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INTRODUCTION TO

TRANSFER TAXES

DEFINITION OF TRANSFER
TRANSFER refers to any transmission of property from one person to
another.

Onerous (Bilateral) Transfer


Onerous transfer of properties involves transmission of property with
consideration, whether monetary or a pure exchange of properties.
Taxes Imposed on Onerous Transfers

Gratuitous (Unilateral) Transfer


Gratuitous transfer of properties involves transmission of property without
consideration.
Taxes Imposed on Gratuitous Transfers

Nature of Transfer Taxes

Classification of Transfer Taxpayers

Properties Included in Determining Value of


Transfer Taxes
Real Properties properties that are immovable in nature. Real properties
are enumerated under Art. 415 of the Civil Code of the Philippines.
Personal Properties properties that are movable in nature, that is, when:
1. the properties can be transported from place to place;
2. location of the properties can be changed without causing injury to the
immovable to which it may be attached;
3. The properties are not included in those items identified in the Civil
Code as real properties.

Properties Included in Determining Value of


Transfer Taxes
Kinds of Personal Properties
1. Tangible Personal Properties
2. Intangible Personal Properties
Situs of Properties
3. Within properties located in the Philippines.
4. Without properties located outside the Philippines

Properties Included in Determining Value of


Transfer Taxes
Intangible Personal Properties considered to be 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 corporations 85% of the
business of which is located in the Philippines.
4. Shares, obligations, or bonds issued by any foreign corporation if such
corporation acquired business situs in the Philippines.
5. Shares or rights in any partnership, business, or industry established in the
Philippines.

General Rule in Transfer Taxation

Rule on RECIPROCITY
Application: Only to NON-RESIDENT ALIENS and only to INTANGIBLE PERSONAL PROPERTIES.
Rule: No transfer tax shall be collected in respect of intangible personal property in the
following instances:
1. If the transferor, at the time of transfer, was a citizen and resident of a foreign
country which did not impose a transfer tax of any character in respect of
intangible personal property of citizens of the Philippines not residing in that
foreign country.
2. The laws of the foreign country of which the transferor at the time of transfer
allows a similar exemption from transfer taxes of every character or description in
respect of intangible personal property owned by citizens of the Philippines not
residing in that foreign country.

FAMILY RELATIONS

Family Relations

Computation of Civil Degrees of Collateral


Relationship
The number of degrees is counted based on
the number of generations (lines) starting with
the person concerned to the next party. (Note:
Always go up first to the nearest common
ascendant of the individual concerned and the
second party.)
Exercise: Find for the Civil Degree of
Collateral Relationship between:
1. G and H
2. I and J
3. D and F
4. G and F
5. H and I

PROPERTY RELATIONS
BETWEEN SPOUSES

Property Regimes
Property Regime the system by which properties are governed by spouses
during their marriage.
Order of System of Property Relations:

Types of Property Regimes

Property
Regimes
Under
Family Code
of the
Philippiness

Property Regimes

Aug.
3,
1988

Property Classification Under Conjugal


Partnership of Gains (CGP)
General Rule:

Date of
Marriage

Property Classification Under Conjugal


Partnership of Gains (CGP)
EXCLUSIVE PROPERTY
1. That which is brought to the marriage as his or her own;
2. That which each acquires during the marriage by gratuitous title;
3. That which is acquired by right of redemption, by barter or by
exchange with property belonging to only one of the spouses; and
4. That which is purchased with exclusive money of the wife or of the
husband

Property Classification Under Conjugal


Partnership of Gains (CGP)
CONJUGAL PROPERTY
1. Those acquired by onerous title during the marriage at the expense of the
common fund, whether the acquisition be for the partnership, or for only one
of the spouses;
2. Those obtained from the labor, industry, work or profession of either or both
of the spouses;
3. The fruits, natural, industrial, or civil, due or received during the marriage
from the common property, as well as the net fruits from the exclusive
property of each spouse;
4. The share of either spouse in the hidden treasure which the law awards to
the finder or owner of the property where the treasure is found;

Property Classification Under Conjugal


Partnership of Gains (CGP)
CONJUGAL PROPERTY
5. Those acquired through occupation such as fishing or hunting;
6. Livestock existing upon the dissolution of the partnership in excess of
the number of each kind brought to the marriage by either spouse;
and
7. Those which are acquired by chance, such as winnings from gambling
or betting. However, losses therefrom shall be borne exclusively by
the loser-spouse.

Property Classification Under Absolute


Community of Property (ACP)
General Rule:

Date of
Marriage

Property Classification Under Absolute


Community of Property (ACP)
EXCLUSIVE PROPERTY
1. Property acquired during the marriage by gratuitous title by either
spouse, and the fruits as well as the income thereof, if any, unless it
is expressly provided by the donor, testator or grantor that they shall
form part of the community property;
2. Property for personal and exclusive use of either spouse. However,
jewelry shall form part of the community property;
3. Property acquired before the marriage by either spouse who has
legitimate descendants by a former marriage, and the fruits as well as
the income, if any, of such property.

CONCEPT OF SUCCESSION

Succession
Succession - 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.
The right of the succession are transmitted from the moment of the death of
the decedent.

Elements of Succession
DECEDENT
Primary Heirs
INHERITANCE/ESTATE
SUCCESSION

Secondary Heirs
HEIRS/SUCCESSORS
Concurring Heirs
ACCEPTANCE
Collateral Heirs

Management of the Estate

EXECUTOR
ESTATE MANAGEMENT
ADMINISTRATOR

Types of Succession

TESTAMENTARY SUCCESSION
SUCCESSION

INTESTATE SUCCESSION
MIXED SUCCESSION

Will
Will 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.
The making of a will is a strictly personal act; it cannot be left in whole or in
part of the discretion of a third person, or accomplished through the
instrumentality of an agent or attorney.
Only persons who are not expressly prohibited to by law may make a will.

Will
Persons Expressly Prohibited by Law to Make a Will:
1. Those below 18 years of age;
2. Those who are not of sound mind at the time of execution.
Persons Disqualified from being witnesses to a will:
3. Any person NOT DOMICILED in the Philippines;
4. Those who have been convicted of FALSIFICATION OF A DOCUMENT,
PERJURY or FALSE TESTIMONY.

Types of Will

NOTARIAL WILL
WILL

HOLOGRAPHIC WILL
CODICIL

Elements of a Testamentary Succession


TESTATOR
DEVISE
TESTAMENTARY
SUCCESSION

INHERITANCE/ESTATE
LEGACY
DEVISEE
HEIRS/SUCCESSORS
LEGATEE

Parts of Testamentary Estate

LEGITIME
ESTATE
FREE PORTION

Compulsory Heirs
LEGITIMATE CHILDREN AND DESCENDANTS
LEGITIMATE PARENTS AND ASCENDANTS
COMPULSORY HEIRS

SURVIVING SPOUSE
ACKNOWLEDGED NATURAL CHILDREN AND
NATURAL CHILDREN BY LEGAL FICTION
OTHER ILLEGITIMATE CHILDREN

Distribution of the Net Estate in


Testamentary Succession
SURVIVORS
Legitimate
Children/Descendants
ONLY
Legitimate Parents ONLY
Spouse ONLY, when
marriage was solemnized
in articulo mortis, and the
testator died within three
months from the time of
the marriage

Legitimate
Legitimate
Children/
Parents/
Descendants Ascendants

Spouse

Illegitimate
Children/
Descendants

Free
Portion

1/3

2/3

Distribution of the Net Estate in


Testamentary Succession
SURVIVORS

Legitimate
Legitimate
Children/
Parents/
Descendants Ascendants

Spouse ONLY, in all other


cases
Illegitimate
Children/Descendants
ONLY
Legitimate
Children/Descendants and
Illegitimate
Children/Descendants

Spouse

Illegitimate
Children/
Descendants

Free
Portion

of the share
of each
legitimate
children/
descendant

varies

Distribution of the Net Estate in


Testamentary Succession
SURVIVORS
Spouse and One
Legitimate
Child/Descendant
Spouse and Two or More
Legitimate
Children/Descendants
Spouse and Legitimate
Parents/Ascendants

Legitimate
Legitimate
Children/
Parents/
Descendants Ascendants

Spouse

Illegitimate
Children/
Descendants

Free
Portion

Equal to the
share of each
legitimate
children/
descendants

varies

Distribution of the Net Estate in


Testamentary Succession
SURVIVORS

Legitimate
Legitimate
Children/
Parents/
Descendants Ascendants

Spouse and Illegitimate


Children/Descendants
Legitimate
Parents/Ascendants,
Spouse, and Illegitimate
Children/Descendants

Spouse

Illegitimate
Children/
Descendants

Free
Portion

1/3

1/3

1/3

1/8

1/8

Distribution of the Net Estate in


Testamentary Succession
SURVIVORS
Spouse, Legitimate
Children/Descendants, and
Illegitimate
Children/Descendants
Legitimate
Parents/Ascendants, and
Illegitimate
Children/Descendants

Legitimate
Legitimate
Children/
Parents/
Descendants Ascendants

Spouse

Illegitimate
Children/
Descendants

Free
Portion

Equal to the
share of each
legitimate
children/
descendants

of the share
of each
legitimate
children/
descendant

varies

Disinheritance
A compulsory heir may, in consequence of disinheritance, be deprived of his
legitime, for causes expressly stated by law.
Disinheritance can be effected only through a will wherein the legal cause
therefor shall be specified.
The burden of proving the truth of the cause for disinheritance shall rest upon the
other heirs of the testator, if the disinherited heir should deny it.
Disinheritance without a specification of the cause, or for a cause the truth of
which, if contradicted, is not proved, or which is not one of those set forth in this
Code, shall annul the institution of heirs insofar as it may prejudice the person
disinherited; but the devises and legacies and other testamentary dispositions
shall be valid to such extent as will not impair the legitime.

Valid Causes for Disinheritance Children and


Descendants (Legitimate and Illegitimate)
1. When a child or descendant has been found guilty of an attempt against
the life of the testator, his or her spouse, descendants, or ascendants;
2. When a child or descendant has accused the testator of a crime for which
the law prescribes imprisonment for six years or more, if the accusation
has been found groundless;
3. When a child or descendant has been convicted of adultery or concubinage
with the spouse of the testator;
4. When a child or descendant by fraud, violence, intimidation, or undue
influence causes the testator to make a will or to change one already
made;

Valid Causes for Disinheritance Children and


Descendants (Legitimate and Illegitimate)
5. A refusal without justifiable cause to support the parent or ascendant who
disinherits such child or descendant;
6. Maltreatment of the testator by word or deed, by the child or descendant;
7. When a child or descendant leads a dishonorable or disgraceful life;
8. Conviction of a crime which carries with it the penalty of civil interdiction.

Valid Causes for Disinheritance Parents and


Ascendants (Legitimate and Illegitimate)
1. When the parents have abandoned their children or induced their
daughters to live a corrupt or immoral life, or attempted against their
virtue;
2. When the parent or ascendant has been convicted of an attempt against
the life of the testator, his or her spouse, descendants, or ascendants;
3. When the parent or ascendant has accused the testator of a crime for
which the law prescribes imprisonment for six years or more, if the
accusation has been found to be false;
4. When the parent or ascendant has been convicted of adultery or
concubinage with the spouse of the testator;

Valid Causes for Disinheritance Parents and


Ascendants (Legitimate and Illegitimate)
5. When the parent or ascendant by fraud, violence, intimidation, or undue
influence causes the testator to make a will or to change one already
made;
6. The loss of parental authority for causes specified in this Code;
7. The refusal to support the children or descendants without justifiable
cause;
8. An attempt by one of the parents against the life of the other, unless there
has been a reconciliation between them.

Valid Causes for Disinheritance Surviving


Spouse
1. When the spouse has been convicted of an attempt against the life of the
testator, his or her descendants, or ascendants;
2. When the spouse has accused the testator of a crime for which the law
prescribes imprisonment of six years or more, and the accusation has been
found to be false;
3. When the spouse by fraud, violence, intimidation, or undue influence cause
the testator to make a will or to change one already made;
4. When the spouse has given cause for legal separation;
5. When the spouse has given grounds for the loss of parental authority;
6. Unjustifiable refusal to support the children or the other spouse.

Intestate (Legal) Succession


Intestate succession takes place when:
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 to, or dispose of all the property
belonging to the testator. In such case, legal succession shall take place only with
respect to the property of which the testator has not disposed;
3. If the suspensive condition attached to the institution of heir does not happen or
is not fulfilled, or if the heir dies before the testator, or repudiates the
inheritance, there being no substitution, and no right of accretion takes place;
4. When the heir instituted is incapable of succeeding, except in cases provided in
this Code.

Order of Intestate (Legal) Succession


Descending Direct Line (Children and Descendants)
Ascending Direct Line (Parents and Ascendants)
Illegitimate Descendants (Children and Descendants)
Surviving Spouse
Collateral Relatives within the 5th Degree

Distribution of the Net Estate in Intestate


Succession
SURVIVOR
Legitimate Children/Descendants ONLY
Legitimate Parents/Ascendants ONLY
Illegitimate Children/Descendants ONLY
Spouse ONLY
FULL BLOOD Siblings ONLY
FULL BLOOD Siblings and Nephews and
Nieces ONLY

SHARE
whole
whole
whole
whole
whole
Whole

Distribution of the Net Estate in Intestate


Succession
SURVIVOR

SHARE

FULL BLOOD and HALF BLOOD Siblings

Whole, to be divided as follows:


Double to what the half blood siblings
receive
Half of what the full blood siblings receive
whole

FULL BLOOD Siblings


HALF BLOOD Siblings
HALF BLOOD Siblings Only
Collateral Relatives w/in the 5th degree
(preference to the nearest degree relatives)
None (to the State)

whole
Whole

Distribution of the Net Estate in Intestate


Succession
SURVIVOR
Legitimate Children/Descendants and
Spouse*:
1 Legitimate Child/Descendant and
Spouse
2 Legitimate Children/Descendants and
Spouse
Legitimate Parents/Ascendants and Spouse

SHARE

each
1/3 each
each

*Spouse considered as one legitimate descendant. Add the total of the number of legitimate
descendants plus the spouse to serve as the denominator in dividing the estate.

Distribution of the Net Estate in Intestate


Succession
SURVIVOR
Legitimate Parents/Ascendants, Spouse and
Illegitimate Children/Descendants:
Legitimate Parents/Ascendants
Spouse
Illegitimate Children/Descendants
Spouse and Illegitimate
Children/Descendants:
Spouse and Siblings

SHARE

each
each

CONCEPT OF DONATION

Donation
Donation an act of liberality whereby a person disposes gratuitously of a thing
or right in favor of another, who accepts it.

DONOR
PARTIES TO DONATION
DONEE

Essential Requisites of Donation

Capacity of the
Donor

Intention to
Donate

Donation
Donative Act or
Delivery

Acceptance by
the Donee

Types of Donation

DONATION MORTIS CAUSA


DONATION
DONATION INTER VIVOS

Formal Requisites of a Donation


1. Real Properties MUST be in a public instrument.
2. Personal Properties depends
1. Tangible
1. Value of P5,000 and below MAY be made orally.
2. Value exceeds P5,000 MUST be in writing.
2. Intangible MUST be in a public instrument.

Persons who may Give or Receive a Donation


Who may GIVE?
Generally: All persons who may contract and dispose of their property.
Considerations:
1. Guardians and trustees cannot donate the property entrusted to them.
2. Husband and wife cannot donate any conjugal or community property
without the consent of the other. However, either spouse may, without
the consent of the other, make donations for charity or on occasion of
family rejoicing or family distress.

Persons who may Give or Receive a Donation


Who may ACCEPT?
Generally: All persons not expressly disqualified by law.
Considerations:
1. Incapacity to succeed by will is applicable to donations inter vivos.
2. Minors and others who cannot enter into a contract may receive
donations but acceptance shall be done through their parents or legal
representatives.

Persons who may Give or Receive a Donation


3. Donations made to conceived and unborn children may be accepted by
those persons who would legally represent them if they were already
born.
4. Donations made to incapacitated persons shall be void.

Void Donations
1. Those made between persons who were guilty of adultery or concubinage at the
time of the donation;
2. Those made between persons found guilty of the same criminal offense, in
consideration thereof;
3. Those made between spouses during the marriage, except moderate gifts which
the spouses may give each other on the occasion of any family rejoicing.
4. Those made between persons living as common-law spouses.
5. Those made to a public officer or his wife, descendants and ascendants, by reason
of his office.
6. Donations to incapacitated persons.
7. Donation of future property.

OTHER FORMS OF DONATIONS


Cancellation of
Debt

Donations

Gratuitous Portion
of Complex
Transfers

On Account of Debtors
Services
Without Consideration

Donations in Trust

General Renunciation

Renunciation of
Inheritance

Specific Renunciation
Renunciation of the
Surviving Spouses Share in
the Common Property