Valuing Unlisted Corporate Shares for Estate Tax Purposes Under Bureau of Internal Revenue Rules (Philippines)
Introduction: Why valuation of unlisted shares matters in estate tax filings
When a decedent owns shares in a privately held corporation, the executor or heirs must report those shares in the estate tax return at their fair market value (FMV) as of the time of death. The FMV directly affects the gross estate, the net estate, and ultimately the estate tax due. Philippine rules treat valuation as a compliance matter: using the wrong valuation method or the wrong financial statements can lead to deficiency assessments, delays in settlement, and problems securing clearances needed to transfer property.
Governing Philippine law and BIR rules on valuation
The National Internal Revenue Code requires that estate properties be appraised at their fair market value at the time of death, and for real property, the FMV is generally the higher of the BIR’s valuation and the local assessor’s schedule of values (National Internal Revenue Code of 1997, as amended; Section 88[B], date accessed in compilation: 2026) [National Internal Revenue Code of 1997 (2026)].
For estate tax amnesty filings and related valuation guidance, Revenue Regulations No. 6-2019 states that for shares of stock not listed, FMV is determined from the issuing corporation’s audited financial statements nearest the date of death, using book value for common shares and par value for preferred shares, and further provides that this valuation is exempt from Revenue Regulations No. 6-2013 (Revenue Regulations No. 6-2019, 2019) [RR No. 6-2019 (2019)].
Scope: what this guide covers (and what it does not)
This article focuses on the accounting computation the BIR requires to determine FMV of unlisted corporate shares for estate tax purposes, using the rule that relies on the audited financial statements nearest the date of death. It is written for typical privately held corporations with standard financial statements.
This article does not compute capital gains tax for share sales, and it does not cover donor’s tax valuation rules for undervalued sales (those are governed by different provisions and have separate jurisprudence). Still, understanding the distinction is helpful because the BIR uses different valuation methods depending on the tax type.
Core rule for estate tax: value is “as of time of death”
Estate tax valuation is anchored on the date-of-death rule: properties are valued at FMV as of the time of death(National Internal Revenue Code of 1997, as amended; Section 88[B]) [National Internal Revenue Code of 1997 (2026)].
For unlisted shares, Revenue Regulations No. 6-2019 reinforces that the relevant audited financial statement is the one nearest to the date of death (RR No. 6-2019, 2019) [RR No. 6-2019 (2019)]. This “nearest date” point matters when the corporation issues audited statements after year-end and the death occurs in between reporting periods.
The BIR’s exact accounting formula for unlisted shares (estate tax)
For estate tax purposes under RR No. 6-2019, the computation is typically based on the issuing corporation’s audited financial statements nearest the date of death. The rule differs depending on whether the shares are common or preferred (RR No. 6-2019, 2019) [RR No. 6-2019 (2019)].
Formula A: Common shares — Book Value per Share (BVPS)
Book Value per Share (BVPS) is generally computed as:
BVPS = (Total Assets − Total Liabilities) ÷ Total Outstanding Common Shares
Then:
FMV of Common Shares in the estate = BVPS × Number of Common Shares owned by the decedent
RR No. 6-2019 expressly adopts book value for common shares as shown in the audited financial statements nearest the date of death (RR No. 6-2019, 2019) [RR No. 6-2019 (2019)].
Formula B: Preferred shares — Par Value per Share
For preferred shares (for estate tax under RR No. 6-2019):
FMV per Preferred Share = Par Value per share (per the corporation’s AFS / corporate records)
Then:
FMV of Preferred Shares in the estate = Par Value × Number of Preferred Shares owned by the decedent
This follows RR No. 6-2019’s rule: par value for preferred shares based on the audited financial statements nearest the date of death (RR No. 6-2019, 2019) [RR No. 6-2019 (2019)].
Worked example (typical scenario)
Assume the audited financial statements nearest the date of death show:
Total Assets = PHP 120,000,000
Total Liabilities = PHP 40,000,000
Total Outstanding Common Shares = 1,000,000 common shares
Then:
BVPS = (120,000,000 − 40,000,000) ÷ 1,000,000 = PHP 80.00 per common share
If the decedent owned 25,000 common shares:
FMV (common shares) = 80.00 × 25,000 = PHP 2,000,000
If the decedent also owned 10,000 preferred shares with par value of PHP 100/share:
FMV (preferred shares) = 100 × 10,000 = PHP 1,000,000
Total FMV of unlisted shares to be included in the gross estate = PHP 3,000,000
Checklist: documents you should secure to support the valuation
Because the governing rule uses the AFS nearest the date of death, estates typically need to assemble a clean paper trail. Common supporting documents include:
- Audited Financial Statements of the issuing corporation nearest the date of death (RR No. 6-2019, 2019) [RR No. 6-2019 (2019)].
- Stock certificates and/or proof of shareholdings in the name of the decedent.
- Corporate secretary’s certificate on the number and class of shares outstanding and owned by the decedent (common vs. preferred).
- Schedule reconciling equity (to explain retained earnings, additional paid-in capital, or other equity accounts reflected in the AFS).
Common issues in computing book value (and how to avoid them)
1) Using the wrong AFS “nearest” the date of death. RR No. 6-2019 is explicit that the audited financial statement should be the one nearest the date of death (RR No. 6-2019, 2019) [RR No. 6-2019 (2019)]. If death occurs mid-year, determine whether the nearest AFS is the latest year-end AFS or a more recent audited set (if available).
2) Confusing book value with fair market value methods used for other tax types. For donor’s tax and certain share sale contexts, the BIR has used different FMV concepts, including the adjusted net asset method in other regulations and cases; however, RR No. 6-2019 states the estate-tax valuation of not listed shares (in that context) is exempt from RR No. 6-2013 (RR No. 6-2019, 2019) [RR No. 6-2019 (2019)].
3) Miscounting outstanding shares. BVPS depends on the correct denominator. Confirm the number of outstanding common shares as of the date relevant to the AFS used, and reconcile this with the corporation’s general ledger and stock and transfer book.
Table: quick summary of the BIR computation for estate tax (unlisted shares)
| Type of share | Valuation basis (estate tax) | Formula used in practice | Primary reference |
|---|---|---|---|
| Common shares (unlisted) | Book value per share from AFS nearest date of death | (Total Assets − Total Liabilities) ÷ Outstanding Common Shares | RR No. 6-2019 (2019) |
| Preferred shares (unlisted) | Par value from AFS nearest date of death | Par Value × Shares owned | RR No. 6-2019 (2019) |
Procedural note: why valuation affects transfer and settlement
In estate settlement, valuation does not only affect the tax computation; it also affects the ability to secure the tax clearances commonly required before assets can be transferred. For example, the Tax Code restricts transfers of certain properties without proof that the corresponding estate taxes due have been paid (National Internal Revenue Code of 1997, as amended; Section 97) [National Internal Revenue Code of 1997 (2026)].
Final observations and compliance tips
First, treat the audited financial statements nearest the date of death as the starting point and keep a clear record of why that AFS is the “nearest” for valuation purposes (RR No. 6-2019, 2019) [RR No. 6-2019 (2019)]. Second, compute common share value using a straightforward book value approach, and value preferred shares at par as required by the same regulation. Third, prepare supporting certifications early (shareholdings, outstanding shares, AFS) so the estate tax filing and later asset transfers are not delayed.
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