Estate Tax Summary for Computation

Composition of Gross Estate

Resident Citizen- all properties, real and personal, within and without the Philippines

Non-resident Alien- properties situated in the Philippines; in case of intangible personal property
situated in the Philippines, exempt if with reciprocity.

Valuation of Gross Estate

1. Real Property- higher between FMV assessed by CIR and FMV as assessed by city assessors
2. Personal Property- FMV at time of death
3. Unlisted Common Shares- BVPS
4. Unlisted Preferred Shares- Par value
5. Listed Shares- Average of highest and lowest price on date of death; if none, nearest date
6. Units of participation- bid price
7. Right of usufruct- estimated life of the beneficiary based on standard mortality table

Inclusions in Gross Estate

1. Properties owned actually and physically present

2. Decedent’s interest
3. Properties not physically in the estate
 Transfers in contemplation of death
 Transfers with retention of certain rights
 Revocable transfers- even if he did not exercise the power
 Transfers under general power of appointment
 Transfer for insufficient consideration
- Should be a transfer in contemplation of death, revocable transfer, transfer
under general power of appointment
 Claims against insolvent persons
 Proceeds from life insurance

Exclusions from Gross Estate

1. Capital of Surviving Spouse

 Excluded from absolute community property (Family Code- August 3 1988)
o Exclusive properties except jewelry
o Properties inherited during marriage
o Properties acquired before marriage by either spouse who has legitimate
descendants by a former marriage
o Income on these properties
 Excluded from conjugal partnership property (Before Family Code)
o Inheritance during marriage
o Properties brought into marriage

2. Proceeds of Life Insurance

  Beneficiary other than estate, executor or administrator designated as irrevocable
 SSS, GSIS
 Group Insurance

3. Certain Acquisitions and Transmissions

a. Merger of the usufruct in the owner of the naked title

b. Transmission of inherited property from the fiduciary heir/legatee to fideicommissary
c. Transmission of inherited property from the first heir/legatee in favor of another
beneficiary, in accordance with the desire of the predecessor
d. Bequests, devises, 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, however, That not more than thirty percent (30%) of the said bequests,
devises, legacies or transfers shall be used by such institutions for administration
purposes.

4. Amounts withdrawn from the deposit accounts of decedent

 6% final withholding Tax

5. Exemptions under special laws

a. Benefits received by the members from the GSIS and the SSS by reason of death
b. Amounts received from the Philippines and US Government for damages suffered
during the last war
c. Benefits received by beneficiaries residing in the Philippines under laws administered by
the US Veteran Administration
d. Bequests, legacies, or donations mortis causa to social welfare, cultural, or charitable
institutions.
e. Grants and donations to the Intramuros Administration

Deductions from Gross Estate

Pre Train Post Train (January 1, 2018)

RC, RA, NRC NRA RC, RA, NRC NRA
ORDINARY DEDUCTIONS
Funeral Expenses   X X
Lower between:
(actual, 5% GE,
200,000)
*Expenses after
interment not
deductible
*Defrayed by
relatives ND
Judicial Expenses   X X
*incurred during
settlement (date
 of death to last
day of filing)
Losses    
During settlement
(death- last day of
filing)
Claims Against    
Estate
Unpaid Mortgage    
Before death
Unpaid Tax    
Before death
TPU    
RA 4917  X  X
Vanishing    
Deductions
Share of Spouse    
SPECIAL DEDUCTIONS
Standard  X  
1,000,000 5,000,000 500,000
Medical  X X X
Max- 500,000
Whether paid or
not
Within 1 year
before date of
death
Family Home  X  X
Max- 1,000,000 Max- 10,000,000
OTHERS
Tax Credit  

Vanishing Deductions

FMV (lower between FMV at date of death or prior decedent and current)
Less: mortgage paid
Initial Basis
Less: Proportional Deduction
Final Basis
Mult: Vanishing Deduction
Vanishing Deduction

Proportional Deduction

Initial basis x (LIT +TPU)

Gross Estate
Non-resident Alien LIT

GE Philippines x (LIT)
GE Total

Estate Tax Credit

Net Estate, Foreign x Philippine Estate Tax Due
Net Estate, world

Filing and Payment

Before Train After Train
Filing GE > 200000 Registered/ registerable properties
Those who have to pay tax
CPA Certification GE > 2M GE > 5M
When to file 6 months after 1 year after
Payment Judicial < 5 years Judicial < 5 years
Extra judicial < 2 years Extra judicial < 2 years

*installment- 2 years from statutory

date
Bank Withdrawal Withdraw till 20,000 Withdraw subject to 6% final tax

Donor’s Tax

Gross Gifts
 Direct gifts
 Gifts through creation of trust
 Transfer for insufficient consideration
 Repudiation of inheritance
 Renunciation by the surviving spouse of his/her share in the common property (hereditary
property)- in favor of certain heirs.
 Condonation of debt

Deductions
 Encumbrances
 Diminutions
 Government
 Charitable, Educational
 Contributed to political parties
 Exempt gift- 250,000

VAT

Transactions deemed sales

  Sale of goods originally meant for sale in the ordinary course of business
 Distributions to shareholders, investors and creditors
 Goods held on consignment for more than 60 days from the date of consignment
 Retirement or cessation of business

Change or Cessation of status as VAT registered person

 Subject to VAT
o Change of business activity
o Cancellation of registration to revert back to a VAT exempt status
o Cancellation of registration of a person who voluntarily elected to be VAT registered
after 3 consecutive years.
 Not subject to VAT
o Change of business name
o Change of control of corporation
o Merger or consolidation of corporations

Zero Rated Sale of Goods

 Export Sales
o Actual export sales
o Sales to toll manufacturers
o Sales to export oriented enterprises
o Sales under the omnibus investment code
o Sales to persons engaged in international shipping and international air transport
operations
 Sales to persons who are exempt under international agreements or special laws.
o ADB
o International Rice Research Institute

VAT on Sale of Services

Zero Rated Sale of Services

 Sale of services such as packing, manufacturing or processing to those engaged in business
outside the Philippines and the products will subsequently be exported
 Sale of services other than those mentioned above to those engaged in business outside the
Philippines and the products will be subsequently exported
 Sale of services by contractors and subcontractors to export oriented enterprises
 Sale of services to persons engaged in international shipping and international air operations on
their operations from the Philippines to another country
 Sale of services to those who are exempt under international agreements and special laws
 Transport of passengers and cargo from the Philippines to another country by domestic air and
sea carriers
 Sale of power generated through renewable sources of energy

Exempt Transactions
1. Sale and importation of agricultural and marine products in their original state, livestock and
poultry
2. Sale and importation of fertilizers, seeds, seedlings, fingerlings, livestock and poultry feeds and
the ingredients to make finished feeds.
3. Importation of personal and household effects belonging to residents coming back from abroad
and non-resident citizens coming to resettle in the Philippines
4. Importation of professional materials, personal things for people coming to settle in the
Philippines as long as the things are for personal use and not for sale or manufacturing.
5. Services subject to percentage tax
6. Services provided by agricultural contract growers and millers from corn to corn grits, palay to
rice and sugar cane into raw sugar.
7. Medical, dental, hospital services except those rendered by professionals.
8. Educational services accredited by DEPED, CHED, TESDA and operated by the government
9. Services under and employer and employee relationship (Income Tax)
10. Services rendered by regional or area headquarters established in the Philippines as supervisory
and communications and coordinating centers for their affiliates and do nor earn or derive
income from the Philippines. (No income)
11. Transactions exempt under international agreements and special laws
12. Sale by agricultural cooperatives duly registered with the Cooperative Development Authority &
Importation of direct farm inputs and machineries to be used directly and exclusively for the
production and processing of their produce.
Members Non Members
Sale of own produce Exempt Exempt
Other than own produce Exempt VAT
13. Gross receipts form lending activities by credit or multipurpose cooperatives registered by CDA
Members Non Members
Lending Activities Exempt Exempt
Non-Lending Activities VAT VAT
14. Sales by non-agricultural, non-electric and non-credit cooperatives duly registered with the CDA
provided that the share in the capital contribution does not exceed 15,000.
15. Export sales of non-VAT registered companies
16. Sale of real properties:
a. Not primarily held in the ordinary course of business
b. Low cost housing (not applicable starting January 2021)
c. Socialized housing- price ceiling per unit is 450,000
d. Residential lots valued at 1.5M or below and residential house and lots and dwellings
valued at 2.5M and below. (Beginning January 2021, sale of house and lot and dwellings
not exceeding 2M)
17. Lease of residential units not exceeding 15,000 per month
18. Sale, importation, printing or publication of books and any newspaper, magazine, review or
bulletin which appears at regular intervals with a fixed price for subscription which is not
devoted principally to the publication of paid advertisements
19. Transport of passengers by international carriers doing business in the Philippines
20. Sale, importation or lease of passenger or cargo vessels and aircraft, including engine,
equipment and spare parts thereof for domestic or international transport operations
 21. The importation of goods, supplies, equipment and fuel to persons engaged in international
shipping or international air transport operations (sale of goods and services are zero-rated)
22. Services of banks, non-bank financial intermediaries performing quasi-banking functions, and
other non-bank financial intermediaries such as money changers etc. (Subject to percentage tax)
23. Sale or lease of goods and services to senior citizens and persons with disabilities.
24. Transfer of property pursuant to Section 40©(2)
25. Association dues, membership fees and other assessment collected on a purely reimbursement
basis by homeowners’ associations (No income)
26. Sale of gold to the BSP
27. Sale of drugs and medicines prescribed for diabetes, cholesterol and hypertension
28. Sale or lease of goods or performance of services, gross sales or receipts do not exceed 3M
annually

Input VAT
1. Local Purchases
2. Capital Goods- estimated useful life more than 1 year
 More than 1M aggregate purchase during the month- allocated UL or 60 months
whichever is shorter (Allowed until December 21, 2021)
 Not more than 1M- month of acquisition
3. Importation- whether personal or business use; paid by importer

Value as determined by BOC

Add: Customs Duties
Add: Excise Taxes
Add: Other Charges (Insurance, freight, postage, interest, commission, bank charge, brokerage,
processing fees)
Tax Base

**If based on quantity or volume of goods

Invoice Amount
Add: Customs Duties
Add: Excise Taxes
Add: Other Charges
Landed Cost (Tax base)

4. Presumptive input VAT

 Processing of Sardines, Mackerel, Milk
 Manufacturing of refined sugar, oil, packed noodle
 4% on primary agricultural products

5. Transitional input VAT

 Claimed by:
i. Person who becomes liable to VAT
ii. Any person who elects to be VAT registered
  2% of the value of the beginning inventory on hand or actual VAT paid on such goods
whichever is higher (total inventory includes VAT and non-VAT supplier)
 Not applicable to exempt goods

6. Standard input VAT

 The government, before making payment for goods or services, shall withhold a Final
VAT due at the rate of 5% of the gross payment.
 Since final, not part of the return anymore
 Starting January 2021, final VAT will shift to a creditable system
 Payments for purchases of goods and services arising from projects funded by Official
Development Authority (ODA) shall not be subject to withholding tax.