QUICKIE NOTES ESTATE TAX AND DONOR’S TAX

TRANSFER(TAXES( 1." Benefits"received"theory"–"the"State"facilitates"

( the"distribution"of"the"estateD"thus"it"expects"to"
Transfer(tax( be"paid"for"the"services"that"it"renders"
A" tax" on" the" right" or" privilege" to" privilege" to" transfer" 2." Ability"to"pay"Theory"–"those"who"own"more"
ownership"of"a"particular"property"from"one"person"to" properties"to"transfer"pay"higher"taxes""
another." 3." Redistribution" of" wealth" –" principle" of"
" ‘reduction" of" social" inequality,’" taxes" paid" by"
Transfer"v."business"tax" the" wealthy" are" programmed" for"
Business"tax"is"the"tax"on"the"right"or"privilege"to"enter" disbursement" by" Congress" more" for" the"
into"an"onerous"transfer"or"transaction."Transfer"tax"is" benefit"of"the"poor"in"terms"of"social"services,"
the"tax"on"the"right"or"privilege"to"transfer"ownership"of" education,"health,"etc."
pa"particular"property,"onerously"or"gratuitously." 4." State"partnership"–"succession"to"the"property"
" of" the" deceased" is" not" a" right" but" a" mere"
Three(kinds(of(transfer( privilege."Hence,"it"has"the"right"to"burden"the"
1." Bilateral"–"transfer"with"a"consideration" transfer" with" tax." The" State" becomes" one’s"
2." Unilateral"–"gratuitous" passive" partner" in" the" accumulation" or"
3." Complex" –" not" in" full" and" adequate" increase"of"his"wealth."
considerationD" partly" onerous," partly" (
gratuitous" Purposes(of(estate(tax(
" 1." To" raise" revenue" to" defray" government"
Gratuitous(transfers( expenses"
1." Inheritance"(Estate"tax)"–"the"operative"fact"is" 2." To"facilitate"distribution"of"wealth"
succession," from" the" moment" of" a" person’s" 3." To"prevent"undue"accumulation"of"wealth"
death"(mortis'causa)" "
2." Donation"or"gift"–"transfer"is"made"during"the" "
lifetime" of" the" owner" of" the" property" (inter' Different(types(of(decedent(
vivos)" 1." Resident"or"citizen"–"all"properties"are"taxed,"
" within" or" without" the" PhilippinesD" personal,"
Kinds(of(transfer(tax( real,"and"intangible)"
1." Estate"tax" a." Resident:"Filipino"or"alien"
2." Donor’s"tax" b." Citizen:"Resident"or"non[resident"
" 2." Non[resident"alien"(whether"or"not"ETB"in"the"
( Philippines)" –" only" properties" within" the"
Philippines" are" taxed," except" intangible,"
ESTATE(TAX(
subject"to"the"principle"of"reciprocity"
( "
Estate(tax( Reciprocity(rule(as(to(intangible(personal(property(
A"tax"on"the"right"of"a"deceased"person"to"transmit"his" of(nonGresident(alien(
or" her" estate" to" his" or" her" lawful" heirs" and/or"
No" tax" shall" be" imposed" on" intangible" personal"
beneficiaries" at" the" time" of" death," and" on" certain" property"of"a"non[resident"alien:"
transfers" which" are" made" by" law" as" equivalent" to" 1." When" his" foreign" country" does" not" impose"
testamentary"dispositions"(NIRC)" transfer" tax" of" any" character" on" intangible"
" personal" property" of" a" citizen" of" the"
Tax(rate( Philippines" not" residing" in" that" foreign"
NIRC:"5%,"8%,"11%,"15%,"or"20%"on"the"value"of"the" countryD"or"
net"estate" 2." When" the" foreign" country" imposes" transfer"
"
taxes" but" grants" similar" exemption" from"
TRAIN:"6%" transfer"taxes"on"intangible"personal"property"
" owned"by"Filipino"citizens"not"residing"therein"
Nature(of(estate(tax( "
It"is"laid"neither"on"the"property"nor"on"the"transfer"or" Notice(of(death(to(the(BIR(
transferee." It" is" an" excise" tax" on" the" privilege" to" Shall" be" made" within" 60" days" from" the" death" of" the"
transmit" property" to" the" heirs" upon" the" death" of" the" decedent"
decedent." TRAIN:'no"longer"required"
"
"
The"burden"of"paying"the"tax"is"on"the"estate"itself." "
"
GROSS(ESTATE(
Applicable(law(in(estate(taxation(
The"law"in"force"at"the"time"of"the"death"of"the"decedent" (
" Gross(estate(
Justifications(of(estate(tax((Theories)(BARS( All" properties" and" interests" in" properties" of" the"
decedent"at"the"time"of"his"death"shall"form"part"of"his"
gross"estate"

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" •" Partner’s"share"in"the"partnership"

Determination(of(the(gross(estate( •" Declared" dividends" of" a" shareholder" in" a"
The" operative" act" which" gives" rise" to" the" liability" for" corporation"prior"to"his"death."Declaration"is"n"
estate" tax" is" the" death" of" the" owner" of" the" property." necessary."
Thus," it" follows" that" the" ascertainment" of" the" gross" "
estate"starts"with"the"inventory"of"his"properties." "
" TRANSFERS(IN(CONTEMPLATION(OF(DEATH(
Exemption( "
P200,000"and"below" Cover"those"transfers"made"during"the"lifetime"but"are"
TRAIN:'P5,000,000" considered"as"part"of"the"gross"estate."The"controlling"
" motive"is"the"thought"of"death"impelled"one"to"dispose"
DateGofGdeath( Valuation( Rule( or( Ithaca( Trust( of"his"property."
Principle(
•" The" length" of" time" between" the" transfer" and"
General" Rule:" The" properties" comprising" the" gross"
the" death" of" the" owner" is" irrelevant." What" is"
estate"shall"be"valued"based"on"the"fair"market"value"
important"is"the"state"of"mind"of"the"transferor"
(FMV)"as"of"the"time"of"death."
which"impelled"him"to"cause"the"transfer."
"
"
•" In"computing"for"the"FMV,"the"current"value"of" "
the" property" shall" be" considered," excluding"
REVOCABLE(TRANSFERS(
encumbrances"attached"to"the"property."
•" For" real" property," whichever" is" higher" "
between" the" zonal" value" ascertained" by" the" Made" when" there" is" a" transfer" of" property" with" the"
BIR"or"assessed"value"by"the"LGU" transferor" retaining" the" rights" to" terminate," alter,"
" revoke," or" amend" (TARA)" the" transfer" during" his"
Fair(Market(Value( lifetime." No" absolute" transfer" of" ownership" is"
In"an"arm’s"length"transaction,"it"is"the"price"that"a"seller" concluded."
who" is" willing" to" sell," but" not" compelled" to" sell" and" a" "
buyer"not"compelled"to"buy,"but"is"willing"to"buy." PROPERTY(PASSING(UNDER(GENERAL(POWER(
" OF(APPOINTMENT(
COMPOSITION(OF(THE(GROSS(ESTATE( "
1." Decedent’s"interest" When"the"power"of"appointment"authorizes"the"donee"
2." Transfers"in"contemplation"of"death" to" appoint" any" person," including" himself," his" spouse,"
3." Revocable"transfers" estate," executor" or" administrator," or" his" creditor," he,"
4." Property" passing" under" general" power" of" under" the" GPA," holds" the" appointed" property" with" all"
appointment" the" attributes" of" ownershipD" thus," the" property" shall"
5." Transfers"for"insufficient"consideration" form" part" of" the" gross" estate" of" the" donee" upon" his"
6." Proceeds"of"life"insurance" death."
7." Prior"interests" "
8." Capital"of"the"surviving"spouse" •" A" donee" under" a" special" power" of"
" appointment"only"holds"the"property"donated"
Gross(estate(formula( in" trust" for" the" donor." Hence," the" property"
" shall"not"form"part"of"his"estate."
Inventories"existing"at"the"time"of"death" "
Less:' properties'not'owned'by'the'decedent' PROCEEDS(OF(LIFE(INSURANCE(
' Properties'excluded'by'law' "
" Taxable"inventories" Life" insurance" proceeds" taken" out" by" the" decedent"
Add:' taxable' transfers' (i.e.' transfers' in' upon" his" own" life." It" should" be" the" decedent" who"
contemplation' of' death,' decedent’s' interest,' insures"his"own"life."
etc.)" "
" Gross"Estate" Beneficiaries(
" 1." The" deceased’s" estate," administrator,"
" executor"
2." Persons"other"than"the"estate,"administrator,"
DECEDENT’S(INTEREST(
and"executor"
( "
All"properties"owned"by"the"decedent"shall"form"part"of" Manner(of(designation(
his"gross"estate,"to"the"extent"of"the"value"of"his"interest" 1." Revocable"–"the"insured"reserves"his"right"to"
therein,"at"the"time"of"his"death." revoke/change"the"beneficiary"anytime"during"
" his" lifetime." At" the" time" of" his" death" it" is"
Note:' Ownership," not" possession," of" the" property" is" presumed"that"there"was"no"waiver"of"his"right"
required." to" revoke" the" beneficiary." Transfer" is" only"
" conditional."

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2." Irrevocable"–"the"insured"cannot"change"the" institutions,"not"part"of"the"net"income"of"which"

beneficiary." Proceeds" therefrom" shall" not" inures" to" the" benefit" of" any" individual:"
form" part" of" his" estate." There" is" absolute" Provided,"however,"that"not"more"than"30%"of"
transfer"of"the"proceeds"to"the"beneficiary." the" said" bequests," devises," legacies" or"
" transfers"shall"be"used"by"such"institutions"for"
Designation( Estate,( others( administration"purposes.""
administrator,( "
executor( The" foregoing" instances" presuppose" that" the" transfer"
Revocable' Subject" to" Subject" to" of" the" property" belonging" to" the" decedent" to' the'
estate"tax" estate"tax" usufructuary,'fiduciary'heir,'first'heir,"as"the"case"may"
Irrevocable' Subject"" Not"subject" be,"has"already"been"taxed."
" "
•" Proceeds"from"GSIS"and"SSS"are"not"taxable" "
" ALLOWABLE(DEDUCTIONS(
" "
TRANSFER(FOR(INSUFFICIENT(CONSIDERATION( Resident(or(citizen( NonGresisdent(
" Allowable"Deductions"
The" principles" of" lesion' under" the" Civil" Code" may" Ordinary"deductions" Ordinary"deductions"
serves"as"basis."" 1." Expenses," 1." Proportionate"
" losses," deductions" for"
Transfers"for"insufficient"consideration"must"fall"under" indebtedness," ELIT"
any"of"the"following:" taxes," etc." 2." Vanishing"
1." Transfer"in"contemplation"of"death" (ELIT)" deductions"
2." Revocable"transfers" 2." Vanishing" 3." Transfers" for"
3." Property"passing"under"GPA" deductions" public"use"
" 3." Transfers" for" 4." Share" in"
Ex.'Sylvs"is"expecting"to"die."She"sold"her"jewelry"set" public"use" conjugal"
for"only"P10,500.00"instead"of"P50,000." 4." Amounts" property"
•" First," determine" if" the" transfer" falls" under" received" under"
TICD,"RT,"or"GPA." RA"4917"
•" No"–"not"subject"to"estate"tax,"but"to"donor’s" 5." Share" in"
tax" conjugal"
•" Yes"–"sufficient"or"insufficient?" property"
o" Sufficient"–"not"subject"to"estate"tax" Special"deductions" No"special"deductions"
o" Insufficient"–"subject"to"estate"tax" 1." Family"home"
" 2." Standard"
Determination(of(gross(estate( deduction"
FMV"of"the"property"transferred"less"the"consideration" 3." Medical"
paid"at"the"time"of"transfer" expenses"
" "
CAPITAL(OF(SURVIVING(SPOUSE( "
" ORDINARY(DEDUCTIONS(
Capital" of" surviving" spouse" shall" not" form" part" of" the" EXPENSES,(LOSSES,(INDEBTEDNESS,(TAXES(
gross"estate"of"the"decedent." (ELIT)(
" "
" ELIT( Period(of( Amount(
ACQUISITIONS/TRANSMISSIONS(NOT(SUBJECT( incurrence( deductible(
TO(TAX((sec.(87,(NIRC)( Funeral" Death"to" Actual"
" expenses" interment"or" expenses"or"
The"following"shall"not"be"taxed:" " burial" 5%"of"the"
1." Merger"or"usufruct"in"the"owner"of"the"naked" TRAIN:' Not" gross"estate,"
title" allowed" to" be" whichever"is"
2." Transmission"or"delivery"of"the"inheritance"or" deducted" lower."
legacy"by"the"fiduciary"heir"or"legatee"to"the" Judicial" During" Amount"of"
fideicomissary" expenses" settlement"of" expensesD"no"
3." Transmission" from" the" first" heir," legatee" or" " estate"(within"6" limit"
donee" in" favor" of" another" beneficiary," in" TRAIN:' Not" months"+"30"
accordance" with" the" desire" of" the" allowed" to" be" days"if"
predecessor"" deducted" extended)"
4." All"bequests,"devises,"legacies"or"transfers"to" Claims" against" As"of"date"of" Amount"of"
social" welfare," cultural" and" charitable" the"estate" death" claimD"no"limit"

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Claims" against" As"of"date"of" Amount"of" SPECIAL(DEDUCTIONS(

insolvent" death" claimD"no"limit" "
Unpaid" As"of"date"of" Extent"of" Deduction( Rules(
mortgages" death" unpaid" Family"home" Whichever"is"lower"between:"
mortgage" 1." Current"FMV"
Losses" During" Amount"of" 2." Extent"of"decedent’s"
settlement"of" property"lostD" interest"
estate"(within"6" no"limit" But" not" to" exceed" P1" million"
months"+"30" (TRAIN:'P10,000,000)"
days"if" Medical"expenses"" All" medical" expenses"
extended)" (TRAIN:' no" longer" incurred," whether" paid" or"
" allowed" to" be" unpaid,"within"(1)"year"prior"to"
TRAIN:'within' deducted)" his"death"and"in"no"case"shall"
1'year'from' exceed"P500,000."
death'provided' Standard" Any" amount" equivalent" to"
said'loss'was' deduction" P1,000,000" (TRAIN:'
not'applied'for' P10,000,000)" shall" be"
income'tax' deducted" from" the" gross"
purposes' estate" without" need" of"
Taxes"" As"of"date"of" Unpaid"taxesD" substantiation.""
death" no"limit" "
" Allowable(deductions(for(nonGresident(aliens(
" Value" of" that" part" of" the" gross" estate" situated' in' the'
VANISHING(DEDUCTIONS( Philippines'
" '
a.k.a."property"previously"taxed" ONLY"Ordinary"deductions"
" 1." Proportionate"deductions"for"ELIT"
Requisites(for(deductibility((DILPIN)( 2." Vanishing"deductions"
Death"of"the"present"decedent"within"5"years"from"date" 3." Transfers"for"public"use"
of"death"of"the"prior"decedent"or"date"of"the"donation" 4." Share"in"conjugal"property"
" '
Identity"of"the"property"is"that"which"was"received"at"the" However(
time" of" death" of" the" prior" decedent" or" date" of" the" For" purposes" of" filing" the" estate" tax" return," all" the"
donation" properties" of" the" decedent" whether" found" in" the"
" Philippines" or" not" should" be" included." This" is" for" the"
Located"in"the"Philippines" determination"of"the"gross"global"estate."
" "
Previously"taxed"–"donor’s"tax"or"estate"tax"was"paid" Formula(for(deductibility(of(ELIT(
by" the" donor" or" estate" of" the" prior" decedent," (Gross"Philippine"Estate/Gross"Global"Estate)"x"ELIT"
respectively" "
" Note:' Vanishing" deductions," transfers" for" public" use,"
Included"in"the"gross"estate"of"the"prior"decedent"or"in" share" of" surviving" spouse" in" conjugal" properties" –"
the"total"amount"of"gifts"of"the"donor" same"requirements"
" "
No"previous"vanishing"deduction"on"the"property"was" "
allowed"in"determining"the"value"of"the"net"estate"of"the" ESTATE(TAX(CREDIT(
prior"decedent" "
" A" remedy" against" international" double" taxation" to"
Formula( minimize" the" onerous" effect" of" taxing" the" same"
" property"twice."Tax"credit"against"Philippine"estate"tax"
VALUE"TAKEN"FOR"PPT"(always"the"lower" is"allowed"for"estate"taxes"paid"to"foreign"countries."
value" between" the" value" at" the" time" of" prior" "
decedent’s"death"or"donation"and"the"value"at" Who(may(avail(
the"time"of"present"decedent’s"death)" Only"the"estate"of"a"decedent"who"was"a"citizen"or"a"
Less:' mortgages'or'liens'paid' resident"of"the"Philippines"at"the"time"of"his"death"
' INITIAL"BASIS"(IB)" "
Less:' (initial" basis" /" gross" estate)" x" ordinary" General" Rule:" The" estate" tax" imposed" by" the"
deductions"only" Philippines" shall" be" credited" with" the" amounts" of" any"
" FINAL"BASIS"(FB)" estate"tax"imposed"by"a"foreign"authority."
' X'Vanishing'deduction'rate' "
" VANISHING"DEDUCTION" Limitations:"

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 QUICKIE NOTES ESTATE TAX AND DONOR’S TAX

1." Per"country"limitation""
2." Global"limitation"
"
ADMINISTRATIVE(MATTERS(
"
Filing(of(notice(of(death(
Notice"of"death"to"the"BIR"must"be"made"within"60"days"
from"the"death"of"the"decedent"
"
TRAIN:'no"longer"required"
"
Filing(of(estate(tax(return((ETR)(
Filed" by" the" executor" or" administrator" of" the" estate"
within"6"months"(TRAIN:'1"year)"from"the"date"of"death"
of"the"decedent,"unless"the"period"is"extended"for"more"
than" 30" days" by" the" Commissioner" on" meritorious"
grounds."
"
When"required"
1." In"all"cases"of"transfers"subject"to"tax"
2." When"the"estate"is"subject"to"estate"tax"
3." Though" exempt" from" tax," the" gross" value"
exceeds"P200,000"(TRAIN:'P5,000,000)"
4." Regardless" of" the" gross" value" of" the" estate"
when" said" estate" consists" of" registered" or"
registrable" property" such" as" real" property,"
motor"vehicle,"shares"of"stock"
5." If" gross" value" of" the" estate" exceeds"
P2,000,000" (TRAIN:' P5,000,000)," the" return"
should" be" supported" with" a" statement" duly"
certified"to"by"a"CPA"
"
Place(of(filing(
1." Authorized"or"accredited"agent"bank"(AAB)"
2." Revenue"district"officer"(RDO)"
3." Collection"officer"
4." Duly" authorized" Treasurer" of" the" city" or"
municipality" in" which" the" decedent" was"
domiciled"at"the"time"of"his"death"
5." If"there"be"no"legal"residence"in"the"PH,"with"
the"Office"of"the"Commissioner"
"
When(to(pay(
Within"6"months"from"death"and"upon"filing"of"the"ETR"
(Pay[as[you[file"system)"
"
TRAIN:"
1." Payable"within"1"year"from"death"
2." May"be"paid"on"installment"within"2"years"from"
death"
3." Maximum" allowable" period" for" the" full"
payment"is"2"years"from"death"without"interest"
and"penalty"
"
"
" "

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DONOR’S(TAX( !
"
Imposed" on" donations" inter' vivos" or" those" made"
between"living"persons"to"take"effect"during"the"lifetime"
of"the"donor"
"
Rate(
( Rate(
In" favor" of" a" relative" 2%[15%"(TRAIN:" 6%"of"
within" the" fourth" civil" the" net" value" of" the" gift"
degree" regardless" of" the"
relationship"between"the"
donor"and"donee)"
Gift" to" stranger" or" 30%"(TRAIN:'deleted)"
juridical"entity" "
"
Exemptions(
Value"of"donation"is"P100,000"(TRAIN:'P250,000)"and"
below"–"exempt"from"donor’s"tax"
"
DST(and(Donor’s(Tax(
Donation"of"real"property"is"not"subject"to"DST,"only"to"
Donor’s"tax"
'
TRAIN:'subject"both"to"DST"and"Donor’s"tax"
"
Dowry(deduction(
Deduction" of" P10,000" is" deductible" from" the" value" of"
the"gift"to"a"child"on"occasion"of"marriage"
"
TRAIN:'deleted"
"
Completed(gift(
Donor’s"tax"shall"not"apply"unless"and"until"there"is"a"
completed"gift."
a." Perfected" –" from" the" moment" the" donor"
knows"of"the"acceptance"by"the"donee"
b." Completed" –" by" delivery," either" actually" or"
constructively,"of"the"donated"property"
"
Donor’s(tax(
Levied,"assessed,"collected"and"paid"upon"the"transfer"
by"any"person,"resident"or"non[resident,"of"the"property"
by"gift."It"shall"apply"whether"the"transfer"is"in"trust"or"
otherwise," whether" the" gift" is" direct" or" indirect," and"
whether" the" property" is" real" or" personal," tangible" or"
intangible."
"
Nature(
Not"a"property"tax"but"a"tax"imposed"on"the"privilege"to"
transfer"property"by"way"of"gift"inter'vivos."
"
Law(applicable(
Law"in"force"at"the"time"of"the"perfection"or"completion"
of"the"donation"
"
Elements(of(donation(
1." Reduction"of"the"patrimony"of"the"donor"
2." Increase"in"the"patrimony"of"the"donee"
3." Intent" to" do" an" act" of" liberality" (animus'
donandi)""

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