 Shares and bonds of foreign corporation are always presumed situated

abroad for transfer tax purposes. TRUE

 For purposes of transfer tax, Real properties are valued at the higher of the
fair value and acquisition cost. TRUE

 Standard deduction is claimable by non-resident alien decedent not in excess

of 5,000,000. FALSE

 Citizens Are subject to tax on transfer of properties regardless of location.

TRUE

 Taxable transfers consist of properties transferred to other persons before

death but are still owned by the decedent at the point of death. TRUE

 Shares, obligations or bonds are issued by a foreign corporation 80% of the

business of which is located in the Phil. is considered located within the
Phil. FALSE

 The reciprocity rule may apply to movable personal property located in the
Phil. TRUE

 Inheritance refers to the property which will be transmitted to the donees.

TRUE

 Estate tax is higher than donor’s tax rate under the new train law (RR12-
2018) FALSE

 The proceeds of life insurance is included in the gross estate if the

beneficiary is revocably designated. TRUE

 The reciprocity rule applies to intangible personal properties of any alien

located in the PHIL. TRUE


 The difference between ordinary and extraordinary is that little “extra.”

 For taxable transfer, if there was no consideration received on the transfer ,

the value to include in the gross estate shall be the fair market value of the
property at the time of the decedent’s death FALSE

 Transfer tax is the tax imposed on the right or privilege to engage in an

onerous transfer of goods or services. FALSE

 Properties not owned by the decedent may be included in gross estate.

FALSE

 When there is reciprocity, the transmission of intangibles located in the Phil.

of a non-resident alien decedent is not subject to tax. TRUE

 Non resident alien is subject to tax only on transfers of Phil. properties

TRUE

 Listed stock are valued at par value. FALSE

 Non-resident aliens can claim only a fractional part of expenses, losses,

indebtedness, taxes and transfer for public purposes

 Non-listed common stocks are valued at their book value. TRUE

 An heir is a person called to the succession either by the provision of a will

or by operation of law. TRUE

Tax law in the Philippines covers national and local taxes. National taxes
refer to national internal revenue taxes imposed and collected by the national
government through the Bureau of Internal Revenue (BIR) and local taxes
refer to those imposed and collected by the local government.

 These internal revenue taxes are the taxes specifically provided by the
National Internal Revenue Code of the Philippines (NIRC).
  They are also commonly called as excise taxes or privilege taxes because
they are imposed on the performance of an act, engagement of an
occupation, or the enjoyment of a privilege.

Differences of Internal Revenue Taxes:

O Income tax - is the tax imposed on a person's income, emoluments, profits

arising from property, practice of profession, conduct of trade or business. In
general, the taxable amount of this tax is the taxpayer’s net taxable income.

O Business tax - is the tax imposed on the right or privilege to engage in an

onerous transfer of goods or services in the normal conduct of a business.
The taxable amount of this tax is based on gross sales or gross receipts.

O Transfer tax – is the tax imposed on one’s right to make casual and
gratuitous transfer of one’s property to the other person.

O Documentary stamp tax – is the tax imposed on the right to enter into a
transaction that is described in the document needed to be filed in any
government office.

NATURE OF TRANSFER TAXES

 Transfer taxes are taxes imposed upon the gratuitous transfer of private
property.
 Transfer refers to any transmission of property from one person to another.
 Property embraces everything which is or may be the subject of ownership.
 Ownership is the exclusive right of possessing, enjoying and disposing of a
property.
 A transfer is gratuitous when there is no consideration for the transfer; it is
onerous when the consideration is received.
 Onerous transfer such as sale, barter or exchange are subject to business
taxes.
NATURE OF TRANSFER TAXES

 Transfer tax is a privilege tax. It is imposed because the transferor is

exercising a privilege in the form of assistance rendered by the government
in effecting the transfer of properties by way of donation or succession.

 Transfer tax is an ad valorem tax. The amount of transfer is dependent on

the value of the properties transferred.

 Transfer tax is a national tax. Transfer taxes are levied by the national
government.

 Transfer tax is a direct tax. Transfer taxes cannot be shifted. The

transferor-donor or transfer or decedent is the one subject to tax.

 Transfer tax is a fiscal tax. Transfer taxes are levied to raise money for the
support of the government.

 Types of Transfers ( Unilateral Transfer)

1. Donation – is the gratuitous transfer of property from a living donor to a

donee. It is called donation inter vivos because it is made between living
persons.

2. Succession – is the gratuitous transfer of property from deceased person

upon death to his heirs. It is a form of donation effected by death, thus, it is
called donation mortis causa.

 Types of Transfer Taxes

1. Donor’s Tax – imposed on donation inter vivos
2. Estate Tax - imposed on donation mortis causa

Classification of Transfer Taxpayers

 Residents or Citizens – they are

1. Resident citizen – Filipino citizens residing in the Philippines
2. Resident alien – Citizens of a foreign country residing in the Philippines
3. Non-resident citizen - Filipino citizens not residing in the Philippines

 Non-resident Aliens - Citizens of a foreign country not residing in the

Philippines

 For purposes of Donor’s tax, juridical persons such as corporations and

partnerships which donate properties are classified as citizens or aliens and
residents or non- residents depending on their place of incorporation or
operations.

Situs of Properties
 The following personal properties are considered located within the
Philippines:
1. Franchise exercisable within the Philippines
2. Shares, obligations or bonds issued by corporations organized or
constituted in the Philippines.
3. Shares, obligations or bonds issued by a 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 a business situs in the Philippines
(i.e. they are used in the furtherance of its business in the Philippines)
5. Shares, rights in any partnership, business or industry established in the
Philippines.
6. Any personal property, whether tangible or intangible, located in the
Philippines.

Reciprocity Rule:

O There is reciprocity if the foreign country of which the decedent was a

citizen and resident at the time of his death/donation:
1. Did not impose a transfer tax; or
2. Allowed similar exemption from transfer tax in respect of intangible
personal property owned by citizens of the Phil. not residing in that foreign
country.

O When there is reciprocity, the transmission of intangibles located in the

Phil. of a non-resident alien decedent is not subject to tax.

O When there is no reciprocity, the transmission of intangibles located in the

Phil. of a non-resident alien decedent is subject to tax.

Timing of Valuation of Transfers

O Donation inter vivos – are valued at the date of completion or perfection
of the donation.
O Donation mortis causa – are valued at the date of death

Non Taxable Transfers

There are transfer of properties which are not actually donation and thus, not
subject to transfer taxes:
1. Void transfers – are those prohibited by law or those that do not conform
to legal requirements for their validity such as the following:
a. transfer of property not owned
b. donation between spouses.
c. oral donation of real properties
d. donations refuse by the donee.

2. Quasi-transfer – there are transmission of properties which do not involve

transfer of ownership.
a. Transmission of the property by a person with a right of usufruct over the
property to the owners of the naked title.
b. Transmission of the property by a trustee to the real owner.
c. Transmission of the property from the first heir to a second heir in
accordance with the desire of the predecessor.

Incomplete transfers:
Incomplete transfers involve the transmission or delivery of properties from
one person to another but ownership is not transferred at the point of
delivery, not until the happening of certain events or conditions in the future.
Initially, incomplete transfers are not subject to transfer taxes upon delivery
but they are subject to transfer tax in the future when the transfer is
completed upon the happening of the event or upon fulfillment of the
specified conditions.

Types of incomplete transfers:

a. Conditional transfers
b. Revocable transfers
c. Transfer in contemplation of death
d. Transfer with reservation of title to property until