Professional Documents
Culture Documents
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● Franchise which must be exercised in the Philippines;
Donations ● Shares, obligations, or bonds issued by any corporation or
1. Donation Inter Vivos – take effect during the lifetime of the sociedad anima organized or constituted in the Philippines in
donor; hence subject to donor’s tax. accordance with its law;
2. Donation Mortis Causa – take effect at the death of the donor; ● Shares, obligations, or bonds by any foreign corporation 85%
hence subject to estate tax. of the business of which is located in the Philippines;
● Shares, obligations, or bonds have acquired a business situs in
Theories on Imposing Estate Tax the Philippines;
1. Benefits – Received Theory – ● Shares or rights in any partnership, business, or industry
○ Government services as to the distribution of the established in the Philippines.
estate of the decedent;
2. Privilege or State Partnership Theory – Reciprocity Agreement When –
○ The State is a silent partner as to the accumulation of 1. If the decedent at the time of his death was a citizen and
property; resident of foreign country which at the time of his death did
○ Inheritance is a privilege; it acquired by another thru not impose an estate tax of any character, in respect of
the protection of the State; intangible personal property of citizens of the Philippines not
3. Ability to Pay Theory – residing in that foreign country, or
○ The heirs and the beneficiaries must pay the tax; 2. If the laws of the foreign country of which the decedent was a
4. Redistribution of Wealth Theory – citizen and resident at the time of his death allows a similar
○ The tax reduces the property received by the exemption from transfer or death taxes of every character or
successor. description in respect of intangible personal property owned by
citizens of the Philippines not residing in that foreign country.
Rate of Estate Tax (Sec. 84) (Sec. 104 of the Tax Code)
● The tax rate is 6% of the net estate in excess of P 5,000,000;
● Whether resident or non – resident decedent; Gross Estate Inclusion(Sec. 85)
● Decedent’s interest
Gross Estate Inclusions (Sec. 85) ○ All interest at the time of decedent’s death;
● The value of the all property, real or personal, tangible or
intangible, at the time of death of the decedent; ● Transfer in contemplation of death
○ Wherever situated except for; ○ Transferred them during the lifetime of the decedent
○ Non – resident, non – citizen decedent (meaning, in anticipation of his death.
nonresident alien) – within the Philippines only; for
intangible property, it is subject to reciprocity ○ “Death must be contemplated, and the thought of
agreement. death, as distinguished from purposes associated with
life, must be the impelling cause of the transfer.”
Provided…
That amount withdrawn from the deposit accounts of a ● Revocable transfer
decedent subjected to the 6% final withholding tax imposed ○ Enjoyment of property transferred by decedent is
under Sec. 97 of the NIRC, shall be excluded from the gross subject at the date of his death to any change through
estate for purposes of computing tax. the exercise of a power to revoke, alter, amend, or
terminate the transfer.
Situs of Gross Estate
● Property Passing Under General power of appointment
○ “Means that the decedent must have had a power
exercisable in favor of himself, his estate, or creditors
of his estate.”
○ Special – decedent appointed only among a restricted
or designated class of persons other than himself, his
estate, his creditors, or creditors of his estate.
Te Pok died on November 20, 2018. Some of the properties he left are ALLOWABLE DEDUCTIONS (Sec. 86)
the following: For non resident alien decedent (within the Philippines)
Mode of Date FMV 1. Standard deduction – P 500,000
Asset Acquisition Acquired Acquired Death 2. Proportionate deduction of claims against the estate, claims
Land Purchase 7-3-14 500,000 350,000 against insolvent person, unpaid mortgage or indebtedness,
Car Donation 10-2-17 800,000 980,000 unpaid taxes and losses (without VD and TPU).
3. Vanishing deduction
Other information: 4. Transfer for public use
a. The gross estate of the decedent, P3M. 5. Share of the surviving spouse
b. The car was mortgaged for P50,000 when it was acquired and
Te Pok paid the same before he died. Exemptions (Sec. 87)
c. The allowable deductions totaled P125,000, which includes The following shall not be taxed:
medical expenses of P 30,000. It excludes bequest to a ● The merger or usufruct in the owner of the naked title;
charitable institution in the amount of P 50,000. ● The transmission or delivery of the inheritance or legacy by the
fiduciary heir or legatee to the fideicommissary;
The vanishing deduction is: ● The transmission from the first heir, legatee, or donee in favor
a. P 581,000 c. P 648,783 of another beneficiary, in accordance with the desire of the
b. P 571,000 d. P 637,617 predecessor;
Family home
A decedent died leaving a family home composed of the following:
Conjugal house worth P 8M, and the land which he exclusively owned
valued at P4M. He also owns a vacation house in Baguio worth P7M. Fideicommissary Substitution
Application:
Mr. A, died, resident citizen, leaving the following properties:
● Properties – USA 5,000,000
● Properties – Philippines 10,000,000
● Allowable deductions – USA 500,000
● Allowable deductions – Phils 1,000,000
● Tax paid in USA 200,000
Tax to be paid?
Exemptions (Sec. 87) ● If there be no legal residence in the Philippines, with the office
The following shall not be taxed: of the commissioner;
● All bequests, devises, legacies, or transfers to social welfare,
cultural, and charitable institutions: provided: Payment of Tax (Sec. 91) Time of payment
● That not more than thirty percent (30%) of the said bequest, ● Pay as you file system
devises, legacies, or transfers shall be used for administration Extension of time
purposes. ● Applicable it there would be undue hardship upon the estate or
any of the heirs;
Exclusion under Special Laws ● Judicial settlement – 5 years;
1. Proceeds of life insurance and benefits received by members of ● Extra judicial settlement – 2 years;
the GSIS (RA 728); ● Statute of limitations as provided in Sec. 203 is suspended;
2. Accruals and benefits received by members from SSS by
reason of death (RA 1792); Payment of Tax (Sec. 91) Extension of time
3. Life insurance proceeds on life insurance policy taken out by ● No extension when there is negligence, intentional disregard of
the decedent for himself, upon his own life, where the rules and regulations, or fraud on the part of the taxpayer;
beneficiary is a third person and is irrevocably designated; ● When the extension is granted, a bond must be furnished by
4. Life insurance proceeds on insurance policy (group insurance) the executor, administrator, or beneficiary;
taken out by his employer on the employees life, whoever the Payment by installment
beneficiary maybe , whether the designation as beneficiary is ● Within 2 years from the statutory date for its payment without
revocable or irrevocable. civil liability and interest.
5. Amount received from the Philippines and the United States
governments for war damages (RA227); Payment of Tax (Sec. 91) Liability for payment
6. Payments from the Philippines of US government to the legal ● The estate tax shall be paid by the executor or administrator
heirs of deceased of World War II Veterans and deceased before delivery to any beneficiary of the distributive share of
civilian for supplies/ services furnished to the US and the estate.
Philippine Army (RA136); ● The beneficiary to the extent of his distributive share shall be
7. Amount received from United States Veterans Administration; subsidiary liable.
8. Transfer by way of bona fide sales; ● If there are no executor or administrator, then any person in
9. Properties held in trust by the decedent; actual or constructive possession of any property of the
10. Acquisition and/ or transfer expressly declared as not taxable; decedent.
11. Personal Equity and Retirement Account (PERA) assets of the
decedent – contributor (Sec. 14, RA9505 – Personal Equity Discharge of Executor or Administrator (Sec. 92 )
and Retirement Act of 2008). ● After payment of the estate tax due;
● Subject to 3 – year period assessment under sec. 203;
Estate tax returns (Sec. 90) Requirements ● Certification from the commissioner is necessary before the
● When the gross estate, regardless of the value, consists of judge ordered the distribution of the property (sec. 94)
registered or registrable property, motor vehicle, shares of
stock or other similar property, a clearance from the BIR is Duties of Certain Officers and Debtors (Sec. 95)
required to transfer the ownership. ● Register of deeds shall not register the transfer unless a
● In lieu of this, the executor or administrator, or any of the legal certification from the commissioner that the estate tax due has
heirs, shall file a return under oath in duplicate, setting forth: been paid; also, they have to inform revenue officers of the non
○ The value of the gross estate; payment of tax discovered by them;
○ Allowable deductions; ● Lawyer, notary public, or government who intervenes shall
○ Other information necessary to establish the correct furnish the BIR officers with copies of information which will
taxes. facilitate the collection of taxes.
● When the gross estate exceeds P 5,000,000, the return shall be ● The debtor of the deceased shall not pay the latter’s heirs,
supported with a statement duly certified to by a certified legatee, executor, or administrator or his creditor unless the
public accountant containing the following: certification has been issued;
○ Itemized assets of the decedent; ● However, he may pay the executor or judicial administrator
○ Itemized deductions; without certification if the credit is included in the inventory of
○ Tax due whether paid or still outstanding. the estate of the deceased.