Estate and Trust
a. Definition of estate
b. Definition of trust
Estate refers to the mass of all property, rights and obligations of a
person which are not extinguished by his death.
Trust is a right on property, real or personal, held by one party for the
benefit of another.
8. Important Pointers on Estates and Trusts
a. Estate as a taxpayer
An estate is a taxpayer if it is under settlement or administration.
b. Trust as a taxpayer
1) A trust is a taxpayer if under the terms of the trust the fiduciary must
accumulate the
income.
2) A trust is a taxpayer if under the terms of the trust the fiduciary may
accumulate or
distribute the income, in his discretion.
c. When is the income
1) If under the term of the trust the title to any part of the corpus or
of the trust taxable to
principal of the trust
the grantor?
may be revested to the grantor, the income of the part of the corpus
or principal shall
be taxable to the grantor.
2) If under the term of the trust the income of the trust shall be applied
for the benefit of the grantor, the income that shall be applied for the
benefit of the grantor shall be taxable to the grantor.
d. Treatment of income When an estate or a trust is a taxpayer, a distribution of the year’s
distribution of the
income to an heir or beneficiary is:
year’s
1) A special item of deduction for the estate/trust;
income to heir or
2) A special item of income to the heir/beneficiary.
beneficiary
e. Computation of
Gross income
xxx xxx
taxable income of
Less: Deductions
the estate or trust
Business expenses
xxx
Distribution of year’s income to the heir or beneficiary
xxxxxx
Net income before exemption
xxx
Less: Personal exemption
xxx
Taxable net income
xxx
Tax due [Sec. 24 (A)]
xxx
Several Trusts with a Common Grantor and a Common Beneficiary
a. Filing of separate
A separate return will have to be filed for each trust by the respective
returns
trustee or fiduciary.
b. Consolidation of the
The separate returns filed by the different fiduciaries shall be
separate returns
consolidated in the BIR allowing against the consolidated taxable income
one exemption only of P50,000.
c. Consolidated income
An income tax shall be computed on the consolidated income.
tax
d. Apportionment of the The tax computed on the consolidated income shall be apportioned to
consolidated income the different trusts, such that each trust shall have a share in the income
tax
tax on consolidated income.
to the different trusts The format of computation follows:
e. Tax payable of each
trust
Taxable income of the trust x Consolidated income tax
Taxable income of all trusts
Each trust shall pay an income tax still due computed as follows:
Income tax apportioned to the trust
xxx
Less: Income tax already paid by the fiduciary of the trust
xxx
Income tax still due
xxx
Filing of Returns and Payment of Tax (Estate and Trust)
a. Who shall file the
The following persons acting in any fiduciary capacity shall file the income
return?
tax return for an estate or trust:
1) Guardians;
5) Receivers;
2) Trustees;
6) Conservators;
3) Executors;
7) All other persons or corporations acting as
fiduciary.
4) Administrators;
b. Gross income is
The return shall be filed if the estate or trust has a gross income of P50,000
P50,000 or more
or more during the taxable year.
c. In case of two or
In case of two or more joint fiduciaries, return filed by one of them shall be
more
a sufficient compliance with the requirements of the Tax Code.
joint fiduciaries
14. Income Tax Returns (Individuals, Estates and Trusts)
a. Pure compensation
The income tax return shall be filed on or before April 15 of the
income earner
succeeding year.
b. Income from business Quarterly declarations:
or practice of
First quarter
April 15
profession
Second quarter
August 15
Third quarter
November 15
Final adjusted return
April 15 of the succeeding year
c. Place of filing of
return
d. Payment of tax
1) Authorized agent banks;
2) Revenue District Officer;
3) Collection agent;
4) Duly authorized city or municipal Treasurer in which the taxpayer has
his legal
residence or principal place of business.
The tax is paid as the return is filed.
ESTATE TAX RATES
There shall be levied, assessed, collected and paid upon the transfer of the net estate of every
decedent, whether resident or non-resident of the Philippines, a tax at the rate of six percent
6% based on the value of such net estate.
TAXABILITY OF THE ESTATE IN GENERAL
1. Classification of a Decedent
a. Resident Citizen
b. Non-Resident Citizen
c. Resident Alien
d. Non-Resident Alien