A.

ESTATE TAX
ESTATE TAX
Estate tax is an excise tax imposed on the privilege of
transferring upon the death of the owner.

Nature, Purpose, and Object

It is a transfer tax (i.e. an excise tax on the right of transmitting property), not a property
tax. Unlike the old inheritance tax, estate tax is a tax on the right to transfer and not the
right to inherit property.

PURPOSE: To tax the shift of economic benefits and enjoyment of property from the
dead to the living.
1. Generate additional revenue
2. Reduce concentration of wealth
3. Provide equal distribution of wealth
4. Most appropriate and effective method for taxing the privilege
5. Only method of collecting the share

NATURE:

1 IT IS A PRIVILEGE/EXCISE TAX
2. IT IS NOT A PROPERTY TAX -imposed not on the general ownership but on the act
of passing ownership
3.IT IS DIFFERENT FROM INHERITANCE TAX-tax imposed on the legal right to
succeed/receive/take a property; tax on the right to transfer and not the right to
inherit property.

ACCRUAL OF ESTATE TAX

-accrues as of the death of the decedent

LAW THAT GOVERNS THE IMPOSITION OF ESTATE TAX

-in force at the time of death of the decedent

TIME AND TRANSFER OF PROPERTIES

-takes place at the time of death

RATE
-BEFORE: 5-20%
-NOW: 6%

NOTE: CORP IS NOT LIABLE FOR ESTATE TAX SINCE IT IS NOT CAPABLE OF A
NATURAL DEATH

GROSS ESTATE
-value of the property, real or personal, tangible/intangible of the decedent

IF RESIDENT/CITIZEN: ALL; wherever situated

IF NON RESIDENT ALIEN: ONLY properties situated in the Philippines
*INTANGIBLE PERSONAL PROPERTY-subj to rule of reciprocity

INTANGIBLE PROPERTIES
1. Franchise
2. Shares, obligations or bonds issued by corp
3. Shares, obligations or bonds issued by a foreign corp 85% loc in the Phil
4. Shares, obligations or bonds issued by a foreign corp situs in the Phil
5. Shares in partnership, bus. Or industry established in the Phil

RULE OF RECIPROCITY
1. INTANGIBLE PROPERTY OF NRA
NOT INCLUDED IF:
A. NRA and did not impose transfer tax
B. Laws of a foreign country allow a similar exemption

2. W/O RECIPROCITY-included in the gross estate

VALUATION OF GROSS ESTATE

1. PROPERTY

1. REAL PROPERTY- whichever is higher between FMV

a. as determined by the Commisioner OR
b. Fixed by City/ Provincial Assessor

2. SHARE OF STOCKS-FMV depend if LISTED/UNLISTED

a. UNLISTED
a.1 Common Shares--book value at the time of Death
a.2 Preferred Shares--at par value

b. LISTED-FMV is the ARITHMETIC MEAN bet. Highest and lowest quoatation at a date
nearest the date of death

2.PARTICIPATION IN ANY ASSOC. RECREATION OR AMUSEMENT CLUB

-FMV is the ARITHMETIC MEAN bet. Highest and lowest quoatation at a date nearest
the date of death

3. RIGHT TO USUFRUCT, USE OF HABITATION, AND ANNUITY

-latest basic standard mortality table

4. IMPROVEMENT
-FMV per latest tax declaration

Situs of Intangible Personal Properties

General Rule: Mobilia Sequuntur Personam
(movables follow the person)
Principle: Taxation of intangible personal properties (such as credits, bills, bank deposits
promissory notes, and corporate stocks) follows the residence/domicile of the owner.

WHAT IS INCLUDED IN GROSS ESTATE? DTR3PT

-Decedent’s Interest at the time of his death

-Transfer in contemplation of his death
-Revocable Transfer
-Property passing GPA
-Proceeds of life insurance
-Prior Interest
-Transfer for Insufficient Consideration
-Capital of the surviving spouse
1. DECEDENT’S INTEREST AT THE TIME OF HIS DEATH
-any interest having value or capable of being valued
-EX. Dividends, partnership profits, right of usufruct

2. TRANSFER IN CONTEMPLATION OF HIS DEATH

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