TRANSFER TAXES

TRANSFER TAXES

 These are taxes imposed upon the privilege of passing ownership of

property without any valuable consideration.
 KINDS OF TRANSFER TAXES UNDER NIRC:
 Estate Tax
 Donor’s Tax
 ONEROUS TRANSFER  gain or loss from sale  Income Tax (Capital Gains Tax or Ordinary Income Tax)

 GRATUITOUS TRANSFER  Donor’s or Estate Tax depending on whether it is inter vivos or mortis causa
TRANSFER TAX VS. INCOME TAX
TRANSFER TAX INCOME TAX
Imposed of the privilege to transfer Imposed on privilege to earn income
property
Rates are Lower: Now 6% for both Estate Rates are Higher
and Donor’s Tax. (Prior TRAIN: schedular Individual Income Tax – Schedular Rates
rates)
Lesser Exemptions More Exemptions
ESTATE TAXATION
ESTATE TAXATION
 It is an excise tax on the right of transmitting property at the time of death and on the
privilege that a person is given in controlling to a certain extent the disposition of his
property to take effect upon date.
 Imposed on gratuitous transfer mortis causa.
 Moment of death determines:
 Law governing Succession and Estate tax
 Right to inherit
 Value of gross estate
 Amount of estate tax
 Value of liabilities
 Who will succeed
ESTATE TAX FORMULA
GROSS ESTATE XX
LESS: ALLOWABLE DEDUCTIONS (XX)
NET ESTATE XX
APPLY TAX RATE 6%
ESTATE TAX DUE XX
LESS: TAX CREDIT (IF ANY) (XX)
ESTATE TAX STILL DUE XX
 TAX RATE: 6% (TRAIN)
 TAX BASE: Net Estate
 GOVERNING LAW: The statute in force at the time of death of the decedent shall
govern estate taxation.
 The estate tax accrues as of the death of the decedent and the accrual of the tax is distinct from the
obligation to pay the same.
 Upon the death of the decedent, succession takes place and the right of the State to tax the privilege
to transmit the estate vests instantly upon death.
GROSS ESTATE
GROSS ESTATE
RESIDENT or CITIZEN DECEDENT NON-RESIDENT ALIEN
DECEDENT
1. ALL Real Property wherever situated. 1. ONLY Real Property situated in the
Philippines.
2. ALL Personal Property wherever 2. ONLY Personal Property
situated; whether (a) Tangible  situated in the
(a) Tangible; or Philippines.
(b) Intangible (b) Intangible  with situs in the
Philippines
XPN: If exempted on the basis of
Reciprocity
SECTION 104 NIRC

GENERAL RULE: “Gross Estate” and “Gifts” include real and personal property, whether tangible or
intangible or mixed. PROVIDED that where the decedent or donor was a NON-RESIDENT ALIEN
at the time of his death or donation, his real or personal property so transferred but which are situated
outside the Philippines shall NOT be included as part of his gross estate.

BASICALLY:
 Resident or Citizen  ALL Property, Personal or Real, Tangible or Intangible, wherever situated
are INCLUDED in his Gross Estate and Gifts.
 Non-Resident Alien  ONLY Property, Personal or Real, Tangible or Intangible, situated in the
Philippines are INCLUDED in his Gross Estate and Gifts.
SECTION 104 NIRC
EXCEPTION: The following Intangible Personal Properties are deemed to have Situs in the
Philippines:
1) Franchise which must be exercised in the Philippines;
2) Shares, Obligations or Bonds issued by any corporation or sociedad anonima organized or
constituted in the Philippines in accordance with its laws;
3) Shares, Obligations or Bonds issued by any foreign corporation, 85% of the business of which is
located in the Philippines;
4) Shares, Obligations or Bonds issued by a foreign corporation, if such shares, obligations or
bonds have acquired business situs in the Philippines.
5) Shares or Rights in any partnership, business or industry established in the Philippines.
SECTION 104 NIRC
EXCEPTION TO THE EXCEPTION: Reciprocity Rule (Hence, go back to General Rule = Exclude)
 Applies to Non-resident Aliens, when:
a) The decedent at the time of his death was a citizen and resident of a foreign country which at the
time of his death:
i. Did not impose a transfer tax or death tax of any character;
ii. In respect of intangible personal property of citizens of the Philippines not residing in the
foreign country.
b) The laws of the foreign country of which the decedent was a citizen and resident at the time of his
death:
i. Allow a similar exemption from transfer taxes of every character.
ii. In respect of intangible personal property owned by citizens of the Philippines not residing in
that foreign country.
HOW TO VALUE GROSS ESTATE
PROPERTY VALUATION
Real Property  Fair Market Value; whichever is HIGHER between:
a) As determined by the Commissioner;
b) As shown in the schedule of values fixed by the provincial & city
assessors.
Shares of Stock
 UNLISTED
- Common  Book Value
- Preferred  Par Value
 LISTED  Arithmetic mean between the highest and the lowest quotation
at a date nearest the date of death, if none is available on the
date of death itself.
HOW TO VALUE GROSS ESTATE
PROPERTY
Right to Usufruct, Use or
Habitation, as well as that of
Annuity
Personal Property
VALUATION
 Shall be taken into account the probable life of the beneficiary in
accordance with the latest basic standard mortality table to be
approved by the Secretary of Finance, upon recommendation of
the Insurance Commissioner.
 Appraised at Fair Market Value (Whether tangible or intangible)
ITEMS TO BE INCLUDED IN THE GROSS ESTATE

 Decedent’s Interest
 Transfer in contemplation of death
 Revocable Transfer
 Transfer under General Power of Appointment (GPA)
 Transfer for Insufficient Consideration
 Proceeds of Life Insurance
 Share of the Surviving Spouse (for married decedents)
 Prior Interest
PROPERTIES NOT PHYSICALLY IN THE ESTATE BUT INCLUDED IN
THE GROSS ESTATE (SEC 85)

A. Decedent’s Interest
B. Transfer in Contemplation of Death
C. Revocable Transfer
D. Transfer under General Power of Appointment
E. Transfers for Insufficient Consideration
F. Proceeds of Life Insurance
A. DECEDENT’S INTEREST
 To the extent of the interest therein of the decedent at the time of his death.
 Refers to the extent of equity or ownership participation of the decedent on any
property physically existing and present in the gross estate, whether or not in his
possession, control or dominion.
 It also refers to the value of any interest in property owned or possessed by the
decedent at the time of his death.
 Includes any interest including its fruits, having value or capable of being valued,
transferred by the decedent at his death.
 EXAMPLES: Rental Income from Buildings, Dividends from Investments and Interests on Bank
Deposits which have accrued at the time of his death.
B.TRANSFER IN CONTEMPLATION OF DEATH

 It is a transfer motivated by the thought of impending death although death may not
be imminent:
1) When the decedent has, at any time, made a transfer in contemplation of or intended to take
effect in possession or enjoyment at or after death; or
2) When decedent has, at any time, made a transfer under which he has retained for his life or for a
period not ascertainable without reference to his death or any period which does not in fact end
before his death:
a) Possession, enjoyment or right to income from the property; or
b) The right alone or in conjunction with any other person to designate the person who will possess or enjoy
the property or income there from.
B.TRANSFER IN CONTEMPLATION OF DEATH

 BASICALLY:
1. Transfer equivalent to testamentary disposition.
2. Inter vivos in form Mortis Causa in substance.
B.TRANSFER IN CONTEMPLATION OF DEATH

GENERAL RULE: INCLUDED in the Gross Estate

EXCEPTION: In case of a bona fide sale for an adequate and full consideration in
money or money’s worth.
 QUESTION (BAR 2013)

Mr. Agustin, 75 years old and suffering from an incurable disease, decided to
sell for valuable and sufficient consideration a house and lot to his son. He
died one year later.
In the settlement of Mr. Agustin's estate, the BIR argued that the house and
lot were transferred in contemplation of death and should therefore form
part of the gross estate for estate tax purposes. Is the BIR correct?
 ANSWER

The BIR is not correct.

Pursuant to Section 85(B) of the NIRC, properties that are transferred in
contemplation of death form part of the gross estate of the decedent. An
exception to this is a bona fide sale for an adequate and full consideration
in money. Therefore, the house and lot which Mr. Agustin sold to his son
for a valuable and sufficient consideration should not be considered as
forming part of Mr. Agustin’s gross estate
C. REVOCABLE TRANSFER
 Refers to a transfer whereby the terms of enjoyment of the property
may be altered, amended, revoked or terminated by the
decedent alone or in conjunction with any other person or where such
power is relinquished in contemplation of the decedent’s death.
 It is enough that the decedent had the power to alter, amend or revoke
though he did not exercise such power.
 It Forms part of the Gross Estate of the Decedent
XPN: Excluded if made in a bona fide sale for an adequate and full
consideration in money or money’s worth.
D. TRANSFER UNDER GENERAL POWER OF APPOINTMENT

 It is the right to designate by will or deed, without restrictions, the

persons who shall succeed to the property of the prior decedent. The
appointment could be in favor of anybody, including himself, his estate, his
creditors, or the creditors of his estate.

 EXCEPTION: EXCLUDED if made by virtue of a bona fide sale for an

adequate and full consideration in money or money’s worth.
 GPA VS. SPA
GENERAL POWER OF APPOINTMENT SPECIAL POWER OF APPOINTMENT
As to nature
Donee has the power to appoint any person he Donee appoints the successor to the property who
chooses or enjoy the property without restriction is within a limited group or class of persons
according to the will of the Donor
As to tax implications
Makes appointed property, for all intents, the Not includible in the gross estate of the Donee
property of the donee; thus, forms part of the gross when he dies
estate of the Donee
As to effects
Donee holds the appointed property with all the Donee holds the appointed property in trust or
attributes of ownership under the concept of an under the concept of a trustee
owner
 TRANSFER IN GENERAL POWER OR
CONTEMPLATION OF DEATH APPOINTMENT
As to effectivity
Takes effect at of after death. For his life or any period not
ascertainable without reference to his
death or for any period which does
not in fact and before his death.
As to means
By means of trust or otherwise By Will or by Deed
 QUESTION (2009 BAR)

In his last will and testament, X bequeathed a painting to his only

son, Z. The will also granted Z the power to appoint his wife, W,
as successor to the painting in the event of Z’s death. Z died and
W succeeded to the property.
Should the painting be included in the gross estate of Z and thus
be subject to estate tax?
 ANSWER

NO. Only property passing under a general power of

appointment is included in the gross estate of the decedent. In
this case, the painting has to be transferred by Z only to his wife,
W, based on the will of his father, X. Since the power of
appointment is specific (i.e., only to his wife), such property
should not be included in his gross estate.
E. TRANSFERS FOR INSUFFICIENT CONSIDERATION

 FAIR MARKET VALUE > CONSIDERATION RECEIVED (The excess or the

difference shall be included in the Gross Estate)
 Applicable in cases of:
a) Transfer in contemplation of death;
b) Revocable transfers; and
c) Transfer under general power of appointment
 TRAIN ALERT!
 Transfers for Insufficient consideration may be subjected to either Estate Tax or
Donor’s Tax or Income Tax,
 If made under (a); (b) or (c):
With Donative Intent  Donor’s Tax
Without Donative Intent  Estate Tax
 Other than (a), (b) or (c):
With Donative Intent  Donor’s Tax
Without Donative Intent  Income Tax
E. PROCEEDS OF LIFE INSURANCE
 INCLUDED, if the beneficiary is:
1) The Estate of the decedent, his executor or administrator,
regardless whether the designation is revocable or irrevocable.

2) A Third Person other than the estate, executor or administrator

where the designation of the beneficiary is revocable
E. PROCEEDS OF LIFE INSURANCE

 EXCLUDED:
1. Benefits from GSIS by reason of Death;
2. Benefits from SSS by reason of Death;
3. Benefits from the Philippine and US Government for was damages;
4. Benefits from US Veteran Administration;
5. Retirement benefits of officials/employees of private firms;
6. Life insurance proceeds on insurance policy upon his own life, where the
beneficiary is a third person and the designation is irrevocable.
EXCLUSIONS AND EXEMPT
TRANSMISSIONS
 TRAIN ALERT!

 PROVIDED: Amounts withdrawn from the deposit accounts of a

decedent subjected to 6% final withholding tax imposed under
Section 97 NIRC shall be EXCLUDED from Gross Estate for purposes
of computing the estate tax. (RR 12-2018)
EXEMPT TRANSMISSIONS (SEC 87)

 “Generation-skipping Transfers”
 Estate planning techniques
 Must be expressly provided in the decedent’s will.
EXEMPT TRANSMISSIONS (SEC 87)

A. The merger of usufruct in the owner of the naked title;

B. Fideicommisary substitution;
C. The transmission from the first heir, legatee or done in favour of
another beneficiary, in accordance with the will of the predecessor; and
D. All bequests, devices, legacies or transfers to social welfare, cultural and
charitable institutions no part of the net income of which inures to the
benefit of any individual; Provided, that no more than 30% of said
bequests, legacies or transfers shall be used by such institutions for
administration purposes.
A. MERGER OF USUFRUCT AND NAKED TITLE

ILLUSTRATION:
In his will, Mr. A left the usufruct of his house and lot in Cavite to his only daughter
X and the naked title thereof to X’s daughter (Mr. A’s only grandchild),Y.
 transmission by A to X & Y  Subject to Estate Tax

When X dies and transmits the usufruct of the subject property to Y.

 EXEMPT from Estate Tax because there was merger of the Usufruct and naked
Title over the property by Y.
B. FIDEICOMMISARY SUBSTITUTION

 The substitution under civil law of another heir or done by a fideicommissum or

direction that the original heir or done at his death or upon some state event
condition transfer the inheritance or gift or a part thereof to the substituted heir or
done.
 Trustor  Trustee (1 degree of consanguinity)

ILLUSTRATION:
Mr. A’s will provides that: His daughter, X will hold the house and lot in Cavite in
trust for his granddaughter, Y; until Y reaches the age of majority.
C.TRANSMISSION FROM THE FIRST HEIR, LEGATEE OR DONEE IN
FAVOUR OF ANOTHER BENEFICIARY, IN ACCORDANCE WITH THE
WILL OF THE PREDECESSOR

ILLUSTRATION:

Mr A’s will provides that: A will hold the property for the first 5 years, then
A must transfer the property to B.
D. TRANSFERS TO SOCIAL WELFARE, CULTURAL AND
CHARITABLE INSTITUTIONS

 REQUISITES:
1. No part of the net income of which inures to the benefit of any
individual;
2. No more than 30% of said bequests, legacies or transfers shall be used
by such institutions for administration purposes
ALLOWABLE DEDUCTIONS
ALLOWABLE DEDUCTIONS

Ordinary Deductions Special Deductions

 ELIT  Family Home
 Claims against the Estate  Standard Deductions
 Claims against an insolvent person
 Amounts Received under RA 4917
 Mortgages, Taxes and Losses
 Share of Surviving Spouse
 Transfer for Public Use (TPU)
 Vanishing Deductions
ALLOWABLE DEDUCTIONS
CITIZENS/RESIDENTS NON-RESIDENT ALIEN
A. Expenses, Losses, Indebtedness, Taxes, etc. LIMIT: PROPORTIONAL
(ELIT)
Phil. Gross Estate x World ELIT
World Gross Estate

a. Claims against the Estate √ √

b. Claims against insolvent person √ √
c. Unpaid mortgages √ √
d.Taxes √ √
e. Losses √ √
ALLOWABLE DEDUCTIONS
CITIZENS/RESIDENTS NON-RESIDENT ALIEN
B.Transfer for Public Use (TPU) √ √
C.Vanishing Deductions √ √
D. Family Home (P10,000,000) √ √
E. Standard Deductions P 5,000,000.00 P 500,000.00
F.Amounts received by heirs under RA
4917 (Retirement Benefits) √ X
G. Conjugal share of the surviving
spouse (for married decedent) √ √
CLAIMS AGAINST THE ESTATE
REQUISITES
1. Notarized debt instrument;
2. If contracted within 3 years before the death, there shall be statement showing the disposition of the
proceeds of the proceeds of the loan;
3. The liability represents a personal obligation of the deceased existing at the time of his death except
unpaid obligations incurred incident to his death;
4. The liability was contracted in good faith and for adequate and full consideration in money or money’s
worth;
5. The claim must be a debt or claim which is valid in law and enforceable in court; and
6. The indebtedness must not have been condoned by the creditor or the action to collect from the
decedent must not have prescribed.
CLAIMS AGAINST INSOLVENT PERSONS

REQUISITES
1. The amount thereof has been initially included as part of his gross estate.
2. The incapacity of the debtors to pay their obligation is proven.
3. Only the portion uncollectible is deductible.
UNPAID MORTGAGES

REQUISITES:
1. In case unpaid mortgage payable us being claimed by the estate, verification must be made as
to who was the beneficiary of the loan proceeds;
2. If the loan is found to be merely an accommodation loan where the loan proceeds went to
another person, the value of the unpaid loan must be included as a receivable of the estate;
3. If there is a legal impediment to recognize the same as receivable of the estate, said unpaid
obligation or mortgage payable shall not be allowed as a deduction from the gross estate;
4. In all instances, the mortgaged property, TO THE EXTENT OF THE DECEDENT’S
INTEREST THEREIN, should always form part of the gross taxable estate.
TAXES

DEDUCTIBLE NOT DEDUCTIBLE

 Taxes which have accrued as of death of the
decedent which were unpaid as of the time of
death.
 Income tax on income received after death.
 Property taxes not accrued before death.
 Estate Tax
LOSSES
REQUISITES:
1. Arising from fire, storm, shipwreck, or other casualty, robbery, theft or embezzlement;
2. Not compensated by insurance or otherwise;
3. Not claimed as deduction in an income tax return of the taxable estate;
4. Occurring during the settlement of the estate or before the last day for the payment of the
estate tax

Last day to pay: 1 year after the decedent’s death

TRANSFER FOR PUBLIC USE

REQUISITES:
1. The disposition is in a last will and testament;
2. To take effect after death;
3. In favour of the government of the Philippines, or any political subdivision thereof; and
4. Exclusively for public use.

NOTE: This should also include bequests, devices or transfers to social welfare, cultural and
charitable institutions. Provided, not more than 30% of the donation is used for administration
purposes.
VANISHING DEDUCTION
 Property previously taxed.
 The deduction allowed from the gross estate for properties previously been taxed (donor’s or estate).
 It is called “Vanishing deduction” because the deduction allowed diminishes over a period of five years.
 The rate of deduction depends of the period from the date of transfer to the death of the decedent,
as follows:
PERIOD DEDUCTION
1 year or less 100%
>1 year – 2 years 80%
>2 years – 3 years 60%
>3 years – 4 years 40%
>4 years – 5 years 20%
VANISHING DEDUCTION
REQUISITES:
1. The present decedent died within 5 years from the transfer of the property from a prior decedent
or donor;
2. The property must be located in the Philippines;
3. The property formed part of taxable estate of the prior decedent, or of the taxable gift of the
donor;
4. The estate tax or donor’s tax on the gift must have been finally determined and paid;
5. The property must be identified as the one received from the prior decedent, or something acquired
in exchange therefore;
6. No vanishing deduction on the property was allowable to the estate of the prior decedent.
HOW TO COMPUTE VANISHING DEDUCTION

 STEP 1: Determine the Initial Value; whichever is LOWER between:

a) Value of the property in the hands of the prior decedent
b) Value in the hands of the present decedent
 STEP 2: Determine the New Initial Value
Reduce initial with any mortgage payment made by present decedent.
 STEP 3: Determine the basis for vanishing deduction.
Initial Value/ Gross Estate x (ELIT + TPP)
 STEP 4: Determine the value of Vanishing deductions
The rate of deduction depends of the period from the date of transfer to the death of the decedent, by
applying the diminishing percentage.
SIMPLIFIED VERSION

 STEP 1: Compute Period & Determine Rate

 STEP 2: Determine Initial Value
 STEP 3: Determine Share of Property in LIT+TPU
 STEP 4: Determine Basis for VD (STEP 1 – STEP 3 = STEP 4)
 STEP 5: Apply Rates determine in Step 1
 ILLUSTRATION
GIVEN:
 Date of Donation: January 20, 2017
Date of Death: January 18, 2019
 Properties Received via Donation/Succession:

VALUE At 1/20/2017 At 1/18/2019

Condominium Unit P 4,000,000 P 5,000,000
Car 1,000,000 800,000

 Gross Estate = P20m

 Total LIT+TPU = P10m
STEP 1: DETERMINE PERIOD

 Date of Donation: January 20, 2017

Date of Death: January 18, 2019

YEAR MONTH DAY

(12 months) (30 days)
2019 – 1= 2018 12+1 -1 = 12 30+18 =48
- 2017 -1 - 20
1 year 11 mos. 28 days
STEP 2: DETERMINE INITIAL VALUE

VALUE At 1/20/2017 At 1/18/2019

Condominium Unit P 4,000,000 P 5,000,000
Car 1,000,000 800,000

 INITIAL VALUE = Value of the Property in the hands of the prior decedent or donor versus the value in the hand
of the present decedent, WHICHEVER IS LOWER
 INITIAL VALUE = 4,000,000 + 800,000 = P 4,800,000
STEP 3: DETERMINE SHARE OF PROPERTIES IN LIT & TPU

 Share = Initial Value x LIT&TPU

Gross Estate

= 4,800,000 x 10,000,000
20,000,000

= P 2,400,000
 STEP 4 AND 5

STEP 4: DETERMINE BASIS OF VANISHING DEDUCTION

 STEP 4 = STEP 2 – STEP 3
 BASIS OF VD = 4,800,000 – 2,400,000 = P2,400,000

STEP 5: APPLY RATE COMPUTED IN STEP 1

 P2,400,000 x 80% = P1,920,000
FAMILY HOME
REQUISITES:
1. The family home must be the actual residential home of the decedent and his family at the
time of his death, as certified by the Barangay Captain of the locality where the family home is
situated;
2. The total value of the family home must be included as part of the gross estate of the
decedent; and
3. Allowable deduction must be in an amount equivalent to:
1. The current fair market value of the family home as declared or included in the gross
estate; or
2. The extent of the decedent’s interest whichever is lower, but not exceeding
P10,000,000.00
STANDARD DEDUCTION

 A deduction allowed without need of substantiation.

CITIZEN/RESIDENT  Php 5,000,000.00

NON—RESIDENT ALIEN  Php 500,000.00
AMOUNT RECEIVED BY HEIRS UNDER R.A. NO. 4917

 Any amount received by the heirs from the decedent’s employer as a consequence
of the death of the decedent-employee in accordance with R.A. No. 4917 is
allowed as a deduction provided the amount of separation benefit is included
as part of the gross estate of the decedent.
ESTATE TAX CREDIT

 A tax credit is granted for estate taxes paid to a foreign country on the estate of citizens and resident
aliens subject to the following limitations.
A. One Foreign Country Only
 The tax credit is whichever is LOWER between:
a) Estate tax paid to the foreign country (actual foreign tax paid)
b) Tax credit limit:
Net Taxable Estate (NTE) x Phil. Estate Tax
NTE, World
ESTATE TAX CREDIT
B. More than One Foreign Country
 the credit shall be that which is the LOWER amount between Limit A and Limit B:
Limit A: Whichever is LOWER between:
1. Estate tax paid to a foreign country
2. Tax credit limit:
NTE, Foreign Country x Phil. Estate Tax
NTE, World
Limit B: Whichever is LOWER between:
1. Total estate taxes paid to all foreign countries
2. Tax Credit Limit:
NTE, Outside Phils. x Phil. Estate Tax
NTE, World
WHEN ESTATE TAX RETURN REQUIRED TO BE FILED

1. When the estate is subject to estate tax; or

2. When the estate is not subject to estate tax BUT the gross estate consists of registered or
registrable property such as motor vehicle or shares of stock or other similar property of which
clearance from the BIR is required as a condition precedent for the transfer of ownership thereof in
the name of the transferee.

Certificate Authorizing Registration (CAR)  proof that the corresponding estate tax was duly paid and it
authorizes any private or government institution to transfer the property of the decedent to its heirs.
WHEN TO FILE ESTATE TAX RETURN

 The Estate Tax Return shall be filed within 1 year after the death of the decedent;
 On Meritorious cases the period may be extended for 30 days.
 In case the available cash of the estate is insufficient to pay the total estate tax due, payment by
installment SHALL be allowed within 2 years from the statutory date for its payment (After
1 year) without civil penalty and interest.
 If a bank has knowledge of the death of a person, who maintained a bank deposit account alone or
jointly with another, it SHALL allow any withdrawal from the said deposit account, subject to a
final withholding tax of 6%.
WHEN THE GROSS ESTATE EXCEEDS P5M

 The Estate Tax Return shall be accompanied by a statement which is certified by an

independent CPA stating:
1. The Itemized assets of the decedent with its corresponding gross value at the
time of his death or in case of an NRA, that part of his gross estate in the
Philippines;
2. The itemized deductions from the gross estate;
3. Amount of tax due, whether paid, still due or outstanding.
WHERE TO FILE ESTATE TAX RETURN

 RESIDENT CITIZEN
 Accredited Agent Bank (AAB), Revenue District Officer (RDO), Collection Officer or duly authorized Treasurer of the City
or Municipality where the decedent was domiciled at the time of his death.

 NON-RESIDENT (Whether Citizens or Aliens)

 Has registered executor/administrator  RDO where such executor or administrator is registered.
 Executor or Administrator not registered  RDO having jurisdiction over the executor’s or administrator’s residence.
 No executor or administrator  Office of the Commissioner
RULES FOR PAYMENT OF ESTATE TAX DUE

 The estate tax due shall be paid at the time when the estate tax return is filed.
 When the Commissioner finds that the payment of the estate tax would impose undue hardships
upon the estate or any heir:
a) The payment of the estate tax may be extended for a period not to exceed 5 years if there is a judicial
settlement of the estate;
b) The payment of the estate tax may be extended for a period not to exceed 2 years if there is an extra-
judicial settlement of the estate.
DONOR’S TAX
DONATION
 It is an act of liberality whereby a person disposes gratuitously a thing or a right in
favour of another, who accepts it.
 REQUISITES:
1. Capacity of the donor;
2. Donative intent (Animo dodandi)
3. Delivery, whether actual or constructive, of the subject gift;
4. Acceptance by the donee;
5. Proper Form
DONOR’S TAX
 A tax on privilege of transmitting one’s property or property rights to another or
others without adequate and full valuable consideration.
 It is a tax imposed on gratuitous transfer inter vivos.
 The law in force at the time of the perfection/completion of the donation shall
govern the imposition of the donor’s tax.
 RATE: 6% of the TOTAL GIFTS in excess of Php 250,000.00 (TRAIN)
WHAT COMPOSE THE GROSS GIFT

RESIDENT OR CITIZEN DONOR NON-RESIDENT ALIEN DONOR

1. ALL Real Property wherever situated. 1. ONLY Real Property situated in the Philippines.
2.ALL Personal Property wherever situated 2. ONLY Personal Property:
(a) Tangible; (a) Tangible  situated in the Philippines
(b) Intangible (b) Intangible  with situs in the Philippines
XPN: Unless exempted on the basis of reciprocity

NOTE:
• The Rules under estate for the valuation of properties are the same with donor’s taxation.
CONTRIBUTION FOR ELECTION CAMPAIGN

 Any contribution in cash or in kind to any candidate, political party or

coalition or parties for campaign purposes, shall be governed by the
Election Code, as amended.
ALLOWABLE DEDUCTIONS FROM GROSS GIFT

1. Encumbrances on the property;

2. Diminution in the value of property
EXEMPT GIFTS

1. Gifts made to or for the use of the National Government or any entity created by any
of its agencies which is not conducted for profit, or to any political subdivision of the said
government;
2. Gifts in favour of educational, charitable, religious, cultural or social welfare corporation,
institutions, foundations, trust or philanthropic organization, research institution or
organization (NGO). Provided, no more than 30% of said gifts shall be used by such
donee for administration purposes.
DONATIONS EXEMPT BY SPECIAL LAWS

Donations to the following special non-stock non-profit institutions duly recognized by the government pursuant to
a special law are exempt:
1. International Rice Research Institute
2. Ramon Magsaysay Award Foundation
3. Southern Philippines Development Administration
4. Philippines American Cultural Foundation
5. Integrated Bar of the Philippines
6. Development Academy of the Philippines
7. National Social Action Council
8. Museum of Philippine Costumes
9. Aqua-culture Department of South East Asia Fisheries Development Center of the Philippines;
10. Intramuros Administration
 TRAIN ALERT!

 SEC 100. Where the property, other than real property referred to in Sec.
24D, is transferred for less than an adequate and full consideration in money
and money’s worth, then the amount by which the fair market value of the
property exceeded the value of the consideration shall, for the purpose of the
tax imposed by this Chapter, be deemed a gift, and shall be included in
computing the amount of gifts made during the calendar year; Provided,
however, that a sale, exchange or other transfer of property made in
the ordinary course of business (a transaction which is a bona fide
sale, at arm’s length and free from donative intent) will be considered as
made of an adequate and full consideration in money or money’s worth.
TRANSFER FOR LESS THAN ADEQUATE AND FUL CONSIDERATION

 Sale or exchange of property under Sec. 24D  Capital Gains Tax

 Other properties: If made with Donative Intent  Donor’s Tax
HOW TO COMPUTE DONOR’S TAX

 Cumulative basis over the period of one calendar year.

 Husband and wife are considered as separate and distinct taxpayers for purposes of
donor’s tax.
ILLUSTRATION

 Donations were made on January 30, 2018 at P2,000,000; on March 30, 20188 at
P1,000,000 and August 15, 2018 at P500,000
 DATE OF DONATION AMOUNT DONOR’S TAX
1. January 30, 2018 P 2,000,000
1/30/18 donation P 2,000,000
SOLUTION
Less: Exempt Gift (250,000)
P 1,750,000 P105,000
2. March 30, 2018 1,000,000
3/30/18 donation 1,000,000
Add: 1/30/18 donation 2,000,000
Less: Exempt Gift (250,000)
2,750,000

Tax Due Thereon 165,000 60,000

Less: Tax due paid on January donation (105,000)
3. August 15, 2018 500,000
8/15//18 donation 500,000
Add: 1/30/18 donation 1,000,000
3/30/18 donation 2,000,000
Less: Exempt Gift (250,000)
TOTAL 3,250,000

Tax Due Thereon 195,000

Less:Tax Due/Paid (165,000)
TAX STILL DUE P30,000
FOREIGN TAX CREDIT IN DONOR’S TAX

REQUISITES:
1. The donor was a Filipino citizen or Resident Alien (Citizen or Resident) at the time
of foreign donation;
2. Donor’s taxes of any character and description are imposed and paid by the
authority of a foreign country.
WHEN TO FILE THE DONOR’S TAX RETURN

 The donor’s tax return is filed and the donor’s tax due is paid within 30 days after the date the gift is
made.
 The return shall be under oath in duplicate setting forth:
a) Each gift made during the calendar year which is to be included in computing net gifts;
b) The deductions claimed and allowable;
c) Any previous net gifts made during the same calendar year;
d) The name of the donee;
e) Relationship of the donor to the donoee; and
f) Such further information as may be required by rules and regulations made pursuant to law.
WHERE TO FILE THE DONOR’S TAX RETURN
RESIDENT
 With an AAB, RDO, Revenue Collection
Officer or duly authorized Treasurer of the city
or municipality where the donor was
domiciled at the time of transfer, or if there be
no legal residence in the Philippines, with the
Office of the Commissioner.
NON-RESIDENT
 Filed with the Philippines Embassy or
Consulate in the country where he is
domiciled at the time of the transfer or directly
with the Office of the Commissioner.
THANK YOU! 