Transfer Taxation Taxation

Estate Taxation Gross Estate

assessed or zonal value,

Real Property
whichever is HIGHER

Traded
Closing price on the date of
Valuation of death or date nearest to the
Shares of date of death (RR 6-2013)
the Gross
Stocks Not traded
Estate
Common shares – book value using
Adjusted Net Asset Method (RR 6-2013)
Preferred shares – par value
difference between the
Inadequate fair market value at the
Consideration time of death and the
value of consideration
 Transfer Taxation Taxation
Estate Taxation Gross Estate
Gross Estate
Decedent
Inclusions to Gross
Residence and
Property Relations Estate
Citizenship

Non- Marriage Settlement or Pre-nuptial Agreement Taxable Transfers

Resident
Resident *valid if made before the celebration of the marriage  Revocable
Types or Citizen
Alien  with retention or reservation
Decedent Conjugal Partnership of Absolute Community of
Decedent of certain rights
Gains Property
Real Wherever Situated in  in contemplation of death
Properties Situated the Phil. before after  under the general power of
August 3, 1988
Personal appointment
Properties:
Tangible Wherever Situated in
Property situated the Phil.
Situated in
the Phil
Wherever
Intangible (with
situated
Property reciprocity
rule)
Family Situated in
none
Home the Phil.
Taxable Wherever Situated in
Transfers situated the Phil.
Local Customs
Transfer Taxation Taxation
Estate Taxation

Gross Estate P XX
Less: Deductions from Gross Estate XX
Net Taxable Estate P XX

Estate Tax Due (Estate Tax Table) P XX

Less: Foreign Estate Tax Credit XX
Estate Tax Still Due/Payable P XX
 D. ESTATE TAX

OLD TAX CODE AMENDMENTS INTRODUCED BY TRAIN LAW

Progressive at 5% to 20% Flat rate of 6%

Standard deduction at Php 1M Php 5M

Family home Php1M Php 10M

CPA Certification needed at Php 2M Php 5M

None Final Withholding tax of 6% on withdrawals

on deposits of decedent
Estate tax return filing deadline-within 6 months
from the date of death 1year

No counterpart provision Payment by installment in 2 years in case of

insufficient cash without civil penalty & interest
Transfer Taxation Taxation
Estate Taxation Gross Estate
EXCLUSIONS FROM GROSS ESTATE  transmission or delivery of the inheritance or legacy of the
 irrevocable life insurance policy proceeds payable to fiduciary heir or legatee to the fideicommissary
beneficiary other than the estate of the deceased, his
executor or administrator.
 SSS/GSIS Insurance proceeds by reason of death
 Payments to legal heirs of deceased war veterans
 received from damages suffered during WWII
 received from U.S. Veterans Administration
 exclusive property of the surviving spouse
 The following exempt transactions:
 All transfers to social welfare, cultural and charitable
institutions, no part of the net income of which inures to
the benefit of any individual
 transmission from the first heir, legatee or donee in favor of
*not more than 30% shall be used for administration
another beneficiary in accordance with the desire of the
purposes
predecessor
 merger of the usufruct and the owner of the naked title
 Transfer Taxation
Estate Taxation
Ordinary Deductions
Ordinary
Requisites
Deduction
Funeral  up to the time of interment
Expenses  not paid by relatives and
friends
 duly supported by evidence
Judicial  during settlement of the
Expenses estate
 not beyond the last day
prescribed by law, or the
extension thereof, for the
filing of estate tax return
 for the benefit of the estate
 duly supported evidence
Taxation
Deductions from Gross Estate
Share of Surviving
Deductions
Spouse
Special Deductions
Amount of Deducted
Inclusions
Deductibility from
Actual Funeral Common  The mourning apparel - surviving spouse
Expenses or Property and unmarried minor children
5% of the gross  Expenses of the deceased’s wake
estate, whichever is  Publication charges for death notices
lower, but in no case  Telecommunication expenses to inform
to exceed P200,000 relatives
 Cost of burial plot, tombstones, monument
or mausoleum but not their upkeep
 Interment and/or cremation fees
 All other expenses incident to internment
Expenses incurred in: Common Fees of executor or administrator.
a) inventory taking of Property Attorney’s fees
asset Court fees
b)their administration Accountant’s fees
c) Payment of debts Appraiser’s fees
d)Distribution among
the heirs
Transfer Taxation Taxation
Estate Taxation Deductions from Gross Estate
Ordinary Requisites Amount of Deductibility Deducted from
Deduction
Losses during the settlement Value of the property lost Common Property if
fires, storm shipwreck or other casualties or from connected to common
robbery, theft or embezzlement.
Not compensated for by insurance Exclusive property if connected
Not claimed as deductions for income tax purposes to exclusive
in an ITR
Incurred not later than the last day for the payment
of the estate tax
personal obligation at the time of death Debts or demands of Common Property if
Indebtedness
contracted in good faith and for adequate and full pecuniary nature which connected to common
(Claim against
consideration in money or money’s worth could have been enforced
the Estate)
valid in law and enforceable in court against the deceased in Exclusive property if connected
must not have been condoned or prescribed his lifetime and could to exclusive
duly notarized have been reduced to
If the loan was contracted within three (3) years simple money terms
before the death of the decedent, the administrator
or executor shall submit a statement showing the
disposition of the proceeds of the loan.
Unpaid Taxes accrued before the death of the decedent Unpaid taxes accrued Common Property if
before the decedent’s connected to common
death Exclusive property if connected
to exclusive
Transfer Taxation Taxation
Estate Taxation Deductions from Gross Estate
Ordinary Requisites Amount of Deductibility Deducted from
Deduction
Claim against  Claim is included in the gross estate Claims that are not collectible Common Property or
insolvent person  incapacity is proven Exclusive Property
 fair market value of the mortgage property Amount of unpaid mortgage
Unpaid Mortgage Common Property or
without deducting the mortgage
Exclusive Property
indebtedness - included
 contracted in good faith and for an adequate
and full consideration
Transfer for Public  testamentary in character The amount of all transfers for Common Property or
purpose  executed by the decedent before his death exclusive public purpose Exclusive Property
 date of death of the present decedent must not
Conjugal Partnership
exceed 5 years
Vanishing of Gains – Exclusive
 can be identified as the one received from prior
Deduction Property
decedent or from the donor, or the property
(Property Absolute Community
acquired in exchanged for the original property
Previously Taxed) of Property – Exclusive
so received
or Common Property
 The property claimed must have been part of
the gross estate situated in the Philippines or
the prior decedent or taxable gift of the donor 100% - < 1 yr
 The estate/donor tax must have been paid by 80% - > 1 yr, < 2 yrs
the prior decedent /donor 60% - > 2 yrs, < 3 yrs
 No vanishing deduction on the property was 40% - > 3 yrs, < 4 yrs
claimed on prior estate 20% - > 4 yrs, < 5 yrs
 Transfer Taxation Taxation
Estate Taxation Deductions from Gross Estate

Deductions

Ordinary Share of Surviving

Deductions Special Deductions Spouse

Family Home Standard Deduction Medical Expenses Benefits under RA 4917

Requisites:
 actual residential home
 total value - included in gross
estate
Amount of Deductibility:
current fair market, or to the
extent of the decedent’s
interest (whether conjugal /
community or exclusive
property) whichever is lower
but not exceeding P10,000,000
 not an optional deduction
Amount of Deductibility:
P5,000,000
Requisites:
 Within 1 year before the
death
 Duly substantiated
Amount of Deductibility:
Cost of medicines, hospital
bills, doctor’s fees which is
actually incurred with a
maximum amount of P500,000
Requisites:
 been in the service of
the same employer for
at least ten (10) years
 not less than 50 years of
age at the time of this
retirement
 availed of only once by
an official or employee
 granted in any cause
beyond the control of
said official or employee
 Transfer Taxation Taxation
Estate Taxation Estate Tax Payable
Resident decedent or citizen decedent
Tax Credit
Resident alien decedent
Net Estate in Foreign Country
One foreign country ETC = × Phil Estate Tax
World Net Estate
Limitation is involved or Actual Estate Tax paid to Foreign Country,
Foreign Estate whichever is lower
Tax Credit (ETC)  Actual estate tax - foreign country
Two or more foreign
ETC=
Total Foreign Net Estate
× Phil Estate Tax  Lower of actual or limit estate tax
Countries are involved World Net Estate credit - per foreign country
 Limit estate tax credit - total
Notice of Death foreign country
• all cases of transfer subject to tax
Required Estate Tax Return
• gross estate exceeds P20,000
• all cases of transfer subject to tax
• Executor Required • gross estate exceeds P200,000
Who? • Administrator/Administratrix • registered/registrable property
• Any of the Legal Heirs • Executor
When? • Within 2 months after death Who? • Administrator/Administratrix
• Any of the Legal Heirs
CPA Certification When? • Within 6 months after death
Required • gross estate exceeds P2,000,0000
• value of the gross estate
Contents • Itemized asset – gross value Information • deductions allowed
• Itemized deductions • necessary to establish the correct taxes
• Tax due – paid or outstanding
Transfer Taxation Taxation
Estate Taxation Estate Tax Payable
Estate Tax Returns Payment of Tax
Resident decedent When? At the time the estate tax returns are filed
• Accredited agent bank
• Revenue District Office (RDO) • court-settled – not to exceed 5 yrs
Extension
• Collection Officer • extra-judicially settled – not to exceed 2 yrs
• Duly authorized treasurer of the city or • negligence
municipality - domicile Extension • intentional disregard of rules and
Place Non-resident decedent (not allowed) regulations
• AAB – executor/administrator • fraud on the part of taxpayer
• RDO - jurisdiction over the executor or • available cash - not sufficient
administrator’s legal residence • not paid within the statutory date
• Office of the commissioner (RDO 39) - - penalty shall be imposed
By
does not have an executor or • after the due date is approved by
installment
administrator in the Philippines the Commissioner or his
authorized representative – pay
interest
meritorious cases – not • executor or administrator - before the delivery
Extension
exceeding 30 days to any heir or beneficiary
When? • two or more executors or administrators -
certified copy of Liability severally liable
the schedule of Within 30 days after the • executor or administrator - primary obligation
partition and promulgation of such order *heir or beneficiary - subsidiary liability
the order of the (distributive share)
court