The document discusses deductions that can be taken from a decedent's gross estate for estate tax purposes in the Philippines. For resident citizens, non-resident citizens, and resident aliens, allowable deductions include funeral expenses up to 5% of the gross estate or PHP 200,000, whichever is lower; judicial expenses of estate administration; claims against the estate; and other items. For non-resident alien decedents, only property located in the Philippines and a portion of expenses are deductible, based on a ratio of Philippine to worldwide assets.

1. Transfer & Business
Taxation
CHAPTER 4: DEDUCTIONS FROM GOSS ESTATE

2. Deduction from Gross State
Resident Citizen, Non-Resident Citizen and Resident Alien
Decedents
 The value of the net estate to a citizen or
resident alien of the Philippines shall be
determined by deducting from the value of
the gross estate of the following items of
deduction:
1. Expenses, losses, indebtedness, and taxes
A. Funeral expenses
B. Judicial expenses of the testamentary/intestate
proceedings
C. Claims against the estate
D. Claims of the deceased against insolvent
persons
E. Unpaid mortgages/indebtedness
F. Unpaid taxes
G. Casualty losses
2. Property previously taxed or vanishing
deduction
3. Transfer for public use
4. Family home
5. Standard deduction equivalent to one million
pesos (P1,000,000)
6. Medical expenses
7. Amount received by heirs under Republic Act
4917
8. Net share of surviving spouse in the conjugal
partnership or community property.

3. Deduction from Gross State
Non-Resident Alien Decedents
 The estate of non-resident alien decedents are taxable only in their gross estate situated in the
Philippines and as such are allowed the following deductions from their gross estate:
1. Expenses, Losses, Indebtedness, and Taxes. This deduction is subject to limitation
as follows:
Gross estate, Phil.
Gross estate, World
× World expenses, losses, indebtedness & taxes = Deduction Allowed
2. Property Previously Taxed. Vanishing deduction on property situated in the Philippines
3. Transfer for Public Use of Property situated in the Philippines
4. Net Share of Surviving Spouse in the Conjugal partnership or Community Property

4. Resident Citizen, Non-Resident Citizen and Resident
Alien Decedents
Expenses, Losses, Indebtedness, and Taxes
Funeral Expenses
 For death occurring on or after Jan. 1, 1998, the amount allowable as deduction shall be the
lower amount between the actual funeral expenses (whether paid or unpaid) and five percent
(5%) of the gross estate, but in no case to exceed two hundred thousand pesos (P200,000). Any
unpaid portion in excess of the P200,000 threshold cannot be claimed as deduction under
‘claims against the estate’. Prior to this date, the following laws and rates govern:
Period Covered Rate Governing Law
Up to Dec. 31, 1972 5% of the gross estate C.A. 466
Jan. 1,1973 – July 27, 1992 5% of the gross estate but not
exceeding P50,000
P.D. 69
July 28, 1992 – Dec. 31, 1997 5% of the gross estate but not
exceeding P100,000
R.A. 7499

5. Resident Citizen, Non-Resident Citizen and Resident
Alien Decedents
Expenses, Losses, Indebtedness, and Taxes
Funeral Expenses
 Actual expenses shall mean those which are actually incurred in connection with the interment or
burial of the deceased. The expenses must be duly supported by receipt, invoices or other evidence
to show that they were actually incurred. The term ‘Funeral Expenses’ is not confined to its
ordinary or usual meaning. They include:
1. Mourning apparel of the surviving spouse and unmarried minor children of the deceased bought
and used on the occasion of the burial;
2. Expenses for the deceased’s wake, including food and drinks;
3. Publication charges for death notices;
4. Telecommunication expenses in informing relatives of the deceased;
5. Cost of burial plot, tombstones, monument or mausoleum but not their upkeep. In case the
deceased owns a family estate or several burial lots, only the value corresponding to the plot
where he is buried is deductible.
6. Interment and/or cremation fees and charges; and
7. All other expenses incurred for the performance of the rites and ceremonies incident to
interment.

6. Resident Citizen, Non-Resident Citizen and Resident
Alien Decedents
Expenses, Losses, Indebtedness, and Taxes
Funeral Expenses
 Expenses incurred after the interment such as for prayers, entertainment, or the like are not
deductible. Any portion of the funeral and burial expenses borne or defrayed by relatives and
friends of the deceased are not deductible.
ILUSTRATION:
CASE
A B C
Gross estate P2,500,000 P3,500,000 P4,500,000
1. Actual funeral expenses 100,000 185,000 250,000
2. 5% of gross estate 125,000 175,000 225,000
3. Maximum limit 200,000 200,000 200,000
Deduction allowed 100,000 175,000 200,000

7. Resident Citizen, Non-Resident Citizen and Resident
Alien Decedents
Expenses, Losses, Indebtedness, and Taxes
Judicial Expenses
 ‘Judicial expenses of the testamentary
or intestate proceedings’ are those
incurred in the:
• inventory taking of assets comprising the
gross estate
• their administration
• the payment of debts of the estate
• distribution of the estate among the
heirs
 Judicial expenses may include:
a. Fees of executor or administration;
b. Attorney’s fees;
c. Court fees;
d. Accountant’s fee’s
e. Appraiser’s fees;
f. Clerk hire;
g. Costs of preserving and distributing the
estate;
h. Costs of storing or maintaining property
of the estate; and
i. Brokerage fees or selling property of the
estate.