of the amount by which the net estate exceeds one million pesos and does not exceed one million two hundred thousand pesos;
Nine and one-half per centum of the amount by which the net estate exceeds one million two hundred thousand pesos and does not exceed one million five hundred thousand pesos; and
Ten per centum of the amount by which the net estate exceeds one million five hundred thousand pesos.
The corresponding estate tax pertaining to and payable by every child or grandchild shall be reduced by five per centum of the said tax.
Rates of inheritance tax.
SEC. 86. Rates of inheritance tax. — In addition to the estate tax imposed by section 85, there shall be levied, assessed, collected and paid an inheritance tax equal to the sum of the following percentages of the value of the individual share of each heir or beneficiary in the net estate, after deducting the amount of the estate tax, of every decedent, whether a resident or non-resident of the Philippines:
(a) When the surviving spouse, a legitimate, recognized natural, or adopted child, or legitimate descendant, or ascendant, or either of the adopting parents is the beneficiary, or the father or mother who had recognized him as natural child, and in every case where the beneficiary receives the property exclusively for educational or charitable purpose, there shall be collected upon the share which corresponds to each beneficiary in the inventoried property a tax according to the following schedule:
One per centum of the amount of the share not in excess of ten thousand pesos;
Two per centum of the amount by which the share exceeds ten thousand pesos and does not exceed thirty thousand pesos;
Three per centum of the amount by which the share exceeds thirty thousand pesos and does not exceed fifty thousand pesos;
Four per centum of the amount by which the share exceeds fifty thousand pesos and does not exceed eighty thousand pesos;
Five per centum of the amount by which the share exceeds eighty thousand pesos and does not exceed one hundred and ten thousand pesos;
Six per centum of the amount by which the share exceeds one hundred and ten thousand pesos and does not exceed one hundred and fifty thousand pesos;
Seven per centum of the amount by which the share exceeds one hundred and fifty thousand pesos and does not exceed one hundred and ninety thousand pesos;
Eight per centum of the amount by which the share exceeds one hundred and ninety thousand pesos and does not exceed two hundred and forty thousand pesos;
Nine per centum of the amount by which the share exceeds two hundred and forty thousand pesos and does not exceed two hundred and ninety thousand pesos;
Ten per centum of the amount by which the share exceeds two hundred and ninety thousand pesos and does not exceed three hundred and fifty thousand pesos;
Eleven per centum of the amount by which the share exceeds three hundred and fifty thousand pesos and does not exceed four hundred and twenty thousand pesos;
Twelve per centum of the amount by which the share exceeds four hundred and twenty thousand pesos and does not exceed five hundred thousand pesos;
Thirteen per centum of the amount by which the share exceeds five hundred thousand pesos and does not exceed six hundred thousand pesos;
Fourteen per centum of the amount by which the share exceeds six hundred thousand pesos and does not exceed seven hundred and twenty thousand pesos;
Fifteen per centum of the amount by which the share exceeds seven hundred and twenty thousand pesos and does not exceed eight hundred and fifty thousand pesos;
Sixteen per centum of the amount by which the share exceeds eight hundred and fifty thousand pesos and does not exceed one million pesos; and
Seventeen per centum of the amount by which the share exceeds one million pesos.
Where the property is received for educational or charitable purposes, it shall be the duty of the person or persons in charge thereof to submit from time to time a report of the administration and use of the property to the Collector of Internal Revenue and within twenty days after demand therefor has been made by the said Collector.
(b) When a brother or sister, who is a legitimate or acknowledged natural child or a common father or mother, or both, or the children of such brother or sister, or any descendant mentioned as such in the will and not included in the subsection (a) hereof is the beneficiary, there shall he collected the same tax fixed in said subsection with an increase of one hundred per centum.
(c) When other relatives within the sixth degree not included in the two next preceding subsections are beneficiaries, there shall be collected the same tax fixed in subsection (a) with an increase of two hundred per centum.
(d) When a relative by affinity within the same degree as those mentioned in subsection (a) and (b), with the exception of the surviving spouse, is the beneficiary, there shall be collected the same tax fixed in subsection (a) with an increase of three hundred per centum.
(c) When strangers are beneficiaries there shall be collected upon the share which corresponds to each beneficiary in the inventoried property a tax according to the following schedule:
Ten per centum of the amount of the share not in excess of ten thousand pesos;
Twenty per centum of the amount by which the share exceeds ten thousand pesos and does not exceed thirty thousand pesos;
Thirty per centum of the amount by which the share exceeds thirty thousand pesos and does not exceed fifty thousand pesos;
Thirty-five per centum of the amount by which the share exceeds fifty thousand pesos and does not exceed eighty thousand pesos;
Forty per centum of the amount by which the share exceeds eighty thousand pesos and does not exceed one hundred and ten thousand pesos;
Forty-five per centum of the amount by which the share exceeds one hundred and ten thousand pesos and does not exceed one hundred and fifty thousand pesos;
Fifty per centum of the amount by which the share exceeds one hundred and fifty thousand pesos and does not exceed one hundred and ninety thousand pesos;
Fifty-five per centum of the amount by which the share exceeds one hundred and ninety thousand pesos and does not exceed two hundred and forty thousand pesos;
Sixty per centum of the amount by which the share exceeds two hundred and forty thousand pesos and does not exceed two hundred and ninety thousand pesos;
Sixty-five per centum of the amount by which the share exceeds two hundred and ninety thousand pesos and does not exceed three hundred and fifty thousand pesos;
Sixty-eight per centum of the amount by which the share exceeds three hundred and fifty thousand pesos and does not exceed four hundred and twenty thousand pesos;
Seventy per centum of the amount by which the share exceeds four hundred and twenty thousand pesos and does not exceed five hundred thousand pesos;
Seventy-one per centum of the amount by which the share exceeds five hundred thousand pesos and does not exceed six hundred thousand pesos;
Seventy-two per centum of the amount by which the share exceeds six hundred thousand pesos and does not exceed seven hundred and twenty thousand pesos;
Seventy-three per centum of the amount by which the share exceeds seven hundred and twenty thousand pesos and does not exceed eight hundred and fifty thousand pesos;
Seventy-five per centum of the amount by which the share exceeds one million pesos.
For the purposes of this tax, strangers are deemed those relatives by consanguinity of the seventh or more remote degree in the collateral line, and all relatives by affinity with the exception of the spouse and those mentioned in subsection (d) of this section: Provided, however, That where the beneficiary is a domestic servant, or a trusted employee, there shall be collected on the first two thousand pesos and five thousand pesos, respectively, the tax fixed in subsection (a) of this section, and on the excess, the tax prescribed in this subsection. In cases of property which by the will of the testator should be divided among the poor, without the designation of any particular persons, or which should be disposed of for masses or other pious works, there shall be collected the tax at the rate fixed in this subsection upon the total amount of said property.
In case the property is transmitted to the heirs subject to the usufructuary interest, use, or habitation, or annuity of a third person, the tax shall be based on the value of the inventoried property less that of the usufruct, use or habitation, or annuity determined as hereinafter provided.
Rule of taxation when beneficiaries belong, to different classes.
SEC. 87. Rule of taxation when beneficiaries belong, to different classes. — When diverse persons not included in the same class or group prescribed in section 86 are beneficiaries, each share shall be subject to the scale of taxation which corresponds to the persons taking.
Gross estate.
Section88. Gross estate. — The value of the gross estate of the decedent shall be determined by including the value at the time of his death of all property, real or personal, tangible or intangible, wherever situated, except real property situated outside the Philippines —
(a) Decedent's interest. — To the extent of the interest therein of the decedent at the time of his death;
(b) Transfers in contemplation of death. — To the extent of any interest therein of which the decedent has at any time made a transfer, by trust or otherwise, in contemplation of or intended to take effect in possession or enjoyment at or after his death, or of which he has at any time made a transfer, by trust or otherwise, under which he has retained for his life or for any period not ascertainable without reference to his death or for any period which does not in fact end before his death (1) the possession or enjoyment of, or the right to the income from the property, or (2) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth. Any transfer of a material part of his property in the nature of a final disposition or distribution thereof, made by the decedent within three years prior to his death without such consideration, shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this Chapter.
(c) Revocable transfers. — (1) To the extent of any interest therein of which the decedent has at any time made a transfer (except in case of bona fide sale) for an adequate and full consideration in money or money's worth; by trust or otherwise, where the enjoyment thereof was subject at the date of his death to any change through the exercise of a power (in whatever capacity exercisable) by the decedent alone or by the decedent in conjunction with any other person (without regard to when or from what source the decedent acquired such power, to alter, amend, revoke, or terminate, or where any such power is relinquished in contemplation of the decedent's death.
(2) For the purposes of this subsection the power to alter, amend, or revoke shall be considered to exist on the date of the decedent's death even though the exercise of the power is subject to a precedent giving of notice or even though the alteration, amendment, or revocation takes effect only on the expiration of a stated period after the exercise of the power, whether or not on or before the date of the decedent's death notice has been given or the power has been exercised. In such cases proper adjustment shall be made representing the interests which would have been excluded from the power if the decedent had lived, and for such purpose if the notice has not been given or the power has not been exercised on or before the date of his death, such notice shall be considered to have been given, or the power exercised, on the date of his death.
(3) The relinquishment of any such power, not admitted or shown to have been in contemplation of the decedent's death, made within three years prior to his death without such consideration and affecting the interest or interests (whether arising from one or more transfers or the creation of one or more trusts) of any one beneficiary mentioned in subsection (a) of section 86, of a value or aggregate value, at the time of such death, in excess of two thousand pesos, then, to the extent of such excess, such relinquishment or relinquishments shall, unless shown to the contrary, be deemed to have been made in contemplation of death within the meaning of this Chapter.
(d) Property passing under general power of appointment. — To the extent of any property passing under a general power of appointment exercised by the decedent (1) by will, or (2) by deed executed in contemplation of or intended to take effect in possession or enjoyment at or after his death, or (3) by deed under which he has retained for his life or any period not ascertainable without reference to his death or for any period which does not in fact end before his death (a) the possession or enjoyment of, or the right to the income from. the property, or (b) the right, either alone or in conjunction with any person, to designate the persons who shall possess or enjoy the property or the income therefrom; except in case of a bona fide sale for an adequate and full consideration in money or money's worth.
(e) Proceeds of life insurance. — To the extent of the amount receivable by the estate of the deceased, his executor, or administrator as insurance under policies taken out by the decedent upon his own life, irrespective of whether or not the insured retained the power of revocation, or to the extent of the amount receivable by any beneficiary designated in the policy of insurance where the insured reserved to himself the power to change or revoke the name of the beneficiary during his lifetime, whether or not he has, during his lifetime, exercised such power of revocation.
(f) Prior interests. — Except as otherwise specifically provided therein, subsections (b), (c), and (e) of this section shall apply to the transfers, trusts, estates, interests, rights, powers, and relinquishment of powers, as severally enumerated and described therein, whether made, created, arising, existing, exercised, or relinquished before or after the enactment of this Code.
(g) Transfer for insufficient consideration. — If any one of the transfers, trusts, interests, rights, or powers, enumerated and described in subsections (b), (c) and (d) of this section is made, created, exercised, or relinquished for a consideration in money or money's worth, but is not a bona fide sale for an adequate and full consideration in money or money's worth, there shall be included in the gross estate only the excess of the fair market value, at the time of death, of the property otherwise to be included on account of such transaction over the value of the consideration received therefor by the decedent.
(h) Capital of the surviving spouse. — The capital of the surviving spouse of a decedent shall not, for the purpose of this Chapter, be deemed a part of his or her gross estate.
Net estate.
SEC. 89. Net estate. — For the purpose of the taxes imposed in this Chapter the value of the net estate shall be determined:
(a) In the case of a citizen or resident of the Philippines, by deducting from the value of the gross estate —
(1) Expenses, losses, indebtedness, and taxes. — Such amounts —
(A) For funeral expenses which shall, in no case, exceed five per centum of the gross estate;
(B) For judicial expenses of the testamentary or intestate proceedings;
(C) For claims against the estate;
(D) For claims of the deceased against insolvent persons where the value of decedent's interest therein is included in the value of the gross estate; and
(E) For unpaid mortgages upon, or any decedent's interest therein, undiminished by such mortgage or indebtedness, is included in the value of the gross estate, but not including any income taxes upon income received after the death of the decedent, or property taxes not accrued before his death, or any estate or inheritance taxes. The deduction herein allowed in the case of claims against the estate, unpaid mortgages, or any indebtedness shall, when founded upon a promise or agreement, be limited to the extent that they were contracted bona fide and for an adequate and full consideration in money or money's worth. There shall also be deducted losses incurred during the settlement of the estate arising from fires, storms, shipwreck, or other casualties, or from robbery, theft, or embezzlement, when such losses are not compensated for by insurance or otherwise, and if at the time of the filing of the return such losses have not been claimed as a deduction from income tax purposes in an income tax return.
(2) Property previously taxed. — An amount equal to the value specified below of any property forming a part of the gross estate situated in the Philippines of any person who died within five years prior to the death of the decedent, or transferred to the decedent by gift within five years prior to his death, where such property can be identified as having been received by the decedent from the donor by gift, or from such prior decedent by gift, bequest, devise or inheritance, or which can be identified as having been acquired in exchange for property so received:
One hundred per centum of the value if the prior decedent died within one year prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death;
Eighty per centum of the value if the prior decedent died more than one year but not more than two years prior to the death of the decedent, or if the property was transferred to him by gift within the same period to his death;
Sixty per centum of the value if the prior decedent died more than two years but not more than three years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death;
Forty per centum of the value if the prior decedent died more than three years but not more than four years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death; and
Twenty per centum of the value if the prior decedent died more than four years but not more than five years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death.
These deductions shall be allowed only where a gift tax, or estate and inheritance taxes imposed under this Title were finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be, and only in the amount finally determined as the value of such property in determining the value of the gift, or the gross estate of such prior decedent, and only to the extent that the value of such property is included in the decedent's gross estate, and only if in determining the value of the net estate of the prior decedent no deduction was allowable under paragraph (2) in respect of the property or property given in exchange therefor. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate and inheritance taxes of the prior decedent, which were paid in whole or in part prior to the decedent's death then the deduction allowable under said paragraph shall be reduced by the amounts so paid. Such deduction allowable shall be reduced by an amount which bears the same ratio to the amounts allowed as deductions under paragraphs (1), (3), and (4) of this subsection as the amount otherwise deductible under said paragraph (2) bears to the value of the decedent's gross estate. Where the property referred to consists of two or more items the aggregate value of such items shall be used for the purpose of computing the deduction.
(3) Transfers for public purposes. — The amount of all bequests, legacies, devises, or transfers, to or for the use of the Government of the Philippines, or any political subdivision thereof, for exclusively public purposes. If the taxes imposed by sections 85 and 86 of this Chapter, or any estate, succession, legacy or inheritance taxes are either by the terms of the will, by the law of the jurisdiction under which the estate is administered, or by the law of the jurisdiction imposing the particular tax, payable in whole or in part out of the bequests, legacies, or devises otherwise deductible under this paragraph, then the amount deductible shall be the amount of such bequests, legacies, or devises, reduced by the amount of such taxes the amount of the deduction under this paragraph for any transfer shall not exceed the value of the transferred property required to be included in the gross estate.
(4) Transfers to the surviving spouse and children. — The amount of all bequests, legacies, devises, or transfers to the surviving spouse and the legitimate or recognized natural or adopted children not exceeding three thousand pesos each.
(b) Deductions allowed to non-resident estates. — In the case of non-resident not a citizen of the Philippines, by deducting from the value of that part of his gross estate which at the time of his death is situated in the Philippines —
(1) Expenses, losses, indebtedness, and taxes. — That proportion of the deductions specified in paragraph (1) of subsection (a) of this section which the value of such part bears to the value of his entire gross estate wherever situated;
(2) Property previously taxed. — An amount equal to the value specified below of any property forming a part of the gross estate situated in the Philippines of any person who died within five years prior to the death of the decedent, or transferred to the decedent by gift within five years prior to his death, where such property can be identified as having been received by the decedent from the donor by gift, or from such prior decedent by gift, bequest, devise, or inheritance, or which can be identified as having been acquired in exchange for property so received:
One hundred per centum of the value if the prior decedent died within one year prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death;
Eighty per centum of the value if the prior decedent died more than one year but not more than two years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death;
Sixty per centum of the value if the prior decedent died more than two years but not more than three years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior his death;
Forty per centum of the value if the prior decedent died more than three years but not more than four years prior to the death of the decedent, or if the property was transferred to him by gift within the same period prior to his death; and
Twenty per centum of the value if the prior decedent died more than four years but not more than five years prior to death of the decedent, or if the property was transferred to him by gift within the same period prior to his death.
These deductions shall be allowed only where a gift tax, or estate and inheritance taxes imposed under this Title were finally determined and paid by or on behalf of such donor, or the estate of such prior decedent, as the case may be, and only in the amount finally determined as the value of such property in determining the value of the gift, or the gross estate of such prior decedent, and only to the extent that the value of such property is included in that part of the decedent's gross estate which at the time of his death is situated in the Philippines, and only if in determining the value of the net estate of the prior decedent no deduction was allowable under paragraph (2) of subsection (b) of this section in respect of the property or properties given in exchange therefor. Where a deduction was allowed of any mortgage or other lien in determining the gift tax, or the estate and inheritance taxes of the prior decedent, which were paid in whole or in part prior to the decedent's death, then the deduction allowable under said paragraph shall be reduced by the amounts so paid. Such deduction allowable shall be reduced by an amount which bears the same ratio to the amounts allowed as deductions under paragraphs (1) and (3) of this subsection as the amount otherwise deductible under paragraph (2) bears to the value of that part of the decedent's gross estate which at the time of his death is situated in the Philippines. Where the property referred to consists of two or more items the aggregate value of such terms shall be used for the purpose of computing the deduction.
(3) Transfer for public use. — The amount of all bequests, legacies, devises, or transfers to or for the use of the Government of the Philippines, or any political subdivision thereof for exclusively public purposes. If the taxes imposed by sections 85 and 86 of this Chapter, or any estate, succession, legacy, or inheritance taxes are, either by the terms of the will, by the law of the jurisdiction under which the estate is administered, or by the law of the jurisdiction imposing the particular tax, payable in whole or in part out of the bequests, legacies, or devises, otherwise deductible under this paragraph, then the amount deductible shall be the amount of such bequests, legacies, or devises reduced by the amount of such taxes. The amount of the deduction for any transfer shall not exceed the value of the transferred property required to be included in the gross estate.
(c) Share in the conjugal property. — The net share of the surviving spouse in the conjugal partnership property as diminished by the obligations properly chargeable to such property shall, for the purpose of this section, be deducted from the net estate of the decedent.
(d) Miscellaneous provisions. — (1) No deductions shall be allowed in the case of a non-resident not a citizen of the Philippines unless the executor, administrator or anyone of the heirs, as the case may be, includes in the return required to be filed under section 93 the value at the time of his death of that part of the gross estate of the non-resident not situated in the Philippines.
(2) For the purpose of this Chapter, stock in a domestic corporation owned and held by a non-resident not a citizen of the Philippines shall be deemed property within the Philippines, and any property of which the decedent has made a transfer by trust or otherwise, within the meaning of subsection (b) or (c) of section 83 of this Chapter, shall be deemed to be situated in the Philippines if so situated either at the time of the transfer or at the time of the decedent's death.
Exemption of certain acquisitions and transmissions.
SEC. 90. Exemption of certain acquisitions and transmissions. — The following shall not be taxed:
(a) The merger of usufruct in the owner of the naked title.
(b) The transmission or delivery of the inheritance or legacy by the fiduciary heir or legatee to the fideicommissary.
(c) The transmission from the first heir, legatee, or donee in favor of another beneficiary, in accordance with the desire of the predecessor.
In the last two cases, if the scale of taxation appropriate to the new beneficiary is greater than that paid by the first, the former must pay the difference.
Determination of value of usufructs, annuities, and other property.
SEC. 91. Determination of value of usufructs, annuities, and other property. — In order to determine the value of the right of usufruct, use or habitation, as well as that of annuity, there shall be taken into account the probable life of the beneficiary in accordance with the American Tropical Experience Table, calculated at eight per centum annual interest.
The estate shall be appraised at its fair market value as of the time of death, or as of six months thereafter, at the election of the executor or administrator in the case of the estate tax or the heirs in the case of inheritance tax. However, for the purpose of determining the value of real property, the assessed value as of the time of death, or, at the election of the executor, administrator or the heirs, as of six months after death, as shown by the tax rolls shall be considered as the fair market value, unless the contrary is shown.
In order to determine the tax which should be paid by the beneficiary of a legacy of education referred to in article 879 of the Civil Code, when the legacy consists of profits, interests, or dividends derived from any property, the legatee should be considered as a usufructuary until he becomes of legal age.
In case a legacy of usufruct is made in favor of a juridical person, the legatee shall pay seventy-five per centum of the tax and the remaining twenty-five per centum shall be paid by the owner of the naked title of the property.
Notice of death to be filed.
SEC. 92. Notice of death to be filed. — In all cases of inheritance or transfer subject to tax, or where, though exempt from tax, the gross value of the estate exceeds three thousand pesos, the executor, administrator, or the heirs, as the case may be, within two months after the decedent's death, or within a like period after qualifying as such executor or administrator, shall give a written notice thereof to the Collector of Internal Revenue.
Returns. (a) Requirements.
SEC. 93. Returns.
(a) Requirements. — In all cases of inheritance or transfers subject to either the estate tax or the inheritance tax, or both, or where, though exempt from both taxes, the gross value of the estate exceeds three thousand pesos, the executor, administrator, or anyone of the heirs, as the case may be, shall file a return under oath in duplicate, setting forth (1) the value of the gross estate of the decedent at the time of his death, or, in case of a non-resident not a citizen of the of the Philippines, of that part of his gross estate situated in the Philippines; (2) the deductions allowed from gross estate in determining net estate as defined in section 89; (3) such part of such information as may at the time be ascertainable and such supplemental data as may be necessary to establish the correct taxes.
(b) Time for filing. — For the purpose of determining both the estate and inheritance taxes provided for in sections 85 and 86 of this Chapter, the return required under the preceding subsection (a) shall be filed within six months after the decedent's death; but if judicial testamentary or intestate proceedings shall be instituted for the settlement of the decedent's state prior to the expiration of said period, the return must be filed within twelve months after the decedent's death.
A certified copy of the schedule of partition and the order of the court approving the same shall be furnished the Collector of Internal Revenue by the clerk of court within thirty days after the promulgation of such order.
(c) Extension of time. — The Collector of Internal Revenue shall have authority to grant, in meritorious cases, a reasonable extension not exceeding thirty days for filing the return.
(d) Place for filing. — The return required under subsection (a) shall be filed with the Collector of Internal Revenue, provincial revenue agent, or with the treasurer of the province, city, or municipality in which the decedent was domiciled at the time of his death.
Where no return, or a false or fraudulent return filed.
SEC. 94. Where no return, or a false or fraudulent return filed. — In case the executor, administrator, or any heir fails to file a return at the time prescribed above, or makes, willfully or otherwise, a false or fraudulent return, the Collector of Internal Revenue shall make the return from his own knowledge and from such information as he can obtain through testimony or otherwise. In any such case, the Collector of Internal Revenue may make a return or amend any return and any return so made shall be prima facie good and sufficient for all legal purposes.
SEC. 95. Payment of tax.
(a) Time of payment.
(1) General rule. — The estate and inheritance taxes imposed by sections 85 and 86 shall be due and payable within nine months and twelve months, respectively, after the decedent's death and shall be paid by the executor, administrator, or the heirs, as the case may be, to the Collector of Internal Revenue or to the treasurer of the province, city, or municipality in which the decedent was domiciled at the time of his death.
(2) Exception. — In case judicial testamentary or intestate proceedings shall be instituted for the settlement of the decedent's estate prior to the expiration of six months after his death, the estate and inheritance taxes shall be due and payable within twenty-one months and twenty-four months, respectively, after the decedent's death.
(b) Extension of time. — When the Collector of Internal Revenue finds that the payment on the due date of the estate or inheritance taxes or of any part of the said amounts would impose undue hardship upon the estate or any of the heirs, he may extend the time for payment of such taxes or any part thereof not to exceed five years in case the estate is settled through the court or two years in case the estate is settled extra-judicially. In such case the amount in respect of which the extension is granted shall be paid on or before the date of the expiration of the period of the extension, and the running of the statute or limitations for assessment as provided in section 331 of this Code shall be suspended for the period of any such extension.
Where the taxes are assessed by reason of negligence, intentional disregard of rules and regulations, or fraud on the part of the taxpayer, no extension will be granted by the Collector.
If an extension is granted, the Collector of Internal Revenue may require the executor, or administrator, or the beneficiary, as the case may be, to furnish a bond in such amount, not exceeding double the amount of the taxes and with such sureties as the Collector deems necessary, conditioned upon the payment of the said taxes in accordance with the terms of the extension.
(c) Liability for payment. — The estate tax imposed by section 85 shall be paid by the executor or administrator before delivering to any beneficiary his distributive share of the estate. For the purpose of this Chapter, the term "executor" or "administrator" means the executor or administrator of the decedent, or, if there is no executor or administrator appointed, qualified, and acting within the Philippines, then any person in actual or constructive possession of any property of the decedent.
The inheritance tax imposed by section 86 shall, in the absence of contrary disposition by the predecessor, be charged to the account of each beneficiary, in proportion to the value of the benefit received, and in accordance with the scale fixed for the class or group to which he pertains: Provided, That in cases where the heirs divide extra-judicially the property left to them by their predecessor or otherwise convey, sell, transfer, mortgage, or encumber the same without paying the estate or inheritance taxes within the period prescribed in the preceding subsections (a) and (b), they shall be solidarily liable for the payment of the said taxes to the extent of the estate they have received.
Examination of return and determination of tax.
SEC. 96. Examination of return and determination of tax. —As soon as practicable, after the return is filed the Collector of Internal Revenue shall examine it and shall determine the correct amount of the taxes due thereon.
Discharge of executor or administrator from personal liability.
SEC. 97. Discharge of executor or administrator from personal liability. — If the executor or administrator makes written application to the Collector of Internal Revenue for determination of the amount of the estate tax and discharge from personal liability therefor, the Collector of Internal Revenue, as soon as possible, and in any event within one year after the making of such application, or, if the application is made before the return is filed, then within one year after the return is filed, but not after the expiration of the period prescribed for the assessment of the tax in section 331, shall notify the executor or administrator of the amount of the tax. The executor or administrator, upon payment of the amount of which he is notified, shall be discharged from personal liability for any deficiency in the tax thereafter found to be due and shall be entitled to a receipt or writing showing such discharge.
Definition of deficiency.
SEC. 98. Definition of deficiency. — As used in this Chapter, the term "deficiency" means:
(a) The amount by which the taxes imposed by this Chapter exceed the amount shown as the taxes by the executor, administrator or any of the heirs upon his return but the amount so shown on the return shall first be increased by the amounts previously assessed (or collected without assessment) as a deficiency and decreased by the amounts previously abated, refunded, or otherwise repaid in respect of such taxes; or
(b) If no amount is shown as the taxes by the executor, administrator or any of the heirs upon his return or if no return is made by the executor, administrator, or any heir, then the amount by which the taxes exceed the amounts previously assessed (or collected without assessment) as a deficiency; but such amounts previously assessed, or collected without assessment, shall first be decreased by the amounts previously abated, refunded, or otherwise repaid in respect of such taxes.
Interest on extended payment.
SEC. 99. Interest on extended payment. — (a) Tax shown on the return. — If the time for the payment of either the estate tax or the inheritance tax or any part thereof is extended as provided in subsection (b) of section 95, there shall be collected, as a part of such amount, interest thereon at the rate of six per centum per annum from the day following the due date of the taxes to the expiration of the period of the extension.
(b) Deficiency. — In case an extension for the payment of a deficiency is granted, there shall be collected, as a part of the tax, interest on the part of the deficiency the time for the payment of which is so extended, at the rate of six per centum per annum for the period of the extension.
Interest on deficiency.
SEC. 100. Interest on deficiency. — Interest upon the amount determined as a deficiency shall be assessed at the same time as deficiency, shall be paid upon notice and demand from the Collector of Internal Revenue, and shall be collected as a part of the tax, at the rate of six per centum per annum from the due date of the tax to the date the deficiency is assessed.
Additions to the tax in case of non-payment.
SEC. 101. Additions to the tax in case of non-payment. — (a) Tax shown on the return.
(1) Payment not extended.-Where the amount of the taxes imposed by this Chapter, or any part of such amount is not paid on the due date of the taxes, there shall be collected as a part of the taxes, interest upon such unpaid amount at the rate of one per centum a month from the due date until it is paid.
(2) Payment extended.-Where an extension of time for payment of the amount of the taxes has been granted, and the amount, the time for the payment of which has been extended, and the interest thereon determined under subsection (a) of section 99, is not paid in full prior to the expiration of the period of the extension, interest at the rate of one per centum a month shall be collected on such unpaid amount from the date when the same was originally due until it is paid.
(b) Deficiency.
(1) Payment not extended. — Where a deficiency, or any interest assessed in connection therewith under section 100, or any addition to the taxes provided for in section 102 is not paid in full within thirty days from the date of the notice and demand from the Collector, there shall be collected as part of the taxes, interest upon the unpaid amount at the rate of one per centum a month from the date of such notice and demand until it is paid.
(2) Payment extended. — If the part of the deficiency the time for payment of which is extended is not paid in accordance with the terms of the extension, there shall be collected, as a part of the taxes, interest on such unpaid amount at the rate of one per centum a month from the date the same was originally due until it is paid.
(c) Surcharge. — If any amount of the taxes included in the notice and demand from the Collector of Internal Revenue is not paid in full within thirty days after such notice and demand, there shall be collected in addition to the interest prescribed herein and in sections 99 and 100 and as part of the taxes a surcharge of five per centum of the unpaid amount.
Ad valorem penalties.
SEC. 102. Ad valorem penalties. — In case of any failure to make and file a return within the time prescribed by law or by the Collector of Internal Revenue, the Collector shall add to the tax twenty-five per centum of its amount, except that, when a return is voluntarily and without notice from the Collector filed after such time, and it is shown that the failure to file it was due to a reasonable cause, no such addition shall be made to the tax. In case a false or fraudulent return is made, the Collector of Internal Revenue shall add to the tax or to the deficiency tax, in case any payment has been made on the basis of such return before the discovery of the falsity or fraud, a surcharge of fifty per centum of its amount. The amount so added to any tax shall be collected at the same time and in the same manner and as part of the tax unless the tax has been paid before the discovery of the neglect, falsity, or fraud, in which case the amount so added shall be collected in the same manner as the tax.
Payment before delivery by executor or administrator.
SEC. 103. Payment before delivery by executor or administrator. — No judge shall authorize the executor or judicial administrator to deliver a distributive share to any party interested in the estate unless it shall appear that the estate tax has been paid.
Duties of certain officers and debtors.
SEC. 104. Duties of certain officers and debtors. — Registers of deeds shall not register in the registry of property any document transferring real property or real rights therein or any chattel mortgage, by way of gifts inter vivos or mortis causa, legacy or inheritance, unless the payment of the taxes fixed in this Title and actually due thereon shall be shown. And they shall immediately notify the Collector of Internal Revenue or the corresponding provincial or city treasurer of the non-payment of the tax discovered by them. Any lawyer, notary public, or any Government officer who, by reason of his official duties, intervenes in the preparation or acknowledgment of documents regarding partition or disposal of donation inter vivos or mortis causa, legacy or inheritance, shall have the duty of furnishing the Collector of Internal Revenue or the provincial or city treasurer of the place where he may have his principal office, with copies of such documents and any information whatsoever which may facilitate the collection of the aforementioned tax. Neither shall a debtor of a deceased pay his debts to the heirs, legatees, executor, or administrator of his creditor, unless the payment of the tax fixed in this Chapter shall be shown; but he may pay the executor or judicial administrator without said requirement if the credit is included in the inventory of the estate of the deceased.
Restitution of tax upon satisfaction of outstanding obligations.
SEC. 105. Restitution of tax upon satisfaction of outstanding obligations. — If, after the payment of the taxes, new obligations of the testator shall appear, and the persons interested shall have satisfied them by order of the court, they shall have a right to the restitution of the proportional parts of the taxes paid.
Payment of tax antecedent to the transfer of shares, bonds, or rights.
SEC. 106. Payment of tax antecedent to the transfer of shares, bonds, or rights. — There shall not be transferred to any new owner in the books of any corporation, sociedad anonima, partnership, business, or industry organized or established in the Philippines, any shares, obligations, bonds, or rights by way of gift inter vivos or mortis causa, legacy, or inheritance unless it is shown that the taxes fixed in this Title and due thereon have been paid.
Specific penalties.
SEC. 107. Specific penalties. — (a) Any person required under this Chapter or regulations made under authority thereof to pay the tax, make a return, keep any records, or supply any information, for the purposes of the computation, assessment, or collection of any tax imposed by this Chapter, who fails to pay such tax, make such return, keep such records, or supply such information, at the time or times required by this Chapter or regulations, shall, in addition to other penalties provided herein, be fined not more than two thousand pesos or imprisoned for not more than six months, or both.
(b) Any person required under this Chapter to make, render, sign, or verify any return, or to supply any information, who makes any false or fraudulent return or statement with intent to defeat or evade the assessment required by this Chapter to be made, in addition to other penalties provided herein, be fined not more than four thousand pesos or imprisoned for not more than one year, or both.
(c) Any executor or administrator who shall deliver or distribute to an heir, legatee, devisee, donee, or beneficiary any real or personal property, credit, right, or franchise, and any officer, manager or employee of any corporation, firm or association, sociedad anonima, partnership, business or industry who transfers in its books to any new owner any share, obligation, bond, or right, pertaining to an estate or inheritance subject to the taxes imposed in this Chapter without their payment being shown, shall be fined not more than five thousand pesos or imprisoned for not more than one year, or both.
(d) Any administrator, executor, donee, legatee, or heir who conceals any goods, rights, credits, or transfers subject to the taxes imposed in this Chapter shall be punished by a fine of not less than twenty-five per centum of the value of that which he may have concealed, not more than said value, or by imprisonment for not more than one year, or both.
Source: Official Gazette of the Republic of the Philippines — Philippine laws are public documents (works of the government).
