Topic 4 – Allowable Deductions for Non-Resident and Exempt Transfers

LEARNING OBJECTIVES:

At the end of chapter, the students are expected to:

1. Define and determine items allowed as deduction for non-resident.

2. Discuss transaction exempt to estate tax.

Notes:

1. Deductions Allowed to Nonresident Estates

a. Expenses, Losses, Indebtedness and Taxes

The proportion of the deductions specified in I (a) above which the value of such part bears to

the value of his entire gross estate wherever situated;

Philippine gross estate

Expenses, losses,

indebtedness, taxes

World gross estate

b. Property Previously Taxed

c. Transfers for Public Use

The amount of all bequests, legacies, devises or transfers to or for the use of the Government

of the Republic of the Philippines or any political subdivision thereof, for exclusively public

purposes. (Transfers for public use of property in the Philippines.)

d. Standard Deduction

Standard deduction amounting to P500,000

SEC. 7. COMPUTATION OF THE NET ESTATE OF A DECEDENT WHO IS A NON-RESIDENT

ALIEN OF THE PHILIPPINES. - The value of the net estate of a decedent who is a non-resident alien in

the Philippines shall be determined by deducting from the value of that part of his gross estate which at

the time of his death is situated in the Philippines the following items of deductions:

1. Standard deduction. – A deduction in the amount of Five Hundred Thousand Pesos (P500,000) shall be
allowed without need of substantiation. The full amount of P500,000 shall be allowed as deduction for
the

benefit of the decedent.

2. The proportion of the total losses and indebtedness which the value of such part bears to the value of
his

entire gross estate wherever situated. Losses and indebtedness shall include the following:

2.1. Claims against the estate.

2.2. Claims of the deceased against insolvent persons where the value of the interest therein is included
in

the value of the gross estate.

2.3. Unpaid mortgages, taxes and casualty losses.