CTT EXAMINATION REVIEWER (NOTES) PAGE A - 19

ESTATE TAXATION Power of appointment – the decedent was given

the authority to hold property during his lifetime and
ESTATE TAX is a tax levied on the privilege to to name the beneficiaries thereof when he dies.
transfer property or estate of the decedent to his 1. General power of appointment– can be exercised
lawful heirs or beneficiaries. in favor of anybody.
2. Special power of appointment – can be exercised
Kinds of donation:
only in favor of certain powers designated by the
1. Donation inter vivos –made between living
prior decedent. The decedent is only a trustee to
persons and which is perfected from the moment
the property and so it should not be part of his
the donor knows of the acceptance of the
estate.
donation by the donee; subject to donor’s tax.
FORMULA IN COMPUTING ESTATE TAX
2. Donation mortis causa – takes effect upon the
death of the donor. It partakes of the nature of a Gross Estate Pxx
testamentary succession and is equivalent to a - Residence & citizenship
transfer in contemplation of death; subject to - Property relations (if married)
estate tax and not donor’s tax. - Exclusions
Less: Deductions
Estate tax (ET) vs. Donor’s tax (DT)
Ordinary deductions:
1. ET - donation mortis causa CUCUL Pxx
DT - donation inter vivos Transfer for public purpose xx
Vanishing deduction x x ( x x)
2. ET - ownership over the property is
Special deductions:
transmitted upon death of the decedent.
Standard deduction ( 5M)
DT- transmitted during the lifetime of the
RA 4917 ( x x)
donor, subject to exceptions.
Family home ( x x)
3. ET - payable in 1 year; installment within 2 Net estate x x
years Less Share of surviving spouse (if married)
DT - payable within 30 days Gross conjugal/community x x
Conjugal/communal expenses ( x x)
4. ET- there is extension for payment
Net conjugal/community xx
DT- no extension for payment is allowed
Divide by 2 x x
5. ET- payment of tax antecedent to transfer of Net taxable estate x x
shares, bonds or rights is allowed x Rate of tax 6%
DT- not allowed Estate tax x x
6. ET- no exemption from net estate in Gross Estate includes real and personal property,
computing the tax whether tangible or intangible, or mixed, wherever
DT- exempt up to P250,000 per year situated.
INTER VIVOS TRANSFERS SUBJECT TO ESTATE I. GROSS ESTATE: RESIDENCE AND
TAX CITIZENSHIP
Property may not be physically part of the estate 1. Properties included in the gross estate of
because they were transferred by the decedent resident or citizen
during his lifetime (inter vivos). However, the property a. Real properties within and without
shall still be included in the gross estate if such b. Tangible personal properties within and
transfers were made under any of the following without
circumstances: c. Intangible personal properties within and
without
a. Revocable transfers – transfers where the
decedent reserves for himself the power to alter, 2. Properties included in the gross estate of a
amend, revoke or even terminate such transfer. nonresident alien
a. Real properties within
b. Transfers with retention or reservation of certain b. Tangible personal properties within
rights – the decedent retains for himself the c. Intangible personal properties within, unless
economic benefits of the property or the power to there is a reciprocity
designate the persons who may exercise such
rights.
Reciprocity clause – Intangible personal properties in
c. Transfers in contemplation of death – the the Philippines belonging to a nonresident, not citizen
decedent was motivated by the thought of death. of the Philippines are not includible in the gross
Exceptions: Not in contemplation of death estate if the foreign country of which the decedent
1. To relieve the donor from the burden of was a citizen and resident at the time of his death:
management. a. Does not impose transfer tax, or
2. To save on income or property taxes. b. Allows similar exemptions from transfer tax in
3. To settle family disputes. respect of intangible personal property owned by
4. To provide independent income for dependents the citizens of the Philippines not residing in that
5. To see the children enjoy the property while foreign country.
the donor is still alive.
6. To protect the family from the hazards of INTANGIBLE PERSONAL PROPERTIES WITHIN
business operations. a. Franchise exercised in the Philippines.
b. Shares obligations or bonds issued by domestic
d. Transfers under the general power of appointment corporations.
CTT EXAMINATION REVIEWER (NOTES) PAGE A - 20

c. Shares obligations or bonds issued by foreign Both spouses shall bear the family expenses in
corporation if 85% or more of its business is proportion to their income, or, in case of
located in the Philippines. insufficiency or default thereof, to the current
d. Shares, obligations or bonds issued by foreign market value or their separate properties.
corporation if they have acquired business situs in
The liability of the spouses to creditors for
the Philippines.
family expenses shall, however, be solidary.
e. Shares or rights in a domestic partnership.
2. All present properties only.
II. GROSS ESTATE of decedent Properties acquired during the marriage shall
1. Married - Property relations belong to the community property.
a. Absolute Community of Property Regime
b. Conjugal Partnership of Gains (Relative) D. REGIME OF UNIONS WITHOUT MARRIAGE
c. Complete Separation of Property 1. CAPACITATED to marry each other – their
d. Other regimes wages and salaries shall be owned by them in
equal shares; the property acquired by both of
2. Regime of Union without Marriage them through their work or industry shall be
a. Qualified to marry each other governed by the rules on co-ownership.
b. Disqualified to marry each other
c. Any other regime In the absence of proof to the contrary, properties
acquired shall be owned by them in equal shares.
A. ABSOLUTE COMMUNITY OF PROPERTY
Unless otherwise provided, the community property 2. INCAPACITATED to marry each other – only the
shall consist of: property acquired by both of them through their
actual joint contribution of money, property or
a. All the property owned by the spouses at the time industry shall be owned in common and in
of the celebration of the marriage; or proportion to their respective contributions.
b. Those acquired during the marriage
In the absence of proof to the contrary, their
The following shall be excluded from the community contributions and corresponding shares are prima
property: facie presumed to be equal.
1. Property acquired during the marriage by The share of any party who is married to another
gratuitous title by either spouse, and the fruits as shall accrue to the absolute community or
well as the income thereof, if any, unless it is conjugal partnership, as the case maybe, if
expressly provided by the donor, testator or existing under the valid marriage.
grantor that they shall form part of the community
property. GROSS ESTATE - Exclusions
1. Proceeds of irrevocable life insurance policy
2. Property for personal or exclusive use of either payable to beneficiary that is not the estate of the
spouse. However, jewelry shall form part of the deceased, his executor or administrator.
community property. 2. Proceeds of life insurance under a group
3. Property acquired before the marriage by either insurance taken by employer (not taken out upon
spouse who has legitimate descendants by a his own life).
former marriage, and the fruits as well as the 3. Insurance proceeds or other benefits from the
income, if any, of such spouse. SSS or GSIS by reason of death.
4. The following benefits:
B. CONJUGAL PARTNERSHIP OF GAINS a. Payments to legal heirs of deceased war
Unless the contrary is proved, all property veterans.
acquired during the marriage, whether the b. Amounts received from damages suffered
acquisition appears to have been made, during World War II.
contracted or registered in the name of one or c. Benefits received from U.S. Veterans
both spouses, is presumed to be conjugal. Administration.

The following are exclusive property of each 5. The following exempt transactions:
spouse: a. The merger of the usufruct in the owner of the
naked title.
a. That which is brought into the marriage as his b. The transmission or delivery of the inheritance
or her own; or legacy of the fiduciary heir or legatee to the
b. That which is acquired during the marriage by fideicommissary.
gratuitous title; c. The transmission from the first heir, legatee or
c. That which is acquired by right of redemption, donee in favor of another beneficiary in
by barter or by exchange with property accordance with the desire of the
belonging to only one of the spouses; and predecessor.
d. That which is purchased with exclusive money
of the wife or of the husband. 6. All bequests, devisees, legacies or transfers to
social welfare, cultural and charitable
C. COMPLETE SEPARATION OF PROPERTY institutions, no part of the net income of which
inures to the benefit of any individual. Provided,
Maybe on: however, that not more than 30% shall be used
1. All properties for administration purposes.
To each spouse shall belong all earnings from
his or her profession, business or industry and 7. The exclusive property of the surviving spouse.
all fruits, natural, industrial or civil, due or RULES ON TRANSFER FOR LESS THAN
received during the marriage from his or her ADEQUATE CONSIDERATION
separate property. 1. The rule applies on the following:
a. Transfer in contemplation of death
b. Revocable transfer
 CTT EXAMINATION REVIEWER (NOTES) PAGE A - 21

c. Property passing under general power of 4. Unpaid taxes – those which have accrued and
appointment unpaid as of decedent’s death. The following are
NOT deductible:
2. The sale or exchange is exercised for an
inadequate consideration in money or money’s a. Income tax upon income received after death;
worth. b. Property taxes not accrued before his death;
c. Estate tax due from the transmission of his
3. The difference between the fair market value at the
estate.
time of death and the value of consideration shall
be included in the gross estate. 5. Losses – Requisites:
a. Must arise from fire, storm, shipwreck or other
DEDUCTIONS FROM GROSS ESTATE
casualties or from theft, robbery or
I. ORDINARY DEDUCTIONS - embezzlement AFTER the death of the
A. CUCUL decedent.
If the decedent was a - b. Not compensated by insurance or otherwise.
1. Resident or citizen - deduct all expenses c. Not claimed as deduction for income tax
(CUCUL) purposes.
2. Nonresident alien - prorate expenses as follows d. Incurred during the settlement of the estate
and not later than the last day for the payment
Phil gross estate x CUCUL of the estate tax.
Total gross estate
B. Transfers for public purposes. All bequests,
1. Claims against the estate – debts or demands of legacies or transfers to or for the use of the
pecuniary nature which could have been enforced government or any political subdivision thereof for
against the deceased in his lifetime and could have exclusively public purpose. The transfer must be
been reduced to simple money judgments. Claims testamentary in character. Oral transfers are not
against the estate or indebtedness in respect of deductible.
property may arise out of (1) contract, (2) tort, or C. Vanishing Deductions (Property previously
(3) operation of law. taxed)
Requisites: PURPOSE: To minimize the effects of a double
a. Personal obligation of the deceased existing at tax on the same property within a short period of
the time of his death. time.
b. Contracted in good faith and for an adequate
and full consideration in money or money’s Requisites for vanishing deductions:
worth; 1. The property is situated in the Philippines.
c. The debt or claim is valid in law and
enforceable in court. 2. Present decedent have acquired the property
d. The debt instrument was duly notarized. by inheritance or donation within five (5) years
e. Not condoned by the creditor or must not have prior to his death.
prescribed. 3. The estate taxes on the prior transfer or the gift
f. If the loan was contracted within 3 years prior to taxes on the gift must have been finally
the death of the decedent, the executor or determined and paid.
administrator shall submit a statement showing
the disposition of the proceeds of the loan. 4. The property subject to vanishing deduction
must be identified as the one received from the
2. Unpaid mortgage – the property left by the prior decedent, or from the donor or having
decedent which was encumbered by a mortgage been acquired in exchange for property so
indebtedness still unpaid at the time of death. received.
Provided, that the gross value of the property 5. The estate of the prior decedent has not yet
mortgaged, undiminished by the mortgage previously availed of the vanishing deduction
indebtedness, must have been included in the
gross estate. Percentages of Vanishing Deduction
Rules: Property Acquired for
a. The classification of the property mortgaged More than Not More than Percentage
(conjugal, community or exclusive) is NOT the x x 1 year 100%
basis in the determination of the deduction 1 year 2 years 80%
whether chargeable against the common 2 years 3 years 60%
property or the exclusive property of the 3 years 4 years 40%
decedent. 4 years 5 years 20%
b. It is chargeable against common property if the 5 years x x 0%
mortgage was contracted during the marriage.
c. It is chargeable against exclusive property if II. SPECIAL DEDUCTIONS
contracted prior to the marriage or by the 1. FAMILY HOME – the dwelling house where the
donor/prior decedent. members of the family reside and the land on
which it is situated; the place to which, whenever
3. Claims against insolvent debtor –receivable of absent for business or pleasure, one still intends
the decedent which can no longer be collected to return.
due to insolvency of the debtor.
a. Must be situated in the Philippines.
Requisites: b. Beneficiaries of family home are the spouses,
a. The amount of claim has been included in the their ascendants and descendants, including
gross estate. legally adopted children, brothers and sisters,
b. The debtor’s incapacity is proven and not whether the relationship be legitimate or
merely alleged. illegitimate,
CTT EXAMINATION REVIEWER (NOTES) PAGE A - 22

c. who are living in the family home and 3. Valuation of shares of stocks, bonds or other
d. who depend upon the head of the family for securities –
legal support. a. Traded in the stock exchange – it shall be
based on the arithmetic mean between the
Provided, that it must have been the decedent’s highest and lowest quoted selling prices of the
family home as certified by the barangay captain securities on the valuation date.
of the locality.
b. Not traded in the stock exchange
Maximum amount deductible: P10 million 1. Preferred shares – par value
2. STANDARD DEDUCTION. An amount equivalent 2. Common shares – book value
to P5 million.
4. FMV of units of participation in any association,
3. AMOUNT RECEIVED BY HEIRS UNDER RA recreation or amusement club (e.g. golf, polo or
4917. Any amount received by the heirs from the similar clubs) – the bid price nearest the date of
decedent’s employer as a consequence of death death published in any newspaper or publication
of the decedent employee. Provided, that such of general circulation.
amount is included in the gross estate of the
decedent. Tax credit for estate tax paid to foreign country
d. NET SHARE OF THE SURVIVING SPOUSE in the 1. Who cannot claim? Non-resident aliens
conjugal / community property. 2. Limitations on tax credit:
1st Limitation
DEDUCTIONS from GROSS ESTATE OF NRA
Net estate (per foreign country) x Phil estate tax
The deductible items are: Total net estate
1.To be pro-rated
Formula: PGE/TGE x CUCUL 2nd limitation

a. Claims against the estate Net estate (all foreign countries) x Phil estate tax
b. Unpaid taxes Total net estate
c. Claims against insolvent persons ADMINISTRATIVE PROVISIONS
d. Unpaid mortgages 1. WHEN CPA CERTIFICATE IS NEEDED – where
e. Losses the gross value of the estate exceeds P5,000,000
2. Standard deduction of P500,000. 2. Contents of the statement certified to by a CPA
3. Vanishing deduction a. Itemized assets of the decedent with their
4. Transfer for public use corresponding gross value at the time of death.
5. Share in the conjugal/community property b. Itemized deductions from gross estate.
Problem a. Amount of tax due whether paid or still due and
outstanding.
Are the following items deductible from gross estate?
3. FILING AND PAYMENT – within one (1) year from
Resident/ NRA the decedent’s death.
Items of Deduction
citizen a. In case of resident decedent. - With any
1. Funeral expenses No No Authorized Agent Bank (AAB), Revenue
Collection Officer (RCO) or duly authorized
2. Judicial expenses No No Treasurer of the city or municipality in which
the decedent was domiciled at the time of the
3. Claims vs. estate Yes Yes
death.
4. Bad debts Yes Yes b. In case of nonresident decedent - with the
5. Unpaid taxes Yes Yes Office of the Commissioner or if there is an
executor or administrator, with the RDO having
6. Losses Yes Yes jurisdiction over the executor or administrator’s
7. Unpaid mortgages Yes Yes legal residence.

8. Transfer for public use Yes Yes SURCHARGES & INTEREST – If the return was
filed and/or the tax was paid after the due date, the
9. Vanishing deduction Yes Yes corresponding surcharges and interest on internal
revenue taxes shall be imposed.
10. RA 4917 Yes No
11. Share of surviving spouse Yes Yes a. Surcharges (ad valorem penalty)
50% False or fraudulent return is willfully filed.
12. Medical expenses No No
Willful neglect to file the return on time.
13. Standard deduction Yes Yes
25% Failure to file any return and pay the tax
14. Family home Yes No due thereon.
VALUATION OF GROSS ESTATE If the return is not filed with the proper
1. Valuation date – the property shall be appraised internal revenue officer.
at its fair market value at the time of death. Failure to pay on time the deficiency tax
shown in the notice of assessment.
2. Valuation of real property–whichever is higher
between: Note: The failure to file any return and pay the tax
a. The FMV as determined by the Provincial or thereon are treated as one act or violation for
City Assessor, (assessor’s market value) and purposes of the imposition of penalties.
b. The FMV as determined by the CIR (zonal
b. Interest for failure to pay tax per return on time
value).
CTT EXAMINATION REVIEWER (NOTES) PAGE A - 23

Rate– 12% per annum computed from the date h. Certificate of Deposit / Investment/
prescribed for payment until the amount is fully Indebtedness owned by the decedent and the
paid. surviving spouse, if applicable.
i. Photocopy of Certificate of Registration of
4. WHEN IS FILING OF RETURN REQUIRED?
vehicles and other-proofs showing the correct
a. When the transfer is subject to tax.
value of the same, if applicable.
b. Regardless of the gross value of the estate,
where said estate consists of registered or j. Photocopy of certificate of stocks, if applicable
registrable property such as real property, k. Proof of valuation of shares of stocks at the
motor vehicle, shares of stock or other similar time of death, if applicable.
property for which a clearance from the BIR is o For listed stocks – newspaper clippings or
required as a condition precedent for the certification from the Stock Exchange.
transfer of ownership in the name of the o For unlisted stocks – latest audited Financial
transferee. Statement of issuing corporation with
5. EXTENSION FOR FILING – CIR in meritorious computation of book value per share
cases may grant extension not exceeding 30
l. Proof of valuation of other types of personal
days.
property, if applicable.
The request for extension shall be filed with the
m.Proof of claimed tax credit, if applicable
Revenue District Officer (RDO) where the estate
n. CPA Statement on the itemized assets of the
is required to secure its TIN and file the estate tax
decedent, itemized deductions from gross
return. The application shall be approved by the
estate and the amount due if the gross value of
Commissioner or his duly authorized
the estate exceeds P5,000,000, if applicable
representative.
o. Certification of Barangay Captain for claimed
6. EXTENSION FOR PAYMENT–when payment on Family Home
due date would impose undue hardship, he may p. Duly notarized Promissory Note for “Claims
extend the period not exceeding – against the Estate” arising from Contract of
5 years – in case of judicial settlement Loan.
2 years – in case of extrajudicial settlement q. Accounting of the proceeds of loan contracted
within three (3) years prior to death of the
Where the taxes are assessed by reason of decedent.
negligence, intentional disregard of rules and r. Proof of the claimed “Property Previously
regulations, or fraud on the part of the taxpayer, Taxed”
no extension will be granted by the Commissioner. s. Proof of claimed “Transfer for Public Use.”
7. PAYMENT OF TAX BY INSTALLMENT–if the 8. WHO SHALL FILE THE RETURN?
available cash of the estate is not sufficient to pay a) The executor or administrator or any of the
its total estate tax liability. legal heirs of the decedent or non-resident of
the Philippines
If any amount of the net taxable estate is not paid
within the statutory date, a corresponding b) Where there is no executor or administrator
applicable penalty shall be imposed. If the appointed, qualified and acting within the
payment after the due date is approved by the Philippines, then any person in actual or
Commissioner or his authorized representative, constructive possession of any property of the
the imposable penalty shall only be the interest. decedent must file the return.
In case the available cash of the estate is c) The Estate Tax shall be paid by the executor or
insufficient to pay the total estate tax due, administrator before the delivery of the
payment by installment shall be allowed within two distributive share in the inheritance to any heir
(2) years from the statutory date for its payment or beneficiary.
without civil penalty and interest.
Where there are two or more executors or
7. ATTACHMENTS TO THE RETURN administrators, all of them are severally liable
for the payment of the tax.
a. Certified true copy of the Death Certificate.
b. Deed of Extra-Judicial Settlement of the The estate tax clearance issued by the
Estate, if the estate is settled extra-judicially Commissioner or the Revenue District Officer
c. Court Orders/Decision, if the estate is settled (RDO) having jurisdiction over the estate, will
judicially; serve as the authority to distribute the
d. Affidavit of Self-Adjudication and Sworn remaining/ distributable properties/share in the
Declaration of all properties of the Estate. inheritance to the heir or beneficiary.
e. A certified true copy(ies) of the Transfer/ d) The executor or administrator of an estate has
Original/Condominium Certificate of Title(s) of the primary obligation to pay the estate tax but
real property(ies) (front and back pages), if the heir or beneficiary has subsidiary liability
applicable. for the payment of that portion of the estate
f. Certified true copy of the latest Tax Declaration which his distributive share bears to the value
of real properties at the time of death, if of the total net estate.
applicable.
g. “Certificate of No Improvement” issued by the The extent of his liability, however, shall in no
Assessor’s Office declared properties have no case exceed the value of his share in the
improvement or Sworn Declaration/ Affidavit of inheritance.
No Improvement by at least one (1) of the 9. Procedures
transferees. a. The heirs / authorized representative /
administrator /executor shall file the estate tax
CTT EXAMINATION REVIEWER (NOTES) PAGE A - 24

return (BIR Form 1801) and pay the Exemptions from gross gifts
corresponding estate tax. 1. Gifts made to the national government or any
entity created by any of its agencies which is not
b. In case of a non-resident decedent, with
conducted for profit, or any political subdivision.
executor or administrator in the Philippines, the
estate tax return shall be filed with the AAB of 2. Gifts in favor of the following non-profit institutions:
the RDO where such executor/administrator is a. Educational
registered or is domiciled, if not yet registered b. Charitable
with the BIR. c. Religious
d. Cultural
c. For non-resident decedent with no executor or
e. Social welfare
administrator in the Philippines, the estate tax
f. Accredited NGO
return shall be filed with the AAB under the
g. Trust or philanthropic organization
jurisdiction of RDO No. 39 South Quezon City.
h. Research institution
8. Payment of tax antecedent to the transfer of
Requisites:
shares, bonds or rights.
1. Provided, that not more than 30% of said gifts
If a bank has knowledge of the death of a person shall be used for administration purposes;
who maintained a bank deposit account alone, or
2. The non-profit institutions must be accredited by
jointly with another, it shall allow any withdrawal
the Philippine Council for NGO Certification
from the said deposit account, subject to a final
(PCNC).
withholding tax of 6% (use BIR Form 2306).
A non-profit institution is one which is:
For this purpose, all withdrawal slips shall contain
a. organized as a non-stock entity;
a statement to the effect that all of the joint
b. paying no dividends;
depositors are still living at the time of withdrawal
c. governed by trustees who receive no
by any one of the joint depositors and such
compensation; and
statement shall be under oath by the said
d. devoting all income whether students’ fees or
depositors.
gifts, donation subsidies or other forms of
philanthropy, to the accomplish-ment of the
DONOR’S TAXATION purposes enumerated in its Articles of
Definition–DONATION is an act of liberality whereby Incorporation.
a person disposes gratuitously of a thing or a right in
3. P250,000 per year
favor of another who accepts it.
Donor’s tax is a tax on the privilege to transmit Exempt under special law – Donation to
property between two or more persons who are living 1. Rural Farm School
at the time of the donation; tax shall apply whether 2. People’s Television Network, Inc.
the transfer is in trust or otherwise, whether the gift is 3. People’s Survival Fund
direct or indirect. 4. Aurora Pacific Economic Zone and Freeport
Authority
Formula in computing Donor’s Tax: 5. Girl Scouts of the Philippines
First donation during the year: 6. Philippine Red Cross
Gross Gift Pxx 7. Tubbataha Reefs Natural Park
Less: Deduction xx 8. National Commission for Culture and the Arts
Net gift xx 9. Philippine Normal University
Less: Exemption 250,000 10. University of the Philippines
Taxable xx 11. National Water Quality Management Fund
x Tax rate 6% 12. Philippine Investors Commission
Donor’s tax due xx 13. Ramon Magsaysay Award Foundation
14. Philippine-American Cultural Foundation
Succeeding donations during same year: 15. International Rice Research Institute
Gross Gift Pxx 16. Task Force on Human Settlements
Less: Deduction xx 17. National Social Action Council
Present net gift xx 18. Aquaculture Department of the Southeast Asian
Add: Prior net gifts during the year xx Fisheries Development Center
Total net gifts xx 19. Development Academy of the Philippines
Less: Exemption 250,000 20. Integrated Bar of the Philippines
Taxable amount xx RATE OF TAX: 6% computed on the basis of total
x Tax rate 6% gifts in excess of P250,000 exempt gift made during
Donor’s tax due xx the calendar year.
Less: Tax/es paid during the year xx
Donor’s tax payable xx Donations made by spouses
In case of donation made by husband and wife out of
Composition of gross gifts (same with estate conjugal or community funds:
taxation)
1. Each is donor to the extent of 1/2 of the value of
Properties classified as intangibles within (same the donation.
with estate taxation) 2. If only one spouse signed the deed of donation,
there is only one donor for donor’s tax purposes,
Deductions from gross gifts without prejudice to the right of the other spouse
1. Mortgage on the property donated assumed by to question the validity of the donation.
the donee.
2. Amount specifically provided by the donor as B. Donation to several donees
diminution on the property donated. If the donor had made several donations to different
persons on the same date, the total net gift shall be
CTT EXAMINATION REVIEWER (NOTES) PAGE A - 25

computed together and contained in one donor’s tax the return must be duly machine validated and
return only. stamped received by the AAB to serve as receipt
Transfer for less than adequate consideration of payment.
Where property, other than real property (capital The machine validation shall reflect the amount
asset) is transferred for less than adequate paid, the date of payment and the transaction
consideration in money or money’s worth, the code and the stamp mark shall also show the
amount by which the fair market value exceeded the name of the bank, branch code, teller’s code and
value of consideration shall be deemed a gift subject teller’s initial.
to donor’s tax.
The AAB shall also issue an official receipt or
A sale, exchange, or other transfer of property made bank debit advice or credit document, whichever
in the ordinary course of business (a transaction is applicable, as additional proof of payment.
which is bona fide, at arm’s length, and free from any
donative intent) will be considered as made for an Surcharges (ad valorem penalty)
adequate and full consideration in money or money’s 50% False or fraudulent return is willfully filed.
worth). Willful neglect to file the return on time.
25% Failure to file any return and pay the tax due
Valuation of property – at fair market value at the thereon.
time of gift (see estate tax). If the return is not filed with the proper
OTHER MATTERS: internal revenue officer.
1. Donations between spouses - Every donation or Failure to pay on time the deficiency tax
grant of gratuitous advantage, direct or indirect, shown in the notice of assessment.
between the spouses during the marriage shall
Interest for failure to pay tax per return on time
be void, except moderate gifts which the spouses
RATE – 12% per annum, or such higher rate as may
may give each other on the occasion of any
be prescribed by rules and regulations, computed
family rejoicing.
from the date prescribed for payment until the
The prohibition shall also apply to persons living amount is fully paid.
together as husband and wife without a valid
Attachments
marriage.
1. Proof of claimed tax credit, if applicable
2. Other persons who cannot donate property to
each other (Void donations) 2. Certified true copies of OCT/TCT/CCT (front and
a. Those made between persons who were guilty back pages) of the donated property, if applicable.
of adultery or concubinage at the time of 3. Certified true copies of the latest tax declaration of
donation. lot and/or improvement, if applicable.
b. Those made between persons found guilty of
the same criminal offense in consideration 4. “Certificate of No Improvement” issued by the
thereof; and Assessor’s Office where the donated real
c. Those made to a public officer or his wife, property/ies have no declared improvements, if
descendants and ascendants, by reason of applicable.
his office.
5. Proof of valuation of shares of stocks at the time
Tax credit for donor’s tax paid to a foreign of donation, if applicable.
country.
6. Proof of valuation of other types of personal
1. Who can claim? Only citizen or resident alien properties, if applicable.
donor.
2. Limitations on tax credit: 7. Proof of claimed deductions, if applicable.

1st limitation 8. Copy of tax debit memo used as payment, if

applicable.
Net gift per foreign country x Phil tax
Total net gift
nd
2 limitation
Net gift all foreign countries x Phil tax
Total net gift
Filing and payment
1. Filing – within 30 days from date of gift
2. Payment – at the time the return is filed.
3. Place of filing – Authorized Agent Bank (AAB),
RDO, Collection Agent, or duly authorized
Treasurer of the City or Municipality where the
donor was domiciled at the time of gift.
If there is no legal residence in the Philippines,
with the Office of the Commissioner or with the
Philippine Embassy or Consulate in the country
where he is domiciled at the time of the transfer.
Returns filed with the Philippine Embassy or
consulate shall be paid thereat.
4. VALIDATION OF TAX RETURN – Where the
return was filed with an AAB, the lower portion of