Transfer Tax

TAX “Innovating
TRANSFER TAXATION Educational

Services”
KHEEN V. BATINGAL
REVIEW NOTES
I. INTRODUCTION TO TRANSFER TAXATION

a. Concept of transfer and types of transfers
i. Concept – Transfers refers to any transmission of property from
one person to another.
ii. Types of transfers:

1. Bilateral transfers – transmission of property for
consideration. (Onerous transactions or exchanges).
2. Unilateral transfers – transmission of property by a
person without consideration. (Gratuitous transactions or
transfers).
a. Donation – gratuitous transfer of property from a
living donor to a donee
b. Succession – gratuitous transfer of property
from a deceased person upon death to his/her
heirs
3. Complex transfers – transfers for less than full and
adequate consideration.
Exception: A sale, exchange, or other transfer made in
the ordinary course of business shall be considered as
made for an adequate and full consideration.
iii. Types of transfer taxes

1. Donor’s tax – tax on donation (donation inter vivos)
2. Estate tax – tax on succession (donation mortis causa)
iv. Basis of transfer taxation

1. Tax evasion or minimization theory
2. Tax recoupment theory
3. Benefit received theory
4. State partnership theory
5. Wealth redistribution theory
6. Ability to pay theory
b. General rule in transfer taxation

i. Classification of transfer taxpayers
1. Resident citizens, resident aliens, and non-resident
citizens – subject to tax on all transfers of properties
regardless of their location
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TAX TRANSFER TAXATION
2. Non-resident aliens – taxable only on properties
transferred with situs within the Philippines
ii. Test of classification for juridical persons

1. Residency – fixed or principal place of business
2. Citizenship – incorporation test
iii. Situs of properties – important for non-resident aliens and

computation of tax credit for foreign taxes paid. The following
properties are considered located in the Philippines:
1. Franchise exercisable in the Philippines
2. Shares, obligations, or bonds issued by any corporation
or sociedad anonima organized or constituted in the
Philippines in accordance with its laws
3. Shares, obligations, or bonds issued by any foreign
corporation 85% of the business of which is located in
the Philippines
4. Shares, obligations, or bonds issued by any foreign
corporation if such shares, obligations, or bonds have
acquired business situs in the Philippines
5. Shares or rights in any partnership, business or industry
established in the Philippines
6. Any personal property, whether tangible or intangible,
located in the Philippines
iv. Reciprocity rule on non-resident aliens – intangible personal

properties of non-resident aliens (NRAs) are exempt from
Philippine transfer tax if the country in which such NRA is a
citizen and resident also exempts the intangible personal
properties of Filipino non-residents therein from transfer taxes
v. Timing of valuation of transfers

1. Donation inter vivos – valued at the date of perfection
of the donation
2. Donation mortis causa – valued at the date of death
vi. Classifying donation as inter vivos or mortis causa

1. Donation mortis causa:
a. Transfers in contemplation of death
b. Transfers intended to take effect upon death
2. Donation inter vivos:

a. Motives associated with life
b. Transfers intended to take effect during the
lifetime of the donor

c. Non-taxable transfers
i. Void transfers – those that are prohibited by law or those that
do not conform to legal requirements for their validity
ii. Quasi-transfers – transmissions of property which do not
involve transfer of ownership
iii. Incomplete transfers – transmission or delivery of properties
from one person to another, but ownership is not transferred at
the point of delivery
1. Conditional transfers
2. Revocable transfers
3. Transfer in contemplation of death
4. Transfers with reservation of title to property until death
d. Completion of incomplete transfers (point of taxability)

i. Completed inter vivos
1. Conditional transfers
a. fulfillment of the condition by the transferee
b. waiver of the same by the transferor
2. Revocable transfers
a. waiver by the transferor to exercise his right of
revocation
b. the lapse of his reserved right to revoke
ii. Completed mortis causa

1. Transfers in contemplation of death & transfers with
reservation of title to property until death –
completed by the death of the decedent
2. Conditional transfers & revocable transfers – pre-
terminated by the death of the decedent
e. Complex incomplete transfers

i. Valuation rules
1. Donation inter vivos – fair value at the date of
completion of transaction less the consideration given
2. Donation mortis causa – fair value at the date of death
less consideration given at the date of transfer
ii. Test of taxability

1. The incomplete transfer must have been paid for less
than full and adequate consideration at the date of
delivery of the property
2. The property must not have decrease in value less than
the consideration paid at the completion of the transfer

II. ESTATE TAX
a. Principles, concepts involving estate taxation
i. Concept of succession and its types
1. Concept of succession – 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. (Article
774, Civil Code)
2. Types of succession
a. Testate. Voluntary or testamentary – A
succession carried out according to the wishes
of the testator expressed in a will executed in
the form prescribed by law.
b. Intestate, involuntary or legal – A succession
with an invalid will or without a will, thus giving
rise to a succession by operation of law.
c. Mixed – A succession which is effected partly by
will and partly by operation of law.
ii. Concept and types of will

1. Concept – An act whereby a person is permitted, with
the formalities prescribed by law, to control to a certain
degree the disposition of this estate, to take effect after
his death. (Article 783, Ibid)
2. Types of will
a. Holographic will – A will which is entirely
written, dated, and signed by the hand of the
testator himself, without the need of witnesses.
b. Notarial, ordinary or attested will – One which
is executed in accordance with the formalities
prescribed by the new civil code.
c. 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
disposition made in the original will is explained,
added to, or altered.
iii. Nature of succession

1. Succession is gratuitous transmission of property from a
deceased person in favor of his successors.
2. Succession involves only the net properties of the
decedent.

iv. Elements of succession
1. Decedent – the person who dies and whose properties,
rights and obligations are transmitted. A decedent who
left a will is called a testator.
2. Estate – the properties, rights and obligations which are
the subject matter of the succession.
3. Heirs/successors – the person to whom the properties,
rights and obligations of the decedent will pass. They are
also known as the beneficiaries.
v. Types of heirs
1. Compulsory heirs – they are entitled to their share in
the estate, with or without a will, unless validly
disinherited or has repudiated his/her share in the
inheritance. Decedents can disinherit an heir on certain
grounds allowable by law, and similarly, heirs can
repudiate their share in the inheritance of the decedent.
a. Primary heirs – legitimate children and
descendants
b. Secondary heirs – legitimate/illegitimate
parents and ascendants
c. Concurring heirs – widow/widower and
illegitimate descendants
2. Voluntary hers – they inherit only if their names are
provided in the will.
vi. Portions of estate for testamentary successions:

1. Legitime – the portion of the testator’s property which
could not be disposed of freely because the law has
reserved it for the compulsory heirs.
2. Free portion – the part of the whole estate which the
testator could dispose of freely through written will
irrespective of his relationship to the recipient.
vii. Intestate succession – in default of testamentary succession,

the following heirs in their order of priority shall be entitled to
claim the inheritance left by the decedent:
1. Concurring heirs and,
a. Descendants, or in their default,
b. Ascendants
2. Relatives in the collateral line up to fifth (5 th) degree of
consanguinity
3. State

viii. Other persons in succession
1. Legatee – a person whom gifts of personal property is
given by virtue of a will
2. Devisee – a person whom gifts of real property is given
by virtue of a will
3. Executors – a person named by the decedent who shall
carry out the provisions of his will
4. Administrators – a person appointed by the court to
manage the distribution of the estate of the decedent
ix. Estate Taxation

Estate taxation pertains to the taxation of the gratuitous transfer
of properties of the decedent to the heirs upon the decedent’s
death.
Estate taxation is governed by the law in force at the time of the

decedent’s death.
x. Estate tax
1. Definition – an excise tax imposed upon the privilege of
transmitting property at the time of death and on the
privilege that a person is given in controlling to a certain
extent the disposition of his property to take effect upon
death. Estate tax laws rest in their essence upon the
principle that death is the generating source from which
the taxing power takes it being, and that it is the power
to transmit or the transmission from the death to the
living on which the tax is more immediately based.
(Lorenzo vs. Posadas, 64 Phil. 353)
2. Nature of estate tax – it is not a tax on property

because their imposition does not rest upon general
ownership but rather, they are privilege tax since they
are imposed on the act of passing ownership of property.
3. Characteristics of estate tax

a. It is a transfer tax
b. It is an ad valorem tax
c. It is a national tax
d. It is a general tax
e. It is a direct tax
f. It is an excise tax

4. Requisites for imposition of estate tax
a. Death of decedent
b. Successor is alive at the time of decedent’s
death
c. Successor is not disqualified to inherit
5. Purpose and object of estate tax

a. To generate additional revenue for the
government
b. To compensate the government for the
protection given to the decedent that enabled
him to prosper and accumulate wealth
c. Remove the disparity in the tax treatment of a
sale and transfer by death
6. Theories on the purposes of estate tax

a. Benefits-protection
b. Privilege or state-partnership
c. Ability to pay
d. Redistribution of wealth
xi. Estate Tax Model

Gross estate XXX,XXX
Less: Deductions from gross estate XXX,XXX
Net taxable estate XXX,XXX
b. Transfers which may be considered donation mortis causa

i. Transfers in contemplation of death
ii. Transfers intended to take effect upon death
iii. Conditional transfers and revocable transfers which are pre-
terminated by the death of the decedent
c. Classification of decedents
i. Resident citizen, non-resident citizen and resident alien
decedents – taxable on properties located within or outside the
Philippines
ii. Non-resident alien decedents – taxable only on properties
located in the Philippines, except intangible personal property
when the reciprocity rules apply
d. Gross estate
i. Concept of gross estate
Residents NRA without NRA with
or citizens reciprocity reciprocity
Property location Within Outside Within Outside Within Outside

Real properties ✓ ✓ ✓ X ✓ X
Personal properties
- Tangible ✓ ✓ ✓ X ✓ X
- Intangible ✓ ✓ ✓ X X X
ii. Gross estate formula

Inventory of properties at the point of death XXX,XXX
Less: Exempt transfers
Properties not owned XXX,XXX
Properties owned but excluded by law XXX,XXX XXX,XXX
Inventory of taxable present properties XXX,XXX
Add: Taxable transfers XXX,XXX
Gross estate XXX,XXX
iii. Exempt transfers

1. Transfers of properties not owned by the decedent
a. Merger of the usufruct in the owner of the naked
title
b. The transmission or delivery of the inheritance
or legacy by the fiduciary heir or legatee to the
fideicommissary
c. The transmission from the first heir, legatee, or
donee in favor or another beneficiary, in
accordance with the desire of the predecessor
d. Proceeds of irrevocable life insurance policy
payable to beneficiary other than the estate,
executor or administrator
e. Properties held in trust by the decedent
f. Separate properties of the surviving spouse of
the decedent
g. Transfer by way of bona fide sales
2. Properties owned but excluded by law from estate

tax
a. Proceeds of group insurance taken out by a
company for employees
b. Proceeds of GSIS policy or benefits from GSIS
c. Accruals from SSS
d. United States Veterans Administration (USVA)
benefits
e. War damage payments
f. All bequests, devises, legacies or transfers to
social welfare, cultural and charitable
institutions, no part of net income of which

inured to the benefit of any individual; provided,
however, that not more than 30% of the said
bequest, devises, legacies or transfers shall be
used by such institutions for administration
purposes
g. Acquisitions and/or transfers expressly declared
as non-taxable by law
iv. Taxable transfers

1. Transfers in contemplation of death
a. Transfers of property to take effect in
possession or enjoyment after death
b. Transfer or property with retention of possession
or enjoyment or right over income of the
property until death
c. Transfer of property with retention of the right to
designate, alone or in conjunction with any
person, the person who shall enjoy the property
and the income therefrom
2. Revocable transfers, including conditional transfers
3. Transfer with retention or reservation of certain rights
4. Transfers under the general power of appointment
v. Composition of gross estate

1. Properties, movable or immovable, tangible or intangible
2. Decedent’s interest on properties
3. Proceeds of life insurance:
a. designated as revocable to any heir
b. regardless of designation, if the beneficiary is
the estate, administrator or executor
4. Taxable transfers
vi. Valuation of the gross estate

1. General valuation rules
a. Fair value at the time of death
b. Fair value set by laws and revenue regulations
c. In default of any laws and revenue regulations,
fair value according to GAAP
d. Encumbrances and decreases in values after
death are ignored

2. Specific valuation rules – all at the date of death of the
decedent
Property Valuation
Real properties Higher between Zonal value or Assessed value
Preferred shares Par value
Unlisted common Book value (unadjusted)
shares
Listed common Arithmetic mean between highest & lower quotation
shares
Usufruct and Present value with interest rate and period approved by Secretary of
annuities Finance, upon recommendation by the Insurance Commissioner
Newly purchased Purchase price (Secondhand value if not newly acquired)
property
Pawned Grossing up pawn value by loan-to-value ratio
properties
Financial Face amount plus accrued interests
instruments
Foreign currency Prevailing exchange rate
vii. Composition of gross estate for married decedents

1. Exclusive properties of the decedent
2. Conjugal/common properties of the spouse
viii. Common types of property regimes

1. Absolute separation of property (ASP)
2. Conjugal partnership of gains (CGP)
3. Absolute community of property (ACP)
4. Local customs
ix. Applicable property regime in default of an agreement

1. Marriages celebrated before August 3, 1988 – Conjugal
partnership of gains
2. Marriages celebrated on or after August 3, 1988 –
Absolute Community of Property
x. Conjugal partnership of gains

Before marriage During marriage
Husband’s property Exclusive
Wife’s property Exclusive
Properties acquired by inheritance & donation Exclusive
during marriage
Other properties acquired during marriage Conjugal

Income from exclusive properties Conjugal
Income from conjugal properties Conjugal
xi. Absolute community of properties

Before marriage During marriage
Husband’s property Community
Wife’s property Community
Property from previous Exclusive
marriage
Properties acquired by inheritance & donation Exclusive
during marriage
Properties of personal exclusive use of either Exclusive
spouse, except jewelry
Other properties acquired during marriage Community
Income from exclusive properties Exclusive
Income from community properties Community
xii. Acquisition of exempt properties – included as exclusive or

common properties of the spouses but shall be excluded in the
computation of the gross estate
e. Deductions from gross estate

i. Concepts and principles of deductions
1. Concept of deductions – refers to amount, which are
subject to limitations by the Tax Code, which either
actually reduces the estate or in a form of incentives
provided, to determine the net taxable estate.
Conjugal/
Exclusive Communal Total
Gross Estate XXX,XXX XXX,XXX XXX,XXX
Less: Ordinary deductions XXX,XXX XXX,XXX XXX,XXX
Estate after Ordinary Deductions XXX,XXX XXX,XXX XXX,XXX
Less: Special deductions XXX,XXX
Net Estate XXX,XXX
Less: Share of the Surviving Spouse x½ XXX,XXX
Net Taxable Estate XXX,XXX
2. Principles of deductions
a. The substantiation rule – items of deduction
must be supported with either documentary
evidence or legal basis to establish their validity
b. Matching principle – proper classification and
categorization of deduction.

c. “No double claim” rule – items of deduction
shall not be claimed simultaneously under
several deduction categories
d. Default presumption on ordinary deduction –
in cases of married decedents, ordinary
deductions are presumed to be against the
common properties unless proven to be an
exclusive property of either spouse
e. Qualified deductions for Nonresident aliens –
No deduction shall be allowed in case of a non-
resident alien decedent, unless the executor,
administrator, or anyone of the heirs, includes in
the return the value at the time of the decedent’s
death that part of his gross estate not situated in
the Philippines
3. Classification of deductions
a. Ordinary deductions – generally those items
that diminish the amount of inheritance, except
for “property previously taxed” which is a
deduction incentive
b. Special deductions – generally those that are
deduction incentives, thus will result only to the
reduction of the net taxable estate, but not to
diminish the amount of inheritance
c. Share of the surviving spouse – interest of the
surviving spouse in the net conjugal or
communal properties of the spouses.
ii. Ordinary deductions

1. Losses, Indebtedness and Taxes (LIT)
a. Losses
i. Concept – These pertain to losses of
properties of the estate during the
settlement of the estate.
ii. Requisites for deductibility:

1. Loss must be a sustained
casualty loss
2. The loss must occur during the
settlement of the estate up to
the deadline of the estate tax
return

3. The loss must not be
concurrently claimed in the
income tax return
iii. Claims against insolvent persons

(Bad debts) – a form of loss but is
presented as a separate item of
deduction in the tax return.
iv. Classification of Losses – classified

based on the “Property classification
Rule.”
b. Claims against the estate (Indebtedness)

i. Concept – The word “claims” as used in
the statute is generally construed to
mean debts or demands of a pecuniary
nature which could have been reduced
to simple money judgments (RAMO 1-
80).
ii. Requisites of deductibility of claims

against the estate:
1. The liability represents a
personal obligation of the
deceased existing at the time of
his death except unpaid medical
expenses
2. The liability was contracted in
good faith and for adequate and
full consideration in money or
money’s worth
3. The claim must be a debt or
claim which is valid in law and
enforceable in court
4. The indebtedness must not
have been condoned by the
creditor or the action to collect
from the decedent must not
have prescribed

iii. Classification Rules:
1. Family benefit rule – if the
obligation was contracted or
incurred for the benefit of the
family, the claim shall be
classified as deduction against
common property.
2. Property classification rule –
if the family benefit rule is
inapplicable, the claims follow
the classification of the relevant
property.
iv. Special rules on certain claims

against the estate:
1. Unpaid mortgage – this
includes mortgage upon, or any
indebtedness, with respect to
property where the value of the
decedent’s interest therein,
undiminished by such mortgage
or indebtedness, is included in
gross estate.
2. Unpaid taxes – this include
national internal revenue taxes
which have accrued as of the
death of the decedent and
which were unpaid as of the
time of death.
3. Accommodation loan –
presented as a receivable in the
gross estate and is presented
as a deduction.
v. Substantiation Requirements:
1. Simple loan and advances
a. The debt instrument
must be duly notarized
at the time the
indebtedness was
incurred, except for
loans granted by
financial institutions
where notarization is
not part of the business

practice/policy of the
financial institution-
lender
b. A duly notarized
Certification from the
creditor as to the unpaid
balance of the debt,
including interest as of
the time of death
c. Proof of financial
capacity of the creditor
to lend the amount at
the time the loan was
granted, as well as its
latest audited balance
sheet with a detailed
schedule of its
receivable showing the
unpaid balance of the
decedent debtor
d. A statement under oath
executed by the
administrator or
executor of the estate
reflecting the disposition
of the proceeds of the
loan if said loan was
contracted within three
(3) years prior to the
death of the decedent
2. Purchase of goods or
services
a. Pertinent documents
evidencing the
purchase of goods or
services as duly
acknowledged,
executed, and signed
by the decedent and the
creditor, such as:
i. Sale of goods –
sales invoice/
delivery receipt

ii. Sale of services
– contract for
the services
agreed to be
rendered
b. Statement of account
given by the creditor as
duly received by the
decedent-debtor
c. Duly notarized
Certification from the
creditor as to the unpaid
balance of the debt
including interest as of
the time of death
d. Certified true copy of
the latest audited
balance sheet of the
creditor with a detailed
schedule of its
receivable showing the
unpaid balance of the
decedent-debtor
3. Where the settlement is made

through the Court in a testate or
intestate proceeding, pertinent
documents filed with the Court
evidencing the claims against
the estate, and the Court Order
approving the said claims, if
already issued, in addition to the
documents mentioned in the
preceding paragraphs
c. Rule on claimable losses, indebtedness and

taxes:
i. Residents or citizens – claimable in full
ii. Nonresident aliens – claimable pro
rata, if gross estate not situated in the
Philippines is also disclosed or reported
in the estate tax return, otherwise, not
deductible

Philippine gross estate
x Losses, indebtedness, & taxes = Claimable LIT
World gross estate
2. Transfers for Public Use – includes the amount of all

bequests, legacies, devises or transfer to or for the use
of the Government of the Republic of the Philippines, or
any political subdivision thereof, for the exclusive public
purposes.
3. Property Previously Taxed (Vanishing Deductions)

a. Concept – Vanishing deduction is an incentive
available to the estate who received certain
properties through gratuitous transfer, which
was previously subjected to transfer tax, within a
short period
b. Requisites of vanishing deduction:

i. The present decedent must have died
within FIVE (5) years from date of
acquisition of property by gratuitous
transfer
ii. The property with respect to which the
deduction is claimed must have been
part of the gross estate SITUATED IN
THE PHILIPPINES of the prior decedent
or taxable gift of the donor
iii. The property must be identified as the
same property received from prior
decedent or donor or the one received
in exchange thereof
iv. The taxes on the transmission from
previous donor or decedent of such
property must have been finally
determined and paid
v. No vanishing deduction on the property
or the property in exchange thereof was
allowed to the prior estate
c. Steps in computing for vanishing deduction:

i. Determine the initial value (lower of
FMV at date of previous transfer & FMV
at date of death of current decedent)

ii. Determine the initial basis
Initial value P xxx,xxx
Less: Indebtedness
assumed and paid
before death xxx,xxx
Initial basis P xxx,xxx
iii. Determine the final basis
Initial basis P xxx,xxx
Less:
(Initial basis/Gross estate)
x (LIT + TPU) xxx,xxx
Final basis P xxx,xxx
iv. Determine the vanishing deduction
Final basis P xxx,xxx
Vanishing percentage xx%
Vanishing deduction P xxx,xxx
100% - within 1 year;
80% - within 2 years;
20% - within 5 years
iii. Special deductions

1. Family home
a. Concept – Family home deduction refers to the
value of the family home, which includes the
dwelling house, and the land on which it is
situated, where the decedent and/or members of
his family reside, which is claimable as an
incentive by the Tax Code
b. Requisites for deduction of family home

i. The family home must be the actual
residential home of the decedent and
his family at the time of his death, as
certified by the Barangay Captain of the
locality where the family home is
situated;
ii. The total value of the family home must
be included as part of the gross estate
of the decedent; and,
iii. The allowable deduction must not
exceed the lowest among the current
fair market value of the family home as
declared or included in gross estate, or

the extent of the decedent’s interest
therein, or P10,000,000.
iv. Claimable only by married decedents
and single decedents who are heads of
their families
2. Standard deduction – a deduction incentive allowable

to the estate without the need of substantiation. A
standard deduction of P5,000,000 shall be allowed to
resident and citizen decedents and P500,000 for non-
resident alien decedents, which both shall be claimed in
full against the gross estate.
3. Benefits under RA No. 4917 – NIRC provides that any

amount received by the heirs from the decedent’s
employer as a consequence of the death of the
decedent-employee in accordance with RA No. 4917 is
allowed as a deduction provided that the amount of the
separation benefit is included as part of the gross estate
of the decedent. (NOTE: Benefit under RA No. 4917
shall be totally exempt from tax)
iv. Share of surviving spouse – one-half of the net conjugal or

community properties of the spouses.
Basis – After deducting the allowable deductions appertaining to

the conjugal or community properties included in the gross
estate, the share of the surviving spouse must be removed to
ensure that only the decedent’s interest in the estate is taxed
(RR No. 2-2003).
v. Rules on claimable deductions per decedent classifications

Residents or Non-resident
Citizens Aliens
Ordinary deductions
Losses Yes
Claims against the estate Yes Pro-rated
Indebtedness Yes Amount
Taxes Yes
Transfer for public use Yes Yes
Vanishing deductions Yes Yes
Special deductions
Family home Yes No
Standard deductions P5,000,000 P500,000

Benefits under RA 4917 Yes No
Share of the surviving spouse Yes Yes
f. Net estate and net taxable estate

i. Determination of the net taxable estate
1. Step 1: Enumerate all the items of inclusion in the gross
estate of the decedent
2. Step 2: Determine the classification of the decedent
(whether resident/citizen or non-resident alien and
whether single or married)
3. Step 3: Classify the items of gross estate into its situs
classification per country (if applicable) and property
regime classification (whether paraphernal, capital or
common/conjugal)
4. Step 4: Enumerate all the items of deduction from gross
estate and classify them accordingly per situs and
property regime classification
5. Step 5: Compute the net taxable estate
ii. Determination of the net estate per country

1. Residents/citizens (for tax credit purposes):
a. Rule on ordinary deductions – classification
rule shall be followed
b. Rule on special deductions:
i. Family home – Within the Philippines
ii. Standard deduction – pro-rated based
on gross estate
2. Non-resident alien (for determination of net

Philippine estate):
a. LIT – pro-rated based on gross estate
b. Other ordinary deductions – property
classification rule shall be followed
g. Tax due and tax credits, if applicable

i. Determination of tax due
Multiply by the net taxable estate by 6% to determine the total
estate tax due.
ii. Determination of foreign tax credit

1. Available only to the estate of resident and citizen
decedents
2. The tax credit is the lower between the actual foreign
estate tax paid or the ratio of the tax due from the foreign
sourced net estate over the total (world) net estate

3. For multiple foreign countries, the lower of actual estate
tax and the foregoing limit for each country is determined
first. The final foreign tax credit shall be the lower of the
total of the tax credit allowable per country and the world
estate tax credit limit.
Foreign net taxable estate
x Philippine estate tax due
World net taxable estate
Total foreign net taxable estate

x Philippine estate tax due
World net taxable estate
h. Tax return preparation and filing and tax payments

i. Mode of filing of tax returns
1. Manual filing system
2. e-BIR Forms
3. Electronic Filing and Payment System (eFPS)
ii. Venue and time of filing of tax returns

1. Venue of filing
a. For resident decedents – the administrator or
executor shall register the estate of the
decedent and secure a new TIN therefor from
the RDO where the decedent is domiciled at the
date of his death
b. For non-resident decedents – whether non-
resident citizen or alien with executor or
administrator in the Philippines, the estate tax
return shall be filed and a new TIN shall be
secured from the RDO where such executor or
administrator is registered. If he is not
registered, the return shall be filed and new TIN
shall be secured from the RDO having
jurisdiction of his legal residence.
2. Where to file the estate tax returns?

a. Accredited agent bank
b. Revenue district office
c. Collection agent
d. Duly authorized treasurer of the city or
municipality in which the decedent or
administrator was domiciled at the time of his
death
e. Office of the commissioner, if the administrator
or executor has no legal residence in the
Philippines

3. Deadline of filing the estate tax return – shall be filed
within one year after the date of death
4. Extension of filing – The commissioner is authorized to

grant, in meritorious cases, a reasonable extension not
exceeding 30 days for filing the return
iii. Payment of estate tax due

1. General rule – shall be paid at the time the return is filed
following the rule, “pay as you file.”
2. Insufficiency of cash to pay tax – if there is difficulty in
paying the tax, the same may be settled by:
a. Installment payment
b. Partial disposition of estate
iv. Installment payment of estate tax

1. Installment payment – may be paid within two years
without the imposition of interest or civil penalties
Subject to approval of the CIR, the estate tax may be
paid as follows:
a. 24 monthly installments
b. 8 quarterly payments
c. 4 semi-annual payments
d. 2 annual payments
In case of lapse of two years without payment of the

entire tax due, the remaining cash balance thereof shall
be due and demandable subject to the applicable
penalties and interest reckoned from the prescribed
deadline for filing the return and payment of tax
2. Partial disposition – a written request which shall be

approved by the BIR, together with a notarized
undertaking that the proceeds thereof shall be
exclusively used for the payment of estate tax due, for
the partial disposition of properties of the estate to be
conveyed for cash consideration in settlement of the
estate tax due.
In case of a failure to pay the total estate tax due out

from the proceeds of said disposition, the estate tax due
shall be immediately due and demandable subject to the
applicable penalties and interest reckoned from the
prescribed deadline of filing of the return.

v. Extension of time – When the Commissioner finds that the
payment on the due date of the estate tax or of any part thereof
would impose undue hardship upon the estate or any of the
heirs, he may extend the time for payment of such tax or any
part thereof not to exceed five (5) years, in case the estate is
settled through the courts, or two (2) years in case the estate is
settled extrajudicially.
In such case, the amount in respect of which the extension is

granted shall be paid on or before the date of the expiration of
the period of the extension, and the running of the Statute of
Limitations for assessment shall be suspended for the period of
any such extension.
Where the taxes are assessed by reason of negligence,

intentional disregard of rules and regulations, or fraud on the part
of the taxpayer, no extension will be granted by the
Commissioner.
If an extension is granted, the Commissioner may require the

executor, or administrator, or beneficiary, as the case may be, to
furnish a bond in such amount, not exceeding double the amount
of the tax and with such sureties as the Commissioner deems
necessary, conditioned upon the payment of the said tax in
accordance with the terms of the extension.
vi. Liability for payment of the estate tax – The estate tax shall
be paid by the executor or administrator before delivery to any
heir of his distributive share of the estate. Where there are two or
more executors or administrators, all of them shall be severally
liable for the payment of tax.
The executor or administrator of an estate has the primary

obligation to pay the estate tax but the heir or beneficiary has
subsidiary liability for the payment of that portion of the estate
which his distributive share bears to the value of the total net
estate. The extent of his liability, however, shall in no case
exceeds the value of his share in the inheritance.
vii. Discharge of executor or administrator from personal

liability – The executor or administrator shall make a written
application for the Commissioner of the amount of the estate tax
and discharge from personal liability. The executor or
administrator, upon payment of the amount of which he is
notified, shall be discharged from personal liability for any

deficiency in the tax thereafter found to be due and shall be
entitled to a receipt in writing showing such discharge.
No judge shall authorize the executor or judicial administrator to

deliver a distributive share to any party interested in the estate
unless a certification from the Commissioner that the estate has
been paid is shown.
If, after the payment of the estate tax, new obligations of the
decedent shall appear, and the persons interested shall have
satisfied them by order of the court, they shall have a right to the
restitution of the proportional part of the tax paid.
viii. Payment of tax antecedent to the transfer of shares, bonds

or rights – There shall not be transferred to any new owner in
the books of any corporation, sociedad anonima, partnership,
business, or industry organized or established in the Philippines
any share, obligation, bond or right by way of gift inter vivos or
mortis causa, legacy or inheritance, unless a certification from
the Commissioner that the estate taxes due thereon have been
paid is shown.
If a bank has knowledge of the death of a person, who

maintained a bank deposit account alone, or jointly with another,
it shall allow any withdrawal from the said deposit account,
subject to a final withholding tax of six percent (6%). For this
purpose, all withdrawal slips shall contain a statement to the
effect that all of the joint depositors are still living at the time of
withdrawal by any one of the joint depositors and such statement
shall be under oath by the said depositors.
ix. Accomplishing of tax returns and forms – BIR Form 1801

Estate Tax Return (January 2018)
The executor, administrator or any of the heirs shall file in

duplicate an estate tax return under oath, setting forth the
following:
1. Value of gross estate at the point of death or, in the case
of non-resident alien, that part of his gross estate
situated in the Philippines
2. The deductions allowed from gross estate
3. Supplemental data which may be necessary to establish
the correct tax

x. Attachments to the tax return – CPA Certification – where the
value of the gross estate exceeds P5,000,000, the return shall
be accompanied by a statement certified by a Certified Public
Accountant.
Contents of the statement:

1. Itemized assets of the decedent with their corresponding
gross value at the time of death or, in the case of a non-
resident decedent, that part of his gross estate situated
in the Philippines
2. Itemized deductions from gross estate
3. The amount of tax due whether paid or still due and
outstanding
i. Compliance requirements
i. Registration/application for TIN
1. BIR Form 1901 Application for Registration for Self-
Employed (Single Proprietor/Professional), Mixed
Income Individuals, Non-Resident Alien Engaged in
Trade/Business, Estate and Trust –
registration/application for TIN of estate undergoing
judicial settlement
2. BIR Form 1904 Application for Registration for One-Time
Taxpayer and Person registering under E.O. 98 –
registration/application for TIN shall be made before
payment of the tax due applicable for extrajudicial
settlement of the estate
ii. Estate tax amnesty act

1. Coverage – There is hereby authorized and granted a
tax amnesty, hereinafter called Estate Tax Amnesty,
which shall cover the estate of decedents who died on or
before December 31, 2017, with or without assessments
duly issued therefor, whose estate taxes have remained
unpaid or have accrued as of December 31, 2017:
Provided, however, That the Estate Tax Amnesty hereby
authorized and granted shall not cover in the exceptions.
2. Entitlement – Except for the exceptions, the estate may

enjoy the immunities and privileges of the Estate Tax
Amnesty and pay an estate amnesty tax at the rate of six
percent (6%) based on the decedent’s total net estate at
the time of death: Provided, That if an estate tax return
was previously filed with the Bureau of Internal Revenue,
the estate tax rate of six percent (6%) shall be based on

net undeclared estate. The provisions of the National
Internal Revenue Code of 1997, as amended, or the
applicable estate tax laws prevailing at the time of death
of the decedent, on valuation, manner of computation,
and other related matters shall apply suppletorily, at the
time of the entitlement: Provided, further, That if the
allowable deductions applicable at the time of death of
the decedent exceed the value of the gross estate, the
heirs, executors, or administrators may avail of the
benefits of tax amnesty under Title II of this Act, and pay
the minimum estate amnesty tax of Five thousand pesos
(₱5,000).
3. Availment – The executor or administrator of the estate,

or if there is no executor or administrator appointed, the
legal heirs, transferees or beneficiaries, who wish to
avail of the Estate Tax Amnesty shall, within two (2)
years from the effectivity of the Implementing Rules and
Regulations of this Act, file with the Revenue District
Office of the Bureau of Internal Revenue, which has
jurisdiction over the last residence of the decedent, a
sworn Estate Tax Amnesty Return, in such forms as may
be prescribed in the Implementing Rules and
Regulations. The payment of the amnesty tax shall be
made at the time the Return is filed: Provided, That for
nonresident decedents, the Estate Tax Amnesty Return
shall be filed and the corresponding amnesty tax be paid
at Revenue District Office No. 39, or any other Revenue
District Office which shall be indicated in the
Implementing Rules and Regulations:
Provided, further, That the appropriate Revenue District

Officer shall issue and endorse an acceptance payment
form, in such form as may be prescribed in the
Implementing Rules and Regulations of this Act for the
authorized agent bank, or in the absence thereof, the
revenue collection agent or municipal treasurer
concerned, to accept the tax amnesty payment. Proof of
settlement of the estate, whether judicial or extrajudicial,
shall likewise be attached to said Return in order to
verify the mode of transfer and the proper recipients:
Provided, finally, That the availment of the Estate Tax

Amnesty and the issuance of the corresponding
Acceptance Payment Form do not imply any admission

of criminal, civil or administrative liability on the part of
the availing estate.
4. Immunities and Privileges – Estates covered by the

Estate Tax Amnesty, which have fully complied with all
the conditions set forth, including the payment of the
estate amnesty tax shall be immune from the payment of
all estate taxes, as well as any increments and additions
thereto, arising from the failure to pay any and all estate
taxes for taxable year 2017 and prior years, and from all
appurtenant civil, criminal, and administrative cases and
penalties under the National Internal Revenue Code of
1997, as amended.
Without prejudice to compliance with applicable laws on

succession as a mode of transfer, the Bureau of Internal
Revenue, in coordination with the applicable regulatory
agencies, shall set up a system enabling the transfer of
title over properties to heirs and/or beneficiaries and
cash withdrawals from the bank accounts of the
decedent, when applicable.
Upon full compliance with all the conditions set forth in

this Title and payment of the corresponding estate
amnesty tax, the tax amnesty granted under this Title
shall become final and irrevocable.
5. Exceptions – The Estate Tax Amnesty shall not extend

to estate tax cases which shall have become final and
executory and to properties involved in cases pending in
appropriate courts:
a. Falling under the jurisdiction of the Presidential
Commission on Good Government;
b. Involving unexplained or unlawfully acquired
wealth under Republic Act No. 3019, otherwise
known as the Anti-Graft and Corrupt Practices
Act, and Republic Act No. 7080 or An Act
Defining and Penalizing the Crime of Plunder;
c. Involving violations of Republic Act No. 9160,
otherwise known as the Anti-Money Laundering
Act, as amended;
d. Involving tax evasion and other criminal offenses
under Chapter II of Title X of the National
Internal Revenue Code of 1997, as amended;
and

e. Involving felonies of frauds, illegal exactions and
transactions, and malversation of public funds
and property under Chapters III and IV of Title
VII of the Revised Penal Code.
j. Tax implications of transactions applying the tax rules and

regulations, and sound tax planning strategies within legal and
ethical bounds to efficiently manage tax liabilities
III. DONOR’S TAX

a. Principles, concepts involving donor’s taxation
i. Concept of donation – an act of liberality whereby a person
disposes gratuitously of a thing or a right in favor of another who
accepts it. (Article 725, New Civil Code)
ii. Essential and formal requisites of donation

1. Essential elements of donation
a. Capacity of the donor
b. Donative intent, in cases of direct gift
c. Acceptance by the donee
d. Delivery, whether actual or constructive, of the
subject matter of the gift
2. Formal requisites of donation

a. Tangible personal property
i. Value not exceeding P5,000.00 – oral
(or in writing) with simultaneous delivery
ii. Value exceeding P5,000.00 – in writing
b. Intangible personal property – public document
c. Real (immovable) property – public document.
The acceptance of the donation may be made in
the same deed of donation or in a separate
public instrument but shall not take effect unless
it is done during the lifetime of the donor.
iii. Concept and nature of donor’s tax

1. Concept of donor’s tax – a tax on the privilege to
transmit property between two or more persons who are
living at the time of the donation. The tax shall apply
whether the transfer is in trust or otherwise, whether the
gift is direct or indirect.
2. Nature of donor’s tax

a. Privilege tax
b. Annual tax

c. Ad valorem tax
d. National tax
e. General revenue tax
f. Proportional tax
iv. Rationale of donor’s taxation

1. To supplement the estate tax
2. To supplement the capital gains tax
3. To recoup the reduced income taxes due to splitting of
capital
v. Exempt donations
1. Exempt Donations under NIRC & Special Laws
a. Aquaculture Department of the Southeast Asian
Fisheries Development Center (Sec. 2, P.D. No.
292)
b. Aurora Pacific Economic Zone and Freeport
Authority (Sec. 7, R.A. No. 10083)
c. Development Academy of the Philippines (Sec.
12, P.D. No. 205)
d. Girl Scouts of the Philippines (Sec. 11, R.A. No.
10073)
e. Integrated Bar of the Philippines (Sec. 3, P.D.
No. 181)
f. International Rice Research Institute (Art. 5(2),
P.D. No. 1620)
g. National Commission for Culture and the Arts
(Sec, 35, R.A. No. 10066)
h. National Social Action Council (Sec. 4, P.D. No.
294)
i. National Water Quality Management Fund (Sec.
9, R.A. No. 9275)
j. People’s Television Network, Incorporated (Sec.
15, R.A. No. 10390)
k. People’s Survival Fund (Sec. 13, R.A. No.
10174)
l. Philippine-American Cultural Foundation (Sec.
4, P.D. No. 3062)
m. Philippine Normal University (Sec. 7, R.A. No.
9647)
n. Philippine Investors Commission (Sec. 9, R.A.
No. 3850)
o. Philippine Red Cross (Sec. 5, R.A. No. 10072)
p. Ramon Magsaysay Award Foundation (Sec. 2,
R.A. No. 3676)

q. Rural Farm School (Sec. 14, R.A. No. 10618)
r. Task Force on Human Settlements (Sec.
3(b)(8). E.O. No. 419)
s. Tubbataha Reefs Natural Park (Sec. 17, R.A.
No. 10067)
t. University of the Philippines (Sec. 25, R.A. No.
9500)
2. Donations for Election Campaign – any contribution in

cash or in kind to any candidate, political party, or
coalition of parties for campaign purposes shall be
governed by the Election Code, as amended. These
donations must be reported to the Commission on
Elections to be exempted from donor’s tax.
3. Transfer for Insufficient Consideration involving

Real Properties classified as Capital Assets – the
sale, exchange and other disposition of real property
classified as capital asset is subject to a capital gains tax
of 6% based on fair value or gross selling price,
whichever is higher
4. General Renunciation of Inheritance – occurs when

an heir or the surviving spouse renounces his or her
share in the hereditary estate of a decedent in favor or
no particular coheir. A general renunciation is a
repudiation of inheritance which cannot be imputed as a
donation.
5. Donation with Reserved Powers (Incomplete

Transfers)
a. Conditional donation
b. Revocable transfers
6. Donation to the Government for Public Use
7. Donation to Accredited Non-Profit Institution

a. Concept – gifts in favor of an educational and or
charitable, religious, cultural or social welfare
corporation, institution, accredited
nongovernment organization, trust, or
philanthropic organization or institution are
exempt from donor’s tax (Sec. 101 (A)(3),
NIRC).

b. Requisites for exemption
i. Not more than 30% of said gift shall be
used by such donee for administrative
purposes
ii. The donee entity must be organized as
a non-stock entity
iii. The donee entity does not pay dividends
iv. The donee entity’s board of trustees
earns no compensation
v. The donee entity must devote all its
income, donations, subsidies, or other
forms of philanthropy to the
accomplishment and promotion of its
purposes enumerated in its Articles of
Incorporation.
c. Accrediting agencies
i. Department of Social Welfare and
Development (DSWD) – for charitable
and or social welfare organizations,
foundations and associations including
but not limited to those engaged in
youth, children, women, family, disabled
persons, older persons, welfare and
development
ii. Department of Science and Technology
(DOST) – for research and other
scientific activities
iii. Philippine Sports Commission (PSC) –
for sports development
iv. National Council for Culture and Arts
(NCCA) – for cultural activities
v. Commission on Higher Education
(CHEd) – for educational activities
d. Gratuitous donations to associations –

associations do not qualify as exempt donee
institutions under Sec. 101 (A)(3) of the NIRC.
Hence, endowments or gifts received by
associations are not exempt from donor’s tax. All
donations to associations for tax purposes must
be covered by a donor’s tax return. (RMC 53-
2013)

e. Onerous donations to associations – not in
the nature of an endowment or donation. They
are in the concept of a fee or price in exchange
for the performance of a service, use of
property, or delivery of an object. (RMC 53-
2013)
8. Quasi-Transfers – involve delivery of property to

another person but will never result in transfer of
ownership thereto.
a. Merger of the usufruct in the owner of the naked
title during the lifetime of the usufructuary
b. The transmission or delivery of the inheritance
or legacy by the fiduciary heir or legatee to the
fideicommissary during the lifetime of the
fiduciary heir
c. The transmission from the first heir, legatee, or
donee during his lifetime in favor of another
beneficiary, in accordance with the desire of the
predecessor
9. Void Donations – invalid donations—include those

prohibited by law and those with defects in their
execution.
a. Prohibited donation under the Civil Code:
i. Donation between spouses, except
moderate gifts
ii. Donations between persons who were
guilty of adultery or concubinage at the
time of donation
iii. Donations between persons found guilty
of the same criminal offense, in
consideration thereof
iv. Donations to a public officer or his wife,
descendants, or ascendants by reason
of his office
v. Donations to incapacitated persons
vi. Donations of future property
b. Donation with defects at execution

i. Donation by person who has no legal
title to the property donated
ii. Oral or written donation of real property
or intangible personal property
iii. Donation refused by the donee

10. Foreign Donations of Non-Resident Alien Donors
11. Donations of Property Exempt under Reciprocity –

the reciprocity rule—no tax shall be imposed with
respect to intangible personal property donations of NRA
donors if:
a. The donor at the time of the donation was a
citizen and resident of a foreign country which at
the time of his death or donation did not impose
a transfer tax of any character in respect of
intangible personal property of citizens of the
Philippines not residing therein.
b. The laws of the foreign country of which the
donor was a citizen and resident at the time of
donation allows a similar exemption from
transfer tax of every character in respect of
intangible personal property of citizens of the
Philippines not residing therein.
vi. Taxable donations – donations that do not qualify among those

exemption criteria are subject to tax.
b. Transfers which may be considered a donation

i. Direct Gift
ii. Gift through Creation of a Trust
iii. Condonation of Debt
iv. Specific Renunciation of Inheritance
v. Renunciation by the Surviving Spouse of his/her Share in the
Conjugal Partnership or Absolute Community after the
Dissolution of the Marriage in favor of the Heirs of the Deceased
Spouse or any Other Person/s
vi. Transfer for Insufficient Consideration (Except Real Properties
classified as Capital Assets)
c. Classification of donors
i. Natural persons
1. Taxable on global donations
a. Resident citizen
b. Nonresident citizen
c. Resident alien
2. Taxable on Philippine donations, subject to reciprocity
rule
a. Nonresident alien

ii. Juridical persons
1. Taxable on global donations
a. Domestic corporation
b. Resident foreign corporation
2. Taxable on Philippine donations, subject to reciprocity
rule
a. Nonresident foreign corporation
d. Net gifts/donations
i. Donor’s tax rate and structure
1. Donor’s tax model – first donation of the year
Net gift PXXX,XXX
Less: Exempt gift 250,000
Net gift subject to donor’s tax XXX,XXX
Multiply by: Donor’s tax rate 6%
Donor’s tax XXX,XXX
Less: Tax credits XXX,XXX
Donor’s tax due/payable XXX,XXX
2. Donor’s tax model – subsequent donations during

the year
Current net gift PXXX,XXX
Prior net gifts XXX,XXX
Total net gifts XXX,XXX
Less: Exempt gift 250,000
Net gift subject to donor’s tax XXX,XXX
Multiply by: Donor’s tax rate 6%
Donor’s tax XXX,XXX
Less: Tax credits XXX,XXX
Donor’s tax due/payable XXX,XXX
ii. Gross gifts

1. Components of gross gift
Residents or NRA without NRA with
Citizens reciprocity reciprocity
Property location Within Without Within Without Within Without
Real properties    X  X
Tangible personal properties    X  X
Intangible personal properties    X X X
2. Properties considered as located in the Philippines

a. Franchise which must be exercised in the
Philippines

b. Share, obligations, or bonds issued by any
corporation or sociedad anonima organized or
constituted in the Philippines in accordance with
its laws.
c. Share, obligations, or bonds issued by any
foreign corporation eighty-five per centum (85%)
of the business of which is located in the
Philippines.
d. Shares, obligations, or bonds which have
acquired business situs in the Philippines.
e. Shares or rights in any partnership, business or
industry established in the Philippines.
f. Any personal property, whether tangible or
intangible, located in the Philippines.
3. Encumbrances on the property – mortgage, real

property tax, and unpaid loans thereto which are to be
transferred to, or to be assumed by, the donee shall
NOT BE DEDUCTED from the value of the Gross Gift.
These shall be reported as ‘deduction against gross gift,’
that is items in gross gift shall be presented in gross
amounts, free from deductions and diminutions.
4. Valuation of gross gifts

a. Real properties – higher between zonal value
and assessed value
b. Personal properties – fair market value
c. Preferred shares – par value
d. Unlisted common shares – book value
(unadjusted)
e. Listed common shares – arithmetic mean
between highest and lowest quotation
f. Usufruct and annuities – present value with
interest rate and period approved by Secretary
of Finance, upon recommendation by the
Insurance Commissioner
g. Newly purchased property – purchase price
(secondhand value if not newly acquired)
h. Pawned properties – grossing up pawn value by
loan-to-value ratio
i. Financial instruments – face amounts plus
accrued interests
j. Foreign currency – prevailing exchange rate

5. Timing of valuation – at the point of completion or
perfection of the donation, which is perfected upon
acceptance of the donee. In conditional donations, the
donation is completed and perfected upon satisfaction
by the donee of the terms of donation or upon waiver by
the donor of the conditions.
6. Donation of common properties – husband and wife

are considered as separate and distinct taxpayers for
purposes of the donor’s tax. Donation of conjugal or
community property by the spouses is deemed ½ made
by the husband and ½ made by the wife.
However, if what was donated is a conjugal or

community property and only the husband signed the
deed of donation, there is only one donor for donor’s tax
purposes, without prejudice to the right of the wife to
question the validity of the donation without her consent
pursuant to the pertinent provisions of the Civil Code of
the Philippines and the Family Code of the Philippines.
iii. Deductions from gross gifts

1. Obligations assumed by the donee
2. Donations to national government and its political
subdivisions
3. Donations in favor of educational, charitable, religious,
cultural and social welfare institution – see exempt
donations
4. Diminution of gift as specified by the donor – not exempt
from donor’s tax but deducted for purposes of future
taxability upon consummation of the subsequent
donation/transfer to the eventual donee.
iv. Net gift and net taxable gift

1. Step 1: Enumerate all the items of inclusion in the gross
gift of the donor in a particular date
2. Step 2: Determine the classification of the donor
(whether resident/citizen or non-resident alien and
whether single or married)
3. Step 3: Classify the items of gross gift into its situs
classification per country (if applicable)
4. Step 4: Enumerate all the items of deduction from gross
gift and classify them accordingly per situs
5. Step 5: Compute the net taxable gift

v. Determination of net gift per country – property classification
rule shall be observed in classifying deductions against gross gift
e. Tax due and tax credits, if applicable

i. Determination of tax due – multiply the net gift subject to
donor’s tax by 6% in order to determine the tax due
ii. Determination of foreign tax credit

1. Available only to the donations made by resident and
citizen donors
2. The tax credit is the lower between the actual foreign
donor’s tax paid or the ratio of the tax due from the
foreign sourced net gift over the total (world) net gift
3. For multiple foreign countries, the lower of actual donor’s
tax and the foregoing limit for each country is determined
first. The final foreign tax credit shall be the lower of the
total of the tax credit allowable per country and the world
donor’s tax credit limit.
Foreign net taxable gift
x Philippine donor’s tax due
World net taxable gift
Total foreign net taxable gift

x Philippine donor’s tax due
World net taxable gift
f. Tax return preparation and filing and tax payments

i. Mode of filing of tax returns
1. Manual filing system
2. e-BIR Forms
3. Electronic Filing and Payment System (eFPS)
ii. Venue and time of filing of tax returns

1. Venue of filing
ANY PERSON making a donation (whether direct or
indirect), unless the donation is specifically exempt
under the NIRC or other special laws, is required, for
every donation, to accomplish under oath a donor’s tax
return in duplicate.
Unless the Commissioner otherwise permits, the return

shall be filed where the donor is domiciled at the time of
the transfer, or if there be no legal residence in the
Philippines, with the Office of the Commissioner.

In the case of gifts made by a non-resident, the return
may be filed with the Philippine Embassy or Consulate in
the country where he is domiciled at the time of the
transfer, or directly with the Office of the Commissioner.
2. Where to file the donor’s tax returns?

a. Accredited agent bank
b. Revenue district office
c. Collection agent
d. Office of the commissioner, if the donor has no
legal residence in the Philippines
e. Philippine embassy or consulate in the country
where the donor is domiciled at the time of
transfer
3. Deadline of filing the donor’s tax return – The donor’s

tax return shall be filed within THIRTY (30) DAYS after
the date the gift is made or completed.
4. Notice of donation by a donor engaged in business –

In order to be exempt from donor’s tax and to claim full
deduction of the donation given to qualified-donee
institutions duly accredited, the donor engaged in
business shall give a notice of donation on every
donation worth at least FIFTY THOUSAND PESOS
(P50,000) to the Revenue District Office (RDO) which
has jurisdiction over his place of business within thirty
(30) days after receipt of the qualified donee institution’s
duly issued Certificate of Donation, which shall be
attached to the said Notice of Donation, stating that not
more than thirty percent (30%) of the said donation/gifts
for the taxable year shall be used by such accredited
non-stock, non-profit corporation/NGO institution for
administration purposes.
iii. Payment of donor’s tax due – pay as you file
iv. Accomplishing of tax returns and forms – BIR Form 1800

Donor’s Tax Return
Any person making a donation shall accomplish under oath a

donor’s tax return which shall set forth:
1. Each gift made during the calendar year which is to be
included in gifts;

2. The deductions claimed and allowable;
3. Any previous net gifts made during the same calendar
year;
4. The name of the donee; and,
5. Such further information as the Commissioner may
require.
v. Attachments to the tax return – formal documents evidencing

the donation made and the acceptance made by the donee.
Common documents include Deed of Donation and Deed of
Acceptance of Donation or Certificate of Donation.
g. Compliance requirements
i. Registration/application for TIN
1. BIR Form 1901 Application for Registration for Self-
Employed (Single Proprietor/Professional), Mixed
Income Individuals, Non-Resident Alien Engaged in
Trade/Business, Estate and Trust –
registration/application for TIN of donor undergoing who
is expected to exercise subsequent donation or may
perform other taxable acts subject to internal revenue
taxes
2. BIR Form 1904 Application for Registration for One-Time
Taxpayer and Person registering under E.O. 98 –
registration/application for TIN shall be made before
payment of the tax due applicable for one-time taxpayer
or any taxpayer who does not expect to engage in
another taxable transaction in the near future
h. Tax implications of transactions applying the tax rules and

regulations, and sound tax planning strategies within legal and
ethical bounds to efficiently manage tax liabilities

Transfer Tax

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Transfer Tax

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TAX “Innovating

TRANSFER TAXATION Educational

I. INTRODUCTION TO TRANSFER TAXATION

ii. Types of transfers:

iii. Types of transfer taxes

iv. Basis of transfer taxation

b. General rule in transfer taxation

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ii. Test of classification for juridical persons

iii. Situs of properties – important for non-resident aliens and

iv. Reciprocity rule on non-resident aliens – intangible personal

v. Timing of valuation of transfers

vi. Classifying donation as inter vivos or mortis causa

2. Donation inter vivos:

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d. Completion of incomplete transfers (point of taxability)

ii. Completed mortis causa

e. Complex incomplete transfers

ii. Test of taxability

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ii. Concept and types of will

iii. Nature of succession

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vi. Portions of estate for testamentary successions:

vii. Intestate succession – in default of testamentary succession,

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ix. Estate Taxation

Estate taxation is governed by the law in force at the time of the

2. Nature of estate tax – it is not a tax on property

3. Characteristics of estate tax

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5. Purpose and object of estate tax

6. Theories on the purposes of estate tax

xi. Estate Tax Model

b. Transfers which may be considered donation mortis causa

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ii. Gross estate formula

iii. Exempt transfers

2. Properties owned but excluded by law from estate

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iv. Taxable transfers

v. Composition of gross estate

vi. Valuation of the gross estate

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vii. Composition of gross estate for married decedents

viii. Common types of property regimes

ix. Applicable property regime in default of an agreement

x. Conjugal partnership of gains

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xi. Absolute community of properties

xii. Acquisition of exempt properties – included as exclusive or

e. Deductions from gross estate

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ii. Ordinary deductions

ii. Requisites for deductibility:

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iii. Claims against insolvent persons

iv. Classification of Losses – classified

b. Claims against the estate (Indebtedness)

ii. Requisites of deductibility of claims

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iv. Special rules on certain claims

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