Philippines Inheritance & Gift Tax Guide 2026

Overview — Estate and Donor's Taxation in the Philippines

Inheritance and gift taxation in the Philippines is governed by the National Internal Revenue Code as amended by the TRAIN Law (Republic Act No. 10963). The Bureau of Internal Revenue (BIR) administers both the estate tax and the donor's tax. The TRAIN Law (effective 2018) significantly reformed the system by replacing the graduated estate tax rates (with a top rate of 20%) with a flat 6% rate, and similarly simplifying the donor's tax to a flat 6%. Both taxes are imposed on Philippine residents' worldwide transfers and on non-residents' Philippine-situated assets.

Estate Tax — 6% Flat Rate

The Philippine estate tax is a single flat rate of 6% on the net estate (gross estate less allowable deductions) exceeding PHP 200,000. Key features:

• Rate: 6% of the net estate (no progressive brackets — a single flat rate)
• Threshold: Estates with a net value of PHP 200,000 or less are exempt from estate tax
• Gross estate: Includes all real and personal property of the decedent at the time of death, wherever situated (for residents) or only Philippine-situated (for non-residents)
• Net estate: Gross estate less allowable deductions
• Filing: Estate tax return (BIR Form 1801) must be filed within 1 year from the decedent's death (extendable for valid cause)

Estate Tax Deductions

The following deductions are allowed in computing the net taxable estate:

• Standard deduction: PHP 5,000,000 — a flat deduction available to all estates, regardless of actual expenses
• Family home deduction: PHP 5,000,000 — the value of the deceased's family home (principal residence) up to PHP 5 million is deductible from the gross estate
• Medical expenses: Medical expenses of the decedent during the last 1 year prior to death, up to PHP 500,000 (subject to documented proof)
• Funeral expenses: Actual funeral expenses, up to 5% of the gross estate but not exceeding PHP 500,000 (whichever is lower)
• Claims against the estate: Debts and liabilities of the decedent that are valid and subsisting at the time of death
• Transfer for public use: Amounts donated to the Government of the Philippines or qualified charitable institutions (subject to limits)
• Losses, casualty, and theft: Losses incurred during the settlement of the estate not compensated by insurance
• Vanishing deductions: Deductions for property previously acquired by the decedent by gift or inheritance from another person within a certain period before death

The combination of the PHP 5,000,000 standard deduction and the PHP 5,000,000 family home deduction means that for most families, no estate tax is payable on estates valued up to PHP 10 million or more.

Vanishing Deductions

Vanishing deductions allow the reduction of the taxable estate for property that was previously subjected to estate tax or donor's tax within a certain period before the decedent's death. The deduction is calculated as a percentage of the value of the property, based on the time elapsed between the prior transfer and the current death:

• Within 1 year: 100% of the property value deductible
• 1-2 years: 80% deductible
• 2-3 years: 60% deductible
• 3-4 years: 40% deductible
• 4-5 years: 20% deductible
• Over 5 years: 0% (no vanishing deduction)

This prevents the same property from being fully taxed multiple times within a short succession period.

Donor's Tax — 6% Flat Rate

The Philippine donor's tax (gift tax) was simplified by the TRAIN Law to a flat 6% rate, replacing the previous graduated system with rates up to 30%. Key features:

• Rate: 6% of the net gift (gross gift less allowable deductions)
• Annual exemption: Gifts totalling PHP 250,000 or less per calendar year are exempt from donor's tax
• Net gift: The value of the gift in excess of PHP 250,000 per year
• Gifts to spouses: Gifts between spouses are exempt from donor's tax (regardless of amount)
• Deductible gifts: Gifts to the Government of the Philippines, educational institutions, and charitable organisations may be deductible or exempt
• Filing: Donor's tax return (BIR Form 1800) must be filed within 30 days after the gift is made

Inheritance and Gift Tax for Family Transfers

Under TRAIN, family transfers are treated relatively favourably:

• Family home deduction (PHP 5M): Reduces the taxable estate for the primary family residence
• Standard deduction (PHP 5M): A flat deduction for all estates, providing significant relief to smaller estates
• Spousal gifts exempt: Gifts between spouses are fully exempt from donor's tax
• PHP 250k annual exemption: Small gifts within the family are tax-free
• Effective exemption for most families: For estates up to approximately PHP 10 million (with the family home), the estate tax is effectively zero

Despite the relatively high headline rate (6%), the generous deductions mean that most family estates and gifts do not actually incur tax.

Filing and Payment

Estate tax returns (BIR Form 1801) are due within 1 year from the date of death. An extension of up to 2 years may be granted by the BIR for valid cause (e.g., complex estate, litigation). Payment may be made in instalments (2-year term) for large estates subject to interest. Donor's tax returns (BIR Form 1800) are due within 30 days of the gift. Late filing and payment incur penalties: 25% surcharge (50% if fraud) plus 12% interest per annum (subject to adjustment by the BIR).

FAQs

Is the estate tax still 6% under TRAIN?

Yes. The TRAIN Law (effective 2018) established a flat 6% estate tax rate on the net estate exceeding PHP 200,000, replacing the old graduated rates (which ranged from 0% to 20%). The 6% flat rate has been maintained through subsequent amendments.

Is there any difference between estate tax for residents and non-residents?

Yes. Resident decedents are taxed on their worldwide estate (all assets, wherever located). Non-resident decedents are taxed only on their Philippine-situated assets (real property in the Philippines, shares in domestic corporations, and certain intangibles). The same 6% rate and deductions apply, but non-residents cannot claim the family home deduction unless the family home is in the Philippines.

What happens if I give more than PHP 250,000 in gifts in a year?

The excess over PHP 250,000 is subject to 6% donor's tax. For example, if you give PHP 1,000,000 in total gifts in a year, the taxable gift is PHP 750,000 (PHP 1M - PHP 250k), and the donor's tax is PHP 45,000 (6% × PHP 750,000). Gifts to spouses are always exempt.

How is the family home defined for estate tax purposes?

The family home is the residential dwelling where the decedent and their family resided at the time of death. It includes the land on which the home is situated. The PHP 5 million deduction applies to the fair market value of the family home as included in the gross estate.

Disclaimer

This guide provides general information about Philippine inheritance and gift tax for the 2026 tax year. Tax laws and rates may change. Always consult with a qualified Philippine tax professional or the BIR directly for advice specific to your situation. InvestmentKit does not provide tax advice.