BUSINESS &

TRANSFER TAX
,
Succession and
Transfer Taxes
Mrs. Analyn Aquevido, CPA, CTT, MBA
TYPES OF TRANSFERS

ONEROUS

GRATUITOUS
Example: Car Dealer
ordinary course of trade or
business or regular sale

Not in the ordinary course of

trade or business or casual sale
TRANSFER TAXES are taxes
imposed upon the gratuitous
disposition of private
properties or rights.
Gratuitous transfer is one that
neither imposes burden nor
requires consideration from
transferee or recipient. The
transfer of ownership is free
because of absence of
financial consideration.
TYPES OF TRANSFER TAXES
1. Donor’s tax – assessed on the net value of
taxable assets transferred during the lifetime of
both donor and the done (donation inter vivos)

2. Estate tax assessed on the net values of taxable

assets transferred that take affect at the time of
death of the donor (donation mortis causa)
SUCCESSION is a mode of
acquisition by virtue of which, the
property, rights and obligations
to the extent of the value of the
inheritance, of a person are
transmitted through his death to
another or others either by his
will or by operation of law (Art.77
of Civil Code).
NATURE OF TRANFER TAXES

❑Transfer tax is an excise tax or privilege tax

imposed on the act of passing the ownership of
property and not on the value of the property or
right.
KINDS OF SUCCESSION
1. Testamentary - succession which results from the designation
of an heir, made in a will executed in the form prescribed by law
(Art. 779, CCP).

2. Legal or Intestate - transmission of properties where there is no

will, or if there is a will, the same is void or lost its validity, or
nobody succeeds in the will.

3. Mixed - transmission of properties, which is effected partly by

will and partly by operation of law.
Causes of Legal Succession or Intestacy
1. If a person dies without a will, or with a void will, or one which
has subsequently lost its validity

2. When the “Will” does not institute an heir.

3. Partial institution of heir. Consequently, intestacy takes place as

to the undisposed portion.

4. When the heir instituted is incapable of succeeding.

5. Other causes such as:

Others Causes of Legal Succession or Intestacy
a. non-fulfilment of the suspensive condition attached to the
institution of heir.
b. Preterition (omission in the testator’s will of one, some or all of
compulsory heirs in the direct line which has the effect of
annulling the institution of heir).
c. Fulfillment of resolutory condition.
Kinds of successors in a testamentary
succession
1. Legatee, an heir to a particular personal property
given by virtue of a will.

2. Devisee, an heir to a particular real property

given by virtue of a will.
Nature of Estate Tax – It is a tax on the right to transfer
property at death (succession) and on certain transfers
which are made by law the equivalent of testamentary
disposition and is measured by the value of the property.

❑ It is an excise tax, the object of which is the shifting of economic

benefits and enjoyment of property from the dead to the living.

❑ It accrues as of the death of the decedent, notwithstanding the

postponement of the actual possession or enjoyment of the estate
by the beneficiary.

❑ The taxpayer in the estate taxation is the estate of the decedent

represented by the administrator, executor or legal heirs.
Kinds of Wills:
1. Notarial or Ordinary or Attested Will – is one
which is executed in accordance with the
formalities prescribed by Art. 804 to 808 of the
New Civil Code. It is a will that is created for the
testator by a third party, usually his lawyer,
follows proper form, signed and dated in front of
the required number of witnesses (3 or more
witnesses) and acknowledged by the presence
of a notary public.
2. Holographic Will–is a written will which must be
entirely written, dated and signed by the hand of
the testator himself, without the necessity of any
witness. This kind of will does not need
formalities because many people can recognize
his handwriting and it can be verified by a
penmanship expert.
Codicil – a supplement or addition to a will, made
after the execution of a will and annexed to be
taken as a part thereof, by which any disposition
made in the original will is explained, added to or
altered.
Elements of Succession
a. Decedent - the person whose property is
transmitted through succession, whether or not he
left a will (Art. 775, CCP).

b. Heir - the person called to the succession either by

the provision of a will or by operation of law (Art. 782,
CCP).

c. Estate - refers to all the property, rights and

obligations of a person which are not extinguished by
his death (Art. 776, CCP).
Executor is the person nominated by a testator to
carry out the directions and request in his will and to
dispose of his property according to his testamentary
provisions after his death. Compulsory or Forced Heirs:
1. legitimate children and descendants
2. In default of the foregoing, legitimate parents
or ascendants
3. Widow or widower; and
Under testamentary succession, the mass of 4. Illegitimate children
properties left by the decedent may be classified
into:
1. Legitime is the portion of the testator’s property
which could not be disposed of freely because
the law has reserved it for the compulsory heirs.
(Art. 886, CCP).
2. Free portion is that part of the whole estate
which the testator could dispose of freely
through written will irrespective of his
relationship to the recipient.