Inherent Powers of the state:
1.) Taxation
- Raises revenue to defray the necessary expenses of the
government
2.) Police Power
-Enact such laws to protect the well being of the people
3.) Eminent Domain
-power of the state or those to whom delegated to take private
property for public use upon paying the owners a just
compensation
Inherent Powers of the State:
Distinctions
Taxation
Police Power
Eminent Domain
Purpose
Support of the
government
Promote and protect
the general welfare
For public purpose
Authorized
Government
Government
Government, public
services, and public
utilities
Amount of imposition
Unlimited
(For government
Needs)
Limited
(To cover necessary
expenses of
regulation)
None
(Government pays
the owner with just
compensation)
Which of the following may not raise
money for the government?
A.) Police Power
B.) Power of taxation
C.) Privatization of governments capital assets
D.) Eminent Domain
Taxation
•
As a state power, a legislative process, and a mode of cost
distribution
Primary Purpose
-Raise Revenue for the government to function
Secondary Purpose
-Compensatory (Reduce inequality)
-Sumptuary (for social and general welfare of the people)
Scope of power of taxation
•
Comprehensive, plenary, unlimited and supreme
•
Subject to inherent and constitutional limitations
Interpretation of tax laws in case of
doubt or ambiguity
•
Tax statues are construed strictly against the government
and liberally in favor of the taxpayer
•
Tax exemption are construed strictly against the
taxpayer claiming tax exemption and liberally in favor
of the government
Classification of taxes according to subject matter
A.) Personal Tax- Tax of fixed amount imposed on individuals, whether citizens
or not, residing within a specified territory to their property or occupation in
which they he/she may engaged (e.g., Community Tax)
B.) Property Tax – Imposed on property whether real or personal. (e.g., Real
property Tax)
C.) Excise Tax/ Privilege tax- Any tax which does not fall within the
classifications of a poll tax or property tax (e.g., Income tax, business tax, DST,
and transfer taxes)
Note: This is different from excise tax
imposed on specific goods
Ordinary and Capital Assets
Ordinary Assets – Assets used in business, such as real property used in trade or
business and etc.
Section 39 A(1), NIRC
Capital Assets – An Asset of the taxpayer that is not an ordinary asset.
Succession and Transfer
Taxes
KHALID M. SUAIB
INTRODUCTION
Under Article. 712 (Civil Code)
Different modes of acquiring Ownership:
1.) Occupation
2.) Intellectual Creation
3.) Law
4.) Donation
5.) Tradition
6.) Contract
7.) Prescription
8.) Succession
Kinds of Transfer
1.) Gratuitous/ Unilateral
- one that neither imposes burden nor requires consideration from
transferee or recipient. Involves a transfer of property without any
expectation of repayment.
-(Subject to transfer taxes: Estate taxes and donors taxes)
2.) Onerous/ Bilateral
-The transferee gives consideration in return for the property or rights
received.
-(Subject to business taxes)
Types of transfer taxes
1.) Estate Tax (donation mortis causa)
-Gratuitous transfer that takes effect at the time of death of
the donor
2.) Donors Tax (donation inter vivos)
-Gratuitous transfer that takes effect during the lifetime of
both donor and donee
Succession
Succession is 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. (Article 774 of Civil Code)
What tax is imposed on
the right to transmit
properties at death?
A.) Income Tax
B.) Business Tax
C.) Donors Tax
D.) Estate Tax
When are the rights to
succession transmitted?
A.) The moment the notice is given to the heirs
B.) The moment the estate tax return is filed
C.) The moment the properties and rights are
delivered to the heirs
D.) The moment of death of the decedent
When are the rights to
succession transmitted?
The rights to the succession are transmitted from the
moment of the death of the decedent. (Article 777 of
civil code)
-notwithstanding the postponement of the actual
possession or enjoyment of the estate of the
beneficiary
Nature of transfer of taxes
- Transfer tax is an excise tax
- Subject matter is the privilege of the transferor to
gratuitously transfer property (Right to transmit)
- Even if the transfer tax is based on the net estate
or net gifts, it shall not be construed as property
tax.
- Estate tax is an excise tax imposed on the act of
passing the ownership of the property at the time
of death and not on the property of right.
The Law that governs the
imposition of estate tax
- Estate tax is governed by the statute in force at the time of
death of the decedent
- Succession (not the tax aspects) is governed by the civil
code.
- Upon the death of the decedent, succession takes place
and the estate tax accrues immediately.
Elements of Succession
A.) Decedent- general term applied to the person whose
property is transmitted through succession, whether or not
he left a will.
- If he left a will, he is also called the testator.
B.) Inheritance (Estate)- Refers to all property, rights and
obligation of a person which are not extinguish by death
c.) Successor/ Heir- person called to succession either by
provision of will or by operation of law.
Executor and Administrator
Executor- designated in the will to carry out the provisions of
the decedents will.
Performs fiduciary duty such as taking care of the decedent's
estate before the final disposition to the heir.
Administrator – Appointed by the court and performs the
same duty as executor.
Successors
A.) Heir- person called to the succession either by the
provision of a will or by operation of law.
-Succeed by Universal Title.
B.) Legatee- Succeed by a particular title on Personal
properties.
C.) Devisee- Succeed by a particular title on Real properties
Michael Kahnwald died in
June 21, 2019. In his will, he
transferred his Truck with plate
number ABC 1234 to his son
named Jonas Kahnwald. Jonas
is a:
A.) Heir
B.) Legatee
C.) Devisee
D.) Time traveler
Michael Kahnwald died in June
21, 2019. In his will, he
transferred his land located in
Batangas to his other son named
Khalid. Khalid is a:
A.) Heir
B.) Legatee
C.) Devisee
D.) Pogi and Mabait
Kinds of Succession
1.) Testamentary or testate succession- Designation of heir
made in a will.
2.) Intestate Succession- Effected by operation of law (Since
there is no will provided or the will is void)
3.) Mixed Succession- Partly testamentary and intestate
9 Causes of Intestate Succession
1.) A person dies without a will
2.) The will is void
3.) When the will does not institute an heir
4.) Partial institution of heir
5.) When the heir instituted is not capable of succeeding
6.) Non-fulfillment of the suspensive condition attached to the institution of heir
7.) Fulfillment of Resolutory condition
8.) Preterition (omission of one, some, or all of the compulsory heirs in the direct
line, whether living at the time of the execution of the will or born after the
death of the testator, shall annul the institution of heir
9.) Repudiation of instituted heir
Classification of heirs:
A.) Compulsory Heirs- They inherit with or without a will. They cannot be
deprived by the testator of their legitime except by disinheritance properly
affected.
I. Primary
II. Secondary
III. Concurring
B.) Voluntary Heirs- Inherit only if they are in the will. They can only inherit from
the free portion and their share is determined by the last will and testament.
C.) Legal or intestate heirs- Those succeed to the estate of the decedent by
operation of law.
Decedent’s Estate
A.) LEGITIME - is that part of the testator’s property which he cannot
dispose of because the law has reserved it for certain heirs who are,
therefore, called compulsory heirs (Article 886, Civil Code)
B.) Free Portion - Is that part of the whole estate which the testator
could dispose of freely through written will irrespective of their
relationship to the recipient. Portion or value after deducting the
legitime of the compulsory heirs.
Kinds of Compulsory Heirs
I.
Primary- Those who have precedence over and exclude other compulsory
heirs.
Example: (Legitimate Children and descendants)
II. Secondary- Those who succeed only in the absence of primary compulsory
heirs
Example: (Legitimate Parents and ascendants)
III. Concurring- Those who succeed together with primary and secondary
Example (Surviving Spouse and illegitimate children)
Note: Siblings are not compulsory but they may be voluntary heirs.
Composition of Gross Estate
Legitime - reserved
for compulsory heirs
Compulsory Heirs
Free Portion - portion that
the testator can freely
disposed of.
Compulsory Heirs and/or voluntary
heirs
• As provided in the last will and
testament
• In absence of will, distributed in
order of priority (Next slide)
Order of Intestate succession
1.) Legitimate children or descendants
2.) Legitimate Parents or ascendants
3.) Illegitimate children or descendants
4.) Surviving Spouse
5.) Brothers and sisters, nephews and nieces
6.) Other collateral relatives within the 5th
degree
7.) State of the government
Collateral Relatives
Consanguinity- Relation of persons descending from the same stock or
common ancestors.
Lineal Consanguinity- subsists between persons whom one is descended in
a direct line from the other
Collateral Consanguinity- Subsist between two persons who have the same
ancestors but who do not ascend or descend on from the other
Affinity- Connection existing in because of marriage.
Wills
Will
•
is an act whereby a person is permitted, with the
formalities prescribed by law, to control to a certain
degree the disposition of his estate, to take effect after
his death. (Art. 783 of CC)
•
The making of a will is a strictly personal act; it cannot
be left in whole or in part to the discretion of a third
person, or accomplished through the instrumentality
of an agent or attorney. (Art.784 of CC)
Will
•
The making of a will is a strictly personal act; it cannot be left in
whole or in part to the discretion of a third person, or
accomplished through the instrumentality of an agent or
attorney. (Art.784 of CC)
•
The testator may entrust to a third person the distribution of
specific property or sums of money that he may leave in general
to specified classes or causes, and also the designation of the
persons, institutions or establishments to which such property
or sums are to be given or applied. (Article 786 of CC)
Persons prohibited by law to
make a will
1. Persons of either sex under eighteen years of age
cannot make a will. (Minor)
2. In order to make a will it is essential that the testator
be of sound mind at the time of its execution. (Not in
sound mind)
The law presumes that every person is of
sound mind, in the absence of proof to
the contrary
•
Burden of proof is the one who opposes it
•
but if the testator, one month, or less, before making
his will was publicly known to be insane, the person
who maintains the validity of the will must prove that
the testator made it during a lucid interval.
Summary on the Validity of
wills
❑ Strictly Personal
❑ Should not be a minor
❑ Should be written
❑ The testator should be in a sound mind
•
Supervening incapacity does not invalidate an effective
will, nor is the will of an incapable validated by the
supervening of capacity.
•
A married woman may make a will without the
consent of her husband, and without the authority of
the court.
• A married woman may dispose by will of all her
separate property as well as her share of the conjugal
partnership or absolute community property.
Kinds of Wills
A.) Notarial/ Ordinary/ Attested Will- Executed in
accordance with the formalities of the New Civil Code.
B.) Holographic Will- Purely entirely in handwritten and
signed by the testator
Notarial Will
• must be in writing and executed in a language or dialect
known to the testator
• must be subscribed at the end thereof by the testator
himself or by the testator’s name written by some
other person in his presence, and by his express
direction
• Subscribed by three or more credible witnesses in the
presence of the testator and of one another.
6 Qualifications to be a Witness
A.
B.
C.
D.
E.
F.
Person of sound mind
Not a minor (18 years of age or more)
Must not be blind, deaf and mute
Must be able to read and write
Must be domiciled in the Philippines
Must not have been convicted of falsification of a
document, perjury, or false testimony.
Holographic Will
•
must be entirely handwritten, dated and signed by the
testator himself.
•
Need not be witness.
(Note: Need witness in probate to prove the handwriting)
•
in case of any insertion, cancellation, erasure or alteration in a
holographic will, the testator must authenticate the same by
his full signature.
Claudia Teidemann has only one daughter named
Regina and she wanted to give her inheritance to her.
She decided to write a will that is entirely handwritten,
dated and signed by herself. What type of will is this?
A.) Notarial Will
B.) Holographic Will
C.) Photographic Will
D.) Will Smith
Mike Wheeler wants to create a will giving a portion of his
inheritance to Jane Hooper. Instead of writing, he decided to
film himself stating his intentions in distributing his estate.
In the video, his friends Dustin, Lucas and Steve were there to
witness his will. What type of will is this?
A.) Notarial Will
B.) Holographic Will
C.) Not a valid Will
D.) Will Byers
Codicil
- is a supplement or addition to a will, made after the execution
of a will and annexed to be taken as a part thereof, by which
any disposition made in the original will is explained, added to,
or altered.
- In order that a codicil may be effective, it shall be executed as
in the case of a will.
Probate of a will
- Court procedure by which a will is proved to be valid or invalid
- In the probate of a holographic will, it shall be necessary that at least
one witness who knows the handwriting and signature of the testator
explicitly declare that the will and the signature are in the handwriting
of the testator.
- If the will is contested, at least three of such witnesses shall be required
- If there are no competent witness, the court may deem it necessary to
have an expert testimony.
Probate of a will
- The validity of a will as to its form depends upon the
observance of the law in force at the time it is made. (Art.795
CC)
- Intestate Proceeding= Absence of a last will and testament
Foreign Wills
- The will of an alien who is abroad produces effect in the Philippines if
made with the formalities prescribed by the law of the place in which he
resides, or according to the formalities observed in his country, or in
conformity with those which this Code prescribes.
-
will made in the Philippines by a citizen or subject of another country,
which is executed in accordance with the law of the country of which he
is a citizen or subject, and which might be proved and allowed by the
law of his own country, shall have the same effect as if executed
according to the laws of the Philippines.
Foreign Wills
-
Wills, that are prohibited in the Civil code, executed by Filipinos in a
foreign country shall not be valid in the Philippines, even though
authorized by the laws of the country where they may have been
executed.
- When a Filipino is in a foreign country, he is authorized to make a will in
any of the forms established by the law of the country in which he may
be. Such will may be probated in the Philippines.
Revocation of wills and
testamentary dispositions
- A will may be revoked by the testator at any time before his death. Any
waiver or restriction of this right is void.
- A revocation done outside the Philippines, by a person who does not
have his domicile in this country, is valid when it is done according to the
law of the place where the will was made, or according to the law of the
place in which the testator had his domicile at the time; and if the
revocation takes place in this country, when it is in accordance with the
provisions of this Code.
Modes of revoking will
-
No will shall be revoked except in the following cases.
-
A.) By implication of law; or (Ex: when an heir commits actions considered as
unworthiness, Art. 1032 CC)
-
B.) By some will, codicil, or other writing executed as provided in case of wills; or
-
C.) By burning, tearing, cancelling, or obliterating the will with the intention of
revoking it, by the testator himself, or by some other person in his presence, and by
his express direction. If burned, torn, cancelled, or obliterated by some other person,
without the express direction of the testator, the will may still be established, and the
estate distributed in accordance therewith, if its contents, and due execution, and the
fact of its unauthorized destruction, cancellation, or obliteration are established
according to the Rules of Court.
Modes of revoking will
-
Subsequent wills which do not revoke the previous ones in an express manner, annul
only such dispositions in the prior wills as are inconsistent with or contrary to those
contained in the later wills
-
A revocation made in a subsequent will shall take effect, even if the new will should
become inoperative by reason of the incapacity of the heirs, devisees or legatees
designated therein, or by their renunciation.
-
A revocation of a will based on a false cause or an illegal cause is null and void
-
If after making a will, the testator makes a second will expressly revoking the first, the
revocation of the second will does not revive the first will, which can be revived only by
another will or codicil.
The will shall be disallowed in
any of the following cases
-
1) If the formalities required by law have not been complied with;
-
(2) If the testator was insane, or otherwise mentally incapable of making a will, at the time of its
execution;
-
(3) If it was executed through force or under duress, or the influence of fear, or threats;
-
(4) If it was procured by undue and improper pressure and influence, on the part of the
beneficiary or of some other person;
-
(5) If the signature of the testator was procured by fraud;
-
(6) If the testator acted by mistake or did not intend that the instrument he signed should be his
will at the time of affixing his signature thereto.
Institution of Heir
-Institution of heir is an act by virtue of which a testator
designates in his will the person or persons who are to succeed
him in his property and transmissible rights and obligations.
Disinheritance
- A compulsory heir may, in consequence of disinheritance, be deprived
of his legitime, for causes expressly stated by law.
- Not applicable to voluntary heirs
-
Disinheritance can be affected only through a will wherein the legal
cause therefore 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
-
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.
9 Requisites of a Valid Disinheritance
A.) Cause must be expressly stated by law;
B.) Effected only through a valid will;
C.) Cause must be certain and true;
D.) Unconditional;
E.) Total or complete; (There is no partial Disinheritance)
F.) Cause must be stated in the will itself;
G.) Will must not have been revoked;
H.) For an existing cause; and
I.) The heir disinherited must be designated in such a manner that there
can be no doubt as to his identity
Grounds for disinheritance children and
descendants, legitimate as well as illegitimate
-
A.) 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;
-
B.) 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;
-
C.) When a child or descendant has been convicted of adultery or concubinage with the spouse of the testator;
-
D.) 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;
-
E.) Maltreatment of the testator by word or deed, by the child or descendant;
-
F.) When a child or descendant leads a dishonorable or disgraceful life;
-
G.) Conviction of a crime which carries with it the penalty of civil interdiction.,
Grounds for disinheritance of parents or ascendants,
whether legitimate or 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;
-
(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 refusal to support the children or descendants without justifiable cause;
Grounds for disinheritance of a 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.
Subsequent Reconciliation
Subsequent reconciliation between the offender and the offended person
deprives the latter of the right to disinherit, and renders ineffectual any
disinheritance that may have been made. (ARTICLE 922 of CC)
Right of Representation
-
is a right created by fiction of law, by virtue of which the representative is raised to
the place and the degree of the person represented, and acquires the rights which
the latter would have if he were living or if he could have inherited.
-
The right of representation allows a descendant to step into the shoes of a
deceased, incapacitated or disinherited relative and inherit their share.
-
The right of representation takes place in the direct descending line, but never in
the ascending.
Right of Representation
- Representation may arise in either:
A.) Death
B.) Incapacity
C.) Disinheritance
- The representative or representatives shall not inherit more than what
the person they represent would inherit, if he were living or could
inherit.
- Heirs who repudiate their share may not be represented
Gross Estate
Characteristics of Estate Tax
A.) Proportional- Fixed Rate (6%)
B.) National- Imposed by the National government
C.) Excise - Impose upon the privilege of transferring property or
shifting economic benefits.
D.) Ad Valorem- Based on the fair market value at the time of death
E.) Direct - Amount to be paid by the person liable to pay.
Basic Formula of Unmarried
Decedent
Gross Estate
Less: Deductions
Net Taxable Estate
Estate Tax rate
Estate Tax due
Estate Tax credit
Estate Tax payable
XXX
(XXX)
XXX
6%
XXX
(XXX)
XXX
FORM 1801 Page 1
FORM 1801 Page 2
Justification for the imposition
of Estate tax
1.) Benefit Received Theory- in exchange for the state's assistance in distributing
the decedent's inheritance and for the benefit it brings to the estate and the
heirs
2.) Privilege or State Partnership Theory - estate tax represents the share of the State as
a passive or silent partner in the accumulation of property by the decedent
3.) Ability to pay Theory-receipt of inheritance creates an ability to pay and thus to
contribute to government income
4.) Redistribution of wealth Theory- lessen the excessive concentration of wealth in
society, which is a result of receiving an inheritance.
Classification of decedents
The decedent may be classified into:
Gross Estate
• Citizen,
• Resident alien; or
• Non-resident alien.
Both: 1.) Property (Real or personal) wherever situated
2.) Intangible personal property wherever situated
1.)Real property situated in the Philippines
2.) Tangible property situated in the Philippines
3.) Intangible property with situs in the Philippines, UNLESS
excluded on the basis of reciprocity
Tangible and Intangible Property
A.) Tangible Property- a physical asset that a business owns and can be
touched, moved, or used. (Examples: Car, building, etc.)
B.) Intangible Property- a non-physical asset that has value to a
business over time. Identifiable non-monetary asset without physical
substance. (Examples: Intellectual property, stocks, etc.)
Concept of reciprocity
➢ Only applicable to Non-resident alien
➢ There is reciprocity when:
o The decedent, at the time of the donation was a citizen and resident of a
foreign country which at the time of the death did not impose transfer
tax on intangible personal property of the citizens of the Philippines not
residing in that foreign country
o The foreign country described in the preceding paragraph 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
Concept of reciprocity
➢ If there is reciprocity, the intangibles personal property shall be
excluded in the computation of gross gift
➢ Assume there is no reciprocity unless stated. ( If problem is silent as
to reciprocity, assume no reciprocity)
Intangible Property with situs within the Philippines
1.) Franchise Which must be exercised within 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 corporation 85% of the
business of which is located in the Philippines.
4.) Shares, obligations or bonds issued by a foreign corporation if such shares,
obligations or bonds have acquired a business situs in the Philippines; and
5.)Shares or rights in any partnership, business or industry established in the
Philippines
Situs of tangible and intangible properties
Property
Situs
❖ Real property and intangible personal
property
Location of the property
❖ Shares, franchise, copyright and the
like
Place where the intangible is exercised
regardless of where the corresponding
certificate is stored
❖ Receivables
Residence of the debtor
❖ Interest Income
Generally considered sourced from
where the debtor is located or resides
❖ Bank deposit
Location of the depositary bank
Situs of tangible and intangible properties
Situs
House and lot, Makati City
Within
House and lot, Japan
Without
Car- Philippines
Within
Car- USA
Without
Bonds Philippines
Within
Bonds, Japan
Without
Shares of stock of domestic
Corporation
Within
Shares of stock of Foreign
Corporation
Without
Shares of stock of Foreign
Corporation (90% of its
operation in Philippines)
Within
Shares of stock of Foreign
Corporation (80% of its
operation in Philippines)
Without
Resident decedent
NRA- No reciprocity
NRA- With reciprocity
Situs of tangible and intangible properties
Situs
Resident decedent
NRA- No reciprocity
NRA- With reciprocity
House and lot, Makati City
Within
✓
✓
✓
House and lot, Japan
Without
✓
✘
✘
Car- Philippines
Within
✓
✓
✓
Car- USA
Without
✓
✘
✘
Bonds Philippines
Within
✓
✓
✘
Bonds, Japan
Without
✓
✘
✘
Shares of stock of domestic
Corporation
Within
✓
✓
✘
Shares of stock of Foreign
Corporation
Without
✓
✘
✘
Shares of stock of Foreign
Corporation (90% of its
operation in Philippines)
Within
✓
✓
✘
Shares of stock of Foreign
Corporation (80% of its
operation in Philippines)
Without
✓
✘
✘
A non resident alien decedent left the following estate:
• House and lot- Hongkong, inherited before marriage
• Car, acquired during marriage in Cebu
• Shares of stocks issued by a foreign corporation, 20% of its
operation is in the Philippines
• Bank Deposit, with the PNB branch in New York, New York
representing income earned during marriage
• Shares of stocks issued by the PLDT group of companies; a
corporation organized under the Philippines laws.
• 5 year, 12% promissory note, receive 2 years ago, during
marriage. The debtor is a resident of Q.C.
P15,000,000
P1,500,000
P250,000
P500,000
P500,000
P500,000
A non resident alien decedent left the following estate:
• House and lot- Hongkong, inherited before marriage
• Car, acquired during marriage in Cebu
• Shares of stocks issued by a foreign corporation, 20% of its
operation is in the Philippines
• Bank Deposit, with the PNB branch in New York, New York
representing income earned during marriage
• Shares of stocks issued by the PLDT group of companies; a
corporation organized under the Philippines laws.
• 5 year, 12% promissory note, receive 2 years ago, during
marriage. The debtor is a resident of Q.C.
SITUS
Without
Within
Without
Without
Within
within
Assuming NO RECIPROCITY, the value of the estate:
• Car, acquired during marriage in Cebu
• Shares of stocks issued by the PLDT group of companies; a
corporation organized under the Philippines laws.
• 5 year, 12% promissory note, receive 2 years ago, during
marriage. The debtor is a resident of Q.C.
• Interest Income (500,000 * 12% *2)
GROSS ESTATE
P1,500,000
P500,000
P500,000
P120,000
P2,620,000
There is Reciprocity, the value of the estate:
• Car, acquired during marriage in Cebu
GROSS ESTATE
P1,500,000
P1,500,000
A Resident citizen decedent left the following estate:
• House and lot in Dubai
• Vacant lot in Cebu
• Shares of stocks issued by a Domestic Corporation , 60% of
its operation is in the Philippines
• Shares of stocks issued by a Foreign Corporation , 70% of its
operation is in the Philippines
.
• Car in Davao
What is the gross estate?
P1,000,000
2,000,000
100,000
200,000
500,000
A Resident citizen decedent left the following estate:
•
•
•
•
•
SITUS
P1,000,000 w/out
House and lot in Dubai
2,000,000 W/in
Vacant lot in Cebu
W/in
Shares of stocks issued by a Domestic Corporation , 60% of 100,000
its operation is in the Philippines
w/out
Shares of stocks issued by a Foreign Corporation , 70% of its 200,000
operation is in the Philippines
.
500,000
W/in
Car in Davao
GROSS ESTATE
All of it is subject
P3,800,000
A Resident Alien decedent left the following estate:
•
•
•
•
•
SITUS
P1,000,000 w/out
House and lot in Dubai
2,000,000 W/in
Vacant lot in Cebu
W/in
Shares of stocks issued by a Domestic Corporation , 60% of 100,000
its operation is in the Philippines
w/out
Shares of stocks issued by a Foreign Corporation , 70% of its 200,000
operation is in the Philippines
.
500,000
W/in
Car in Davao
GROSS ESTATE
Same as Resident citizen
P3,800,000
A Non Resident Alien decedent left the following estate:
•
•
•
•
•
SITUS
House and lot in Dubai
P1,000,000 w/out
Vacant lot in Cebu
2,000,000 W/in
Shares of stocks issued by a Domestic Corporation , 60% of 100,000
W/in
its operation is in the Philippines
Shares of stocks issued by a Foreign Corporation , 70% of its 200,000
w/out
operation is in the Philippines
.
Car in Davao
500,000
W/in
GROSS ESTATE (2,000,000 + 100,000 +500,000)
P2,600,000
Because it is Non- Resident Alien, only those within (Assume no reciprocity)
A Non Resident Alien decedent left the following estate:
With Reciprocity
SITUS
• House and lot in Dubai
P1,000,000 w/out
• Vacant lot in Cebu
2,000,000 W/in
• Shares of stocks issued by a Domestic Corporation , 60% of 100,000
W/in
its operation is in the Philippines
• Shares of stocks issued by a Foreign Corporation , 70% of its 200,000
w/out
operation is in the Philippines
.
• Car in Davao
500,000
W/in
GROSS ESTATE (2,000,000 +500,000)
P2,500,000
If with reciprocity, remove those intangible personal property and include only
tangible personal property within
Valuation of Gross Estate
• All Properties whether tangible or intangible are value or appraised as at
the time of death of the decedent for estate taxation purposes
A.) In general
B.) Real Property
C.) Personal Property
Fair market Value at the time of death
The HIGHER value between
1.) FMV determined by the commissioner (Zonal Value),
and
2.) FMV shown in the schedule of values fixed by
the provincial and city assessors (Assessed Value) .
GR: Fair market value at the time of death
*Recently Purchase- Purchase Price
*Not recently purchased- Pawn Value X 3
Valuation of Gross Estate
D.) Shares of stocks/ securities
1.)LISTED/ TRADE IN STOCK EXCHANGE
- FMV shall be the arithmetic mean between the highest and lowest
quotation at a date nearest to the date of death if none is available on the
date itself
2.) UNLISTED/ NOT TRADE IN STOCK EXCHANGE
a.)Common Shares- Book Value of per share of the issuing corporation
b.) Preference Shares- Par value of preference share
Valuation of Gross Estate
E.) Units of participation in any association, recreation, or amusement club
- Shall be the bid price nearest the date of death published in any newspaper
or publication of general circulation
F.) Right to usufruct, use or habitation, and annuity
- In accordance with the latest Basic Standard Mortality Table, to be
approved by the secretary of finance, upon the recommendation of insurance
commissioner
Practice problems
Situation A:
Peter Parker brought a truck with a purchase price of P3,000,000. He bought
the car on installment on the following terms: down payment of P500,000 and
annual installment of P700,000 for four years. On his way home he run over an
approaching tank and died. On the date of his death the fair value of the truck
is P2,000,000.
Answer: P2,000,000
Practice problems
Situation B:
Peter Parker recently brought a truck with a purchase price of P3,000,000. He
bought the car on installment on the following terms: down payment of
P500,000 and annual installment of P700,000 for four years. On his way home
he run over an approaching tank and died.
Answer: P3,000,000
Practice problems
Situation C:
Personal Property not recently purchased, pawn value is P300,000.
Answer: P900,000 (P300,000 X3)
Practice problems
Situation D:
A decedent devised to his daughter a 1000 square meter lot in Cebu City with
the following valuation:
Fair Value as determined by city assessors
Zonal Value as determined by the CIR
Fair Value determined by Independent Assessors
P20,000/sqm
17,000,000
18,500,000
Answer: P20,000,000 (20000X 1000)
( Higher Between Zonal and Assessed Value)
*Ignore the Fair value determined by independent assessors
Practice problems
Situation E:
Real Property
Zonal Value, 6 months before the death
Assessed Value, time of death
Answer: 1,200,000
P1,700,000
1,200,000
Practice problems
Situation F:
Decedent owns 100,000 ordinary shares of Beta company at the time of his
death. At that time, Beta company outstanding shares were 1,000,000 with 10
par value and retained earnings amounting to P5,000,000. The shares are not
traded in the stock exchange.
Answer: P1,500,000 (15X 100,000 shares)
𝑇𝑜𝑡𝑎𝑙 𝑆ℎ𝑎𝑟𝑒 ℎ𝑜𝑙𝑑𝑒𝑟𝑠 𝐸𝑞𝑢𝑖𝑡𝑦
Book value per share=
𝑇𝑜𝑡𝑎𝑙 𝑜𝑢𝑡𝑠𝑡𝑎𝑛𝑑𝑖𝑛𝑔 𝑠ℎ𝑎𝑟𝑒𝑠
𝑃10,000,000+𝑃5,000,000
=P15
1,000,000
Practice problems
Situation G:
Decedent left 10,000 Shares. The shares were traded in a local stock exchange.
At the death, the following were available:
Highest Quotation
Lowest Quotation
Book Value
Par Value
P800 per share
P200 per share
P400 per share
P600 per share
Answer: P5,000,000 (10,000 shares X ((800+200/2))
Practice problems CORRECTION
Situation I:
Decedent left 10,000 Common Shares. The shares were not traded in a local
stock exchange. At the death, the following were available:
Book Value
Par Value
Fair market value at time of death
Answer: P4,000,000
P400 per share
P200 per share
P300 per share
Practice problems
Situation H:
Decedent left 10,000 common Shares. The shares were not traded in a local
stock exchange. At the death, the following were available:
Book Value
Par Value
Answer: P4,000,000
P400 per share
P200 per share
Practice problems
Situation I:
Decedent left 10,000 Preference Shares. The shares were not traded in a local
stock exchange. At the death, the following were available:
Book Value
Par Value
Answer: P6,000,000
P400 per share
P600 per share
Exemptions and Exclusions from the gross estate
A.) Exclusions under Section 85 and 104 of the Tax Code
B.) Exclusions under Section 87 of tax code
C.) Exclusions under the special laws
Exclusions under Section 85 and 104 of the Tax Code
A.) Exclusive Property of the surviving spouse
The Gross estate of married decedents:
a.) Exclusive property of the decedent
b.) Common property of the decedent and the surviving spouse
Exclusive property of Husband= Capital
Exclusive property of Wife= Paraphernal
Exclusions under Section 85 and 104 of the Tax Code
B.) Property outside the Philippines if the decedent is a Non-Resident Alien
For Non-resident aliens, only his/her properties situated within then
Philippines are included in gross estate. Properties outside the Philippines are
not included for the gross estate of the Non-Resident Alien
C.) Intangible Personal property in the Philippines of the Non-Resident Alien
subject to reciprocity law
Exclusions under Section 87 of tax code
A.) The Merger of usufruct in the owner of the naked title
B.) The transmission or delivery of the inheritance or legacy by the fiduciary
heir or legatee to the fideicommissary
C.) The transmission from the first heir, legatee or donee in favor of another
beneficiary, in accordance with the desire of the predecessor; and
D.) All bequests, devises, legacies or transfers to social welfare, cultural and
charitable institutions, no part of the net income of which inures to the benefit
of any individual: Provided, however, That not more than thirty percent (30%)
of the said bequests, devises, legacies or transfers shall be used by such
institutions for administration purposes
The Merger of usufruct in the owner of the naked title
• Usufruct grants the right to use, possess and administer property, and to the income,
utility, profits and advantages produced from the property subject to usufruct.
• The Previous decedent gives only the right of usufruct to the current decedent and
names the other beneficiary the owner of naked title.
• The current decedent (Usufructuary) is not considered as the owner of the property.
Upon the death of the current decedent, the usufruct will be merged to the owner of
naked title, the intended beneficiary.
• The naked owners will become full owners at the end of the usufruct’s term or upon
the death of the usufructuary.
The Merger of usufruct in the owner of the naked title
Upon death
merge to the
naked title. Not
subject to Estate
Assigns
Usufruct
Front Man
Oh Il-Nam
Upon Death subject to
Estate tax
Usufructuary
-Benefit the use of property
Seong Gi Hun
Owner of
Naked Title
-Inherit title of ownership
The transmission from the first heir, legatee or donee in favor
of another beneficiary, in accordance with the desire of the
predecessor (Transfer of Special Power of Appointment)
• Special Power of appointment exists when the donee-decendent can appoint
only from a restricted class or designated class of persons other than himself
• Property transferred under special power of appointment should be excluded
from gross estate of the donee of the power because the done decedent only
holds the property in trust
The transmission from the first heir, legatee or donee in favor
of another beneficiary, in accordance with the desire of the
predecessor (Transfer of Special Power of Appointment)
Upon death Not
subject to Estate
Devised property
with condition to
give the property
to 2nd Heir
Hailey
Taylor (1st Heir)
Upon Death subject to
Estate tax
Acting only as
trustee
Khalid (2nd Heir)
The transmission from the first heir, legatee or donee in favor
of another beneficiary, in accordance with the desire of the
predecessor; and
Upon death Not
subject to Estate
Devised property
with condition to
give the property
to 2nd Heir
Willard
Upon Death subject to
Estate tax
Will (1st Heir)
FATHER
Acting as Fiduciary
Jaden (2nd Heir)
SON
Fideicommissary
• In a fideicommissary substitution, there must be a first heir and a second heir whose relationship must be one
degree such that of parent and child, vice versa
All bequests, devises, legacies or transfers to social welfare,
cultural and charitable institutions, no part of the net income of
which inures to the benefit of any individual: Provided,
however, That not more than thirty percent (30%) of the said
bequests, devises, legacies or transfers shall be used by such
institutions for administration purposes
• The value of transfer to social welfare, cultural, and charitable
institutions should be included in the gross estate. An equal
amount, however, may be taken up as a deduction.
Exclusions under the special laws
1. Benefits received from the Government Service Insurance System (GSIS).
2. Benefits received from the Social Security System (SSS)
3. Amounts received from the Philippines Government and the United State
governments from damages suffered during the last war
4. Benefits received from the U. S. Veterans Administration
5. Retirements benefits of officials/employees of a private firm (R.A 4917)
6. Bayanihan to Recover as one Act (Compensation paid to private and
public health workers who have contracted COVID-19)
7. A veteran of his/her shares of stock, common or preferred, with the
Philippine Veterans Bank shall not be subject to Estate Tax (REVENUE
REGULATIONS NO. 5-2022 )
COMPOSITION OF GROSS ESTATE
Sec 85 of the NIRC enumerates the composition of Gross Estate
A. Decedent's Interest
B. Transfer in Contemplation of Death
C. Revocable Transfer
D. Property Passing Under General Power of Appointment
E. Transfers for Insufficient Consideration
F. Claims against the insolvent persons
G. Proceeds of life insurance
Decedents Interest
• To the extent of the interest therein of the decedent at the time of his death
• Person’s estate, the wealth that he would have possessed, enjoyed and
disposed, had he lived.
• As a rule, the interest must exist at the time of the decedent’s death to be
included as part of the gross estate
Addition to Gross Estate: Retirement Benefit of
officials/employees of a private firm (R.A 4917)
• One of exclusions included in special laws
• RA No. 4917 – AN ACT PROVIDING THAT RETIREMENT BENEFITS OF EMPLOYEES OF PRIVATE
FIRMS SHALL NOT SUBJECT TO ATTACHMENT, LEVY, EXECUTION OR ANY TAX WHATSOEVER.
Requirements for R.A 4917
A.) Registered Reasonable Private Benefit Plan
B.)At least 10 years of service
C.) Not less than 50 years of age
D.) Availed only once
• Included in Gross estate at first then we deduct the full amount (special deduction).
Transfer in Contemplation of Death
• To the extent of any interest therein of which the decedent has at any time made a transfer,
by trust or otherwise, in contemplation of or intended to take effect in possession or
enjoyment at or after death, or of which he has at any time made a transfer, by trust or
otherwise, under which he has retained for his life or for any period which does not in fact
end before his death (1) the possession or enjoyment of, or the right to the income from
the property, or (2) the right, either alone or in conjunction with any person, to designate
the person who shall possess or enjoy the property or the income therefrom; except in case
of a bona fide sale for an adequate and full consideration in money or money's worth.
• Disposition of property with the thought of death as controlling motive.
• If the transfer of property is a Bonafide sale for an adequate and full consideration, it is not
a transfer in contemplation of death
Transfer in Contemplation of Death
• An elderly person, realized that due to the nature of his illness and age, death might not be
too far. Motivated by the thought of death, he gratuitously transferred most of his
properties to his children while he is still alive. Should the properties transferred included in
the gross estate of the decedent at the time of death?
• Answer: Yes, The properties were intended to take effect upon his death
Transfer in Contemplation of Death
• Rodrigo, a singer, gratuitously transferred property to Sabrina worth
P100,000 during her lifetime. What amount should be included in
the gross estate at the time of her death?
• Answer: None, Treat as donation inter-vivos
Transfer in Contemplation of Death
• On Jan 25, 2025, due to severe prostate cancer, Egon donated his properties to Claudia, his
daughter. The value of the property at the time of transfer is P500,000. A week after, Egon
died. At the time of his death the fair market value of the properties was increased to
P550,000. What amount should be included in the gross estate of the decedent?
• Answer: P550,000
- Donation mortis causa intended to take effect at the time of death
Revocable Transfer including conditional transfer
• A transfer where the terms of enjoyment of the property may be altered, amended,
revoked, or terminated by the decedent.
• It is sufficient that the decedent had the power to revoke even though he did not exercise
that power.
Conditional Transfer
• Conditional transfer where the attached conditions are not completed by the donee prior
to the donors death
Revocable Transfer including conditional transfer
• For Revocable transfers:
Status
Included in Gross estate?
Exercised the right
Yes
Not exercised the right
Yes
Waived the right
No
Expiration of the right before death
No
Expiration of the right after death
Yes
Revocable Transfer including conditional transfer
• For conditional transfer
Status
Included in gross estate?
The condition is FULFILLED
BEFORE DEATH
NO
The condition is FULFILLED
AFTER DEATH
YES
The condition is NOT
FULFILLED
YES
Waived the condition
NO
Property Passing Under General Power of Appointment
• Power of Appointment refers to the right to designate the person or persons who will
succeed to the property of the prior decedent.
• It can be General or Special
• General power of appointment- when the power of appointment authorizes the done of
the power to appoint any person he/she pleases. (Included in Gross estate of the donee
upon his death)
• Special power of appointment - when the donee can appoint only from a restricted or
designated class of persons other than himself. (Not Included in Gross estate of the donee
upon his death)
The transmission from the first heir, legatee or donee in favor
of another beneficiary, in accordance with the desire of the
predecessor (Transfer of Special Power of Appointment)
Upon death Not
subject to Estate
Devised property
with condition to
give the property
to 2nd Heir
Hailey
Taylor (1st Heir)
Upon Death subject to
Estate tax
Acting only as
trustee
Khalid (2nd Heir)
The transmission from the first heir, legatee or donee in favor
of another beneficiary, in accordance with the desire of the
predecessor (Transfer of General Power of Appointment)
Upon death
subject to Estate
Did not give any
condition
ANYONE
Hailey
Taylor (1st Heir)
Upon Death subject to
Estate tax
Can choose
anyone
Transfers for Insufficient Consideration
• If any one of the transfers, trusts, interests, rights or powers is made, created, exercised or
relinquished for a consideration in money or money's worth, but is not a bona fide sale for
an adequate and full consideration in money or money's worth, there shall be included in
the gross estate only the excess of the fair market value, at the time of death, of the
property otherwise to be included on account of such transaction, over the value of the
consideration received therefor by the decedent.
• When a sale or transfer was made for a price less than its fair market value at the time of
sale or transfer, the excess fair market value of the transferred property at the time of death
over the value of consideration shall be included in the Gross estate.
Transfers for Insufficient Consideration
Two Fair market values to consider:
A.) Fair market value at the time of sale or transfer
• to determine whether or not the consideration was full and adequate
B.) Fair market value at the time of death
• To determined what amount to be included in the gross estate.
• If the Sale or transfer is a valid sale (Ordinary course of business) or a Bonafide sale, not
subject to estate tax
• If no consideration either estate or donors tax
Transfers for Insufficient Consideration
Bojji, decedent, owns a property valued at P2,000,000 at the time of his death. The said
property was sold by Bojji during his lifetime to Kage for P1,000,000 when its value was
P1,500,000. For estate tax purposes, how much will be included in the gross estate?
Answer: P1,000,000
The FMV value at the time of transfer is used to know if the sale or transfer falls under
insufficient consideration. Since the FMV@ sale is greater than the consideration, there is an
insufficient consideration.
(1.5M > 1M)
FMV At the time of death minus Consideration (2,000,000 – P1,000,000)
Transfers for Insufficient Consideration
Bojji, decedent, owns a property valued at P2,000,000 at the time of his death. The said
property was sold by Bojji during his lifetime to Kage for P1,000,000 when its value was
P900,000. For estate tax purposes, how much will be included in the gross estate?
Answer: P0
Since the FMV@ sale is less than the consideration, there is an sufficient consideration or valid
sale.
Transfers for Insufficient Consideration
Bojji, decedent, owns a property valued at P900,000 at the time of his death. The said
property was sold by Bojji during his lifetime to Kage for P1,000,000 when its value was
P1,500,000. For estate tax purposes, how much will be included in the gross estate?
Answer: P0
Since the FMV@ death is less that consideration received, the payment is considered full and
adequate.
Transfers for Insufficient Consideration
A revocable transfer with the following circumstances: Fair market value at the time of
transfer- P300,000; Fair market value at the time of death P170,000; consideration received
when transferred – P200,000:
A.) Include gross estate of P30,000
B.) Include gross estate of P130,000
C.) Include gross estate of P100,000
D.) Not include in Gross estate
Answer: D
Since the FMV@ death is less that consideration received, the payment is considered full and
adequate.
Claims against the insolvent persons
• Insolvent persons- is someone who is unable to pay their debts or meet their financial
obligations.
• A juridical declaration of insolvency is not required but the incapacity of the debtor to pay
his obligation should be proven.
• The full amount of the claim against the insolvent person should be included as gross
estate
• The portion of the claim which is not collectible should be allowed as deduction from the
gross estate.
Proceeds of life insurance
• To the extent of the amount receivable by the estate of the deceased, his executor, or
administrator, as insurance under policies taken out by the decedent upon his own life,
irrespective of whether or not the insured retained the power of revocation, or to the
extent of the amount receivable by any beneficiary designated in the policy of insurance,
except when it is expressly stipulated that the designation of the beneficiary is irrevocable.
Beneficiary
Designation
Gross Estate
Executor
Revocable/Irrevocable
Included
Administrator
Revocable/Irrevocable
Included
3rd Party
Revocable
Included
3rd Party
Irrevocable
Excluded
• Exclude proceeds from SSS and GSIS
• If problem is silent as to revocability, then assume revocable.
Proceeds of life insurance
• Proceeds under group insurance taken by employer are not subject to estate tax
• Under Section 11 of the insurance code (RA10607)
-The insured should have the right to change the beneficiary he designated in the policy,
unless he has expressly waived this right in said policy. Notwithstanding the foregoing, in
event the insured does not change beneficiary during his lifetime, the designation shall be
deemed irrevocable.
Proceeds of life insurance
Not Included in Gross estate
A.) 3rd Person designated as Irrevocable
B.) 3rd person designated as revocable but the insured did not change
the beneficiary during his/her lifetime.
B.) Life Insurance under a group insurance taken by the employer
C.) SSS and GSIS
Void Transfer
A void transfer is considered as if it never happened, and the property
remains part of the estate, available for distribution to rightful heirs.
Included in gross estate
Transfer with Retention/ reservation of rights
-allows the transferor to continue enjoying, possessing or controlling
the property (beneficial ownership) because only the naked title has
been transferred.
To the extent of any interest therein of which the decedent has at any time made a transfer,
by trust or otherwise, in contemplation of or intended to take effect in possession or
enjoyment at or after death, or of which he has at any time made a transfer, by trust or
otherwise, under which he has retained for his life or for any period which does not in fact
end before his death (1) the possession or enjoyment of, or the right to the income from the
property, or (2) the right, either alone or in conjunction with any person, to designate the
person who shall possess or enjoy the property or the income therefrom; except in case of a
bona fide sale for an adequate and full consideration in money or money's worth.
Determine if included in Gross Estate or not:
1.) Transfer with reservation of certain rights
2.) Transfer for insufficient consideration
3.) Transfer for an adequate and full consideration in money’s worth
4.) Transfer in contemplation of death
5.) Insurance proceeds from SSS and GSIS
6.) Proceeds from insurance taken out by a company for its employees
7.) Transfer from the first heir to the second heir designated by the predecessor
8.) Donation to the National Government
9.) Merger of naked title with the owner of usufruct
10.) Merger of usufruct in the owner of naked title
11.) Legacy to a charitable institution whose administrative expenses did not exceed 30% of the legacy
Included in Gross Estate
Determine if included in Gross Estate or not:
2.) Transfer for insufficient consideration
✓
✓
3.) Transfer for an adequate and full consideration in money’s worth
✗
4.) Transfer in contemplation of death
✓
5.) Insurance proceeds from SSS and GSIS
✗
1.) Transfer with reservation of certain rights
Determine if included in Gross Estate or not:
6.) Proceeds from insurance taken out by a company for its
employees
7.) Transfer from the first heir to the second heir designated by
the predecessor
8.) Donation to the National Government
9.) Merger of usufruct in the owner of naked title
10.) Legacy to a charitable institution whose administrative
expenses did not exceed 30% of the legacy
Included in Gross Estate
✗
✗
✓
✗
✓
Determine if included in Gross Estate or not:
1. The decedent took an insurance on his life for P10,000,000.
2. The decedent took an insurance on his life for P20,000,000
and designated his estate as the revocable beneficiary.
3. The decedent took an insurance for his life for P5,000,000
and irrevocably designated the administrator of his estate as
the beneficiary.
4. The decedent took an insurance on his life for P10,000,000
and designated his son as beneficiary.
5. The decedent took an insurance on his life for P10,000,000
and designated his son as irrevocable beneficiary.
Included in Gross Estate
Determine if included in Gross Estate or not:
1. The decedent took an insurance on his life for P10,000,000.
2. The decedent took an insurance on his life for P20,000,000
and designated his estate as the revocable beneficiary.
3. The decedent took an insurance for his life for P5,000,000
and irrevocably designated the administrator of his estate as
the beneficiary.
4. The decedent took an insurance on his life for P10,000,000
and designated his son as beneficiary.
5. The decedent took an insurance on his life for P10,000,000
and designated his son as irrevocable beneficiary.
Included in Gross Estate
✓
✓
✓
✓
✗
Administrative Provisions
Filing of estate tax return and payment of estate tax due
• Estate Tax Return – BIR Form 1801
• BIR Form 1801 shall be filed in triplicate (3 copies)
• Notice of death is not required
• Tax Rate= 6%
Filing of estate tax return and payment of estate tax due
• Pay as you file system
• Filing and Payment
Primary Obligation- Executor or administrator
Secondary Obligation- Heirs
• When there are two or more executors or administrators, all of them are severally liable
for the payment of tax.
Filing of estate tax return and payment of estate tax due
• Certificated by a CPA needed for- Returns showing gross value of MORE than P5,000,000.
Contents of the certificate:
A.) Itemized assets of the decedent with their corresponding gross value at the time of his
death, or in case of non-resident alien, of that part of his estate in the Philippines
B.) Itemized deductions
C.) The amount of tax due whether paid or still due and outstanding
• Timing of filing the estate tax return
-Within one year from the decedent's death
Extension of time to FILE the estate tax return
-The commissioner or any Revenue officer authorized by him shall have the authority to
grant a reasonable extension not exceeding 30 days for filing of return.
Filing of estate tax return and payment of estate tax due
Extension of payment of estate tax
A. Court- Not more than 5 years
B. Extra-Judicial- Not more than 2 years
• If fraud or negligent, no extension is allowed
If an extension is granted, the commissioner or his duly authorized representative may require
the executor, administrator, or beneficiary to furnish a bond in such amount, not exceeding
double the amount of the tax and with such sureties as commissioner deems necessary.
In case of insufficiency of cash for the payment of estate tax, the estate may be allowed the options:
A.) Payment by installment (BIR form 0605)
-allowed within two years without civil penalty and interest.
B.) Partial disposition of estate to be able to use its proceeds to pay the estate tax due
• Civil penalties and interest
Interest- 12%
Surcharge Penalty of 25%- no false or fraudulent
Surcharge Penalty of 50%- there is false, malice or fraudulent
intent.
Withdrawal of Bank deposit from decedent
-Subject to Final with holding tax of 6%
-Within one year
Place of Filing and payment
UNDER EOPTA (RA11976)
• Place can be any
A.) Authorized Agent Banks (AABs)
B.) Revenue Collection Officers
C.) Authorized Tax software Providers (ATSPs)
Regardless of Venue
Note: Wrong venue for filing and payment of tax has been removed so there is no civil penalty
for wrong venue.
In filing estate tax return, a CPA certificate is required when:
a.) Gross estate is less than P5,000,000
b.) Gross estate is P5,000,000 or more.
c.) Gross estate is more than P5,000,000
d.) Gross estate is P2,000,000 or more.
Deductions from the gross estate
Deductions from the gross estate
• To compute for the net taxable estate, there are certain items that can
be deducted from the gross estate under the tax code.
• Sections 86 (A) and 86 (B) of the tax code, as amended by the Train
law (Jan 1, 2018), allows deduction from the gross estate
Deductions from the gross estate
Deductions are classified as:
A.) Ordinary Deductions
B.) Special Deductions
C.) Share of the surviving spouse (For married decedents)
Deductions from the gross estate
A.) Ordinary Deductions
• Losses
• Claims against insolvent persons
• Claims against the estate
• Unpaid Taxes/ Mortgage
• Vanishing Deduction
• Transfer for public use
B.) Special Deductions
• Family Home
• Retirement Benefits under RA. 4917
• Standard deduction
C.) Share of the surviving spouse (For married decedents)
Ordinary Deductions
1.) LITe (Losses, Indebtedness, Taxes, etc.)
2.) Transfer for Public Use (TFPU)
3.) Vanishing deduction
Ordinary Deductions
1.) LITe (Losses, Indebtedness,
Taxes, etc.)
2.) Transfer for Public Use
(TFPU)
3.) Vanishing deduction
Decedent
Citizen/Resident Non resident Alien
✓
✓(Proportional)
✓
✓
✓
✓
For proportional= Total LITe X (GE Phils/ GE World)
Losses
Casualty Losses include losses arising from acts of God (Storms, Fire,
etc.) and arising from acts of man (Robbery, theft, etc.)
The amount of deductible is the value of the property lost.
Losses
Requisites for deductibility:
a) Incurred during the settlement of the estate;
b) Arising from fires, storms, shipwreck, or other casualties, or
from robbery, theft or embezzlement;
c) Not compensated for by insurance or otherwise;
d) Not claimed as deduction for income tax purposes in an
income tax return;
e) Incurred not later than the last day for the payment of the
estate tax.
Losses
Aang shipped his car worth P1,200,000 from Manila to Zamboanga
city. While riding his glider, he met an accident and died. Two weeks
after he died, the ship carrying his car sank somewhere in the ocean.
A.) Is the loss deductible from the gross estate of Aang?
B.) How about if the loss occurred before he died, but discovered after
death?
C.) How about the entire amount was indemnified by insurance?
Losses
Aang shipped his car worth P1,200,000 from Manila to Zamboanga city. While
riding his glider, he met an accident and died. Two weeks after he died, the
ship carrying his car sank somewhere in the ocean.
A.) Is the loss deductible from the gross estate of Aang? Yes
B.) How about if the loss occurred before he died, but discovered after death?
Nope The loss should occur after death irrespective the time it was discovered
C.) How about the entire amount was indemnified by insurance?
Cannot claim as deduction
Indebtedness or claims against
the estate
• The word “claims” is generally construed to mean debts or demands
of a pecuniary nature which could have been enforced against the
deceased in his lifetime and could have been reduced to simple
money judgements
• The liability represents a personal obligation of the deceased
existing at the time of his death, contracted in good faith for
adequate and full consideration.
Indebtedness or claims against
the estate
• Claims against the estate or indebtedness in respect of property
may arise out of:
(1) Contract;
(2) Tort;
(3) Operation of law
Indebtedness or claims against
the estate
Requisites for deductibility:
a) The liability represents a personal obligation of the deceased existing at the time of his
death
b) The liability was contracted in good faith and for adequate and full consideration in
money or money’s worth;
c) The claim must be a debt or claim which is valid in law and enforceable in court;
d) The indebtedness must not have been condoned by the creditor or the action to collect
from the decedent must not have prescribed.
e) At the time the indebtedness was incurred the debt instrument was duly notarized; and
f) If the loan was contracted within three (3) years before the death of the decedent, the
administrator or executor shall submit a statement showing the disposition of the proceeds
of the loan
Substantiation requirements
In case of simple loan (including advances):
1.) Duly Notarized at the time the indebtedness was incurred (XPN: Financial
institutions)
2.) Duly notarized certification from the creditor as to the unpaid balance of the
debt, including interest as of the time of death.
• Creditor is a Corporation: sworn certification signed by the President or Vice
President, or another principal officer
• Creditor is a Partnership: sworn certification should be signed by any of the
general partners.
• Creditor is a bank or other financial institutions: certification shall be signed
by the branch manager
• iv. Creditor is an Individual: sworn certification should be signed by him/her
Substantiation requirements
In case of simple loan (including advances):
3.) Proof of financial capacity of the creditor.
4.) Latest audited balance sheet
5.) The statement under oath by administrator or executor of the estate
reflecting the disposition of the proceeds of the loan if said loan was
contracted three years prior to the death of the decedent.
Substantiation requirements
If the unpaid obligation arose from purchase of goods or
services
A.) Pertinent documents evidencing the purchase of goods or
service
B.) Notarized certification from the creditor as to the
unpaid balance of the debt as of the time of death
C.) Latest audited balance sheet of creditor
Funeral Medical, and Judicial
expenses
Starting Jan 1, 2018 (Train Law) the following expenses are no longer allowed as a
deduction from the gross estate of a decedent:
A.) Funeral Expenses
B.) Medical Expenses
c.) Judicial Expenses
Unpaid Mortgage or
indebtedness on property
• Deductions allowed when a decedent leaves property encumbered by a mortgage or
indebtedness contracted in good faith and for adequate and full consideration.
• Gross estate: Include the property mortgaged @FMV
• Deductions from gross estate: Outstanding debt or mortgage
• In case unpaid mortgage is being claimed by the estate= Verification must be made as
to who was the beneficiary of the loan proceeds
Unpaid Mortgage or
indebtedness on property
• Accommodation loan
-The value of the unpaid loan must be included as a receivable of the estate.
-If there is legal impediment to recognize the accommodation loan as receivable
of the estate, the unpaid mortgage shall not be allowed as a deduction from the
gross estate
• Receivables from gambling (wagering gains) before death are inclusions from
the decedent's gross estate, however, debts from wagering or gambling losses
are not allowed as deductions from the gross estate.
Taxes
• Taxes which have accrued as of the death of the decedent which
were unpaid as of the time of death.
• The following are not allowed as a deduction:
A.) Property Tax accrued after death
B.) Income Tax received after death
C.) Estate Tax
PRACTICE PROBLEM
In 20XX Charlie Puth died due to not talking to her anymore. The following claims against
Charlie’s estate were claimed by his heirs as deductions from the decedents gross estate.
Notes payable (notarized)
Notes Payable (not notarized)
Unpaid Property taxes before his death
Unpaid property taxes on his estate (after death)
Unpaid mortgage on his properties before death
Debts from gambling losses questioned by the
decedent while still alive
P500,000
200,000
300,000
100,000
50,000
50,000
How much is the deductible indebtedness or claims against the estate?
PRACTICE PROBLEM
Notes payable (notarized)
Notes Payable (not notarized)
Unpaid Property taxes before his death
Unpaid property taxes on his estate (after death)
Unpaid mortgage on his properties before death
Debts from gambling losses questioned by the
decedent while still alive
P500,000
200,000
300,000
100,000
50,000
50,000
Included in deductible indebtedness or claims against the estate:
A.) Notes payable (notarized)
P500,000
B.) Unpaid taxes before his death
300,000
C.) Unpaid mortgage on his properties before death
50,000
Claims against the estate
P850,000
Claims of the deceased against insolvent
persons as defined under R.A. 10142
• These are claims by the decedent during his lifetime that are not collectible.
• For purposes of estate taxation, a judicial declaration of insolvency is not
required
• a. The incapacity of the debtor to pay his obligation should be proven.
• b. The full amount owed by the insolvent must first be included in the
decedent’s gross estate and the amount uncollectible shall be allowed as
deduction.
Transfer for Public use
• Dispositions in a last will and testament or transfers to take effect
after the death in favor of the government of the Philippines or
any political subdivision for exclusively public purposes
• Before a transfer for public use is allowed as deduction from gross
estate, same amount shall be included fists in the computation of
gross estate
Ordinary Deductions
• Losses
• Claims against insolvent persons
• Claims against the estate
• Unpaid Taxes/ Mortgage
• Vanishing Deduction
• Transfer for public use
Vanishing deduction (Property
previously taxed)
• It is an amount allowed to reduce the taxable estate of a decedent
where the property received by him from a prior decedent or donor
by (1) gift or by (2) bequest, device or inheritance, has been the
object of previous transfer taxation.
•
Allowed as a deduction to minimize the effect of or as a remedy
against double taxation
Vanishing deduction (Property
previously taxed)
•
Requisites for deductibility:
a) Death - the present decedent died within 5 years from the date of death of the prior
decedent or date of gift.
b) Identity of property -the property with respect to which deduction is sought can be
identified as the one received from the prior decedent, or from the donor, or as the
property acquired in exchange for the original property so received.
c) Location - the property must be located in the Philippines.
.
Vanishing deduction (Property
previously taxed)
d.) Inclusion of the Property- the property must have formed part of the gross
estate situated in the Philippines of the prior decedent or have been included
in the total amount of the gifts of the donor made within 5 years prior to the
present decedent’s death
e.) Previous Taxation of the Property- the estate tax on the prior succession,
or the donor’s tax on the gift must have been finally determined and paid by
the prior decedent or by the donor as the case maybe
f.) No previous vanishing deduction on the property
Vanishing deduction (Property
previously taxed)
VANISHING DEDUCTION RATES
Years
Rates
Within 1 year
100%
Beyond 1 year to 2 Years
80%
Beyond 2 years to 3 Years
60%
Beyond 3 years to 4 Years
40%
Beyond 4 years to 5 Years
20%
Pro-forma computation:
VALUE TO TAKE
PXX
Whichever is lower between the value of the property:
A.)The lower amount between the value of the property in the gross estate of the prior decedent or
value of the gift
B.) Value of the same property in the gross estate of the present decedent
LESS: MORTGAGE PAID (1st deduction)
(XX)
(Paid by the present decedent from the mortgage assumed when the property was inherited or received as a
donation)
Initial Basis
PXX
LESS: PROPORTIONAL DEDUCTION (2nd deduction):
𝐼𝑛𝑖𝑡𝑖𝑎𝑙 𝐵𝑎𝑠𝑖𝑠
X (LIT + Transfer for public use)
𝐺𝑟𝑜𝑠𝑠 𝑒𝑠𝑡𝑎𝑡𝑒
(XX)
Final Basis
X Vanishing Deduction Rate
VANISHING DEDUCTION
XX
%
XX
PRACTICE PROBLEM
Peter Parker received a car as a gift from Miles Morales on January 1, 2025. The value of
the Car at the time it was donated to Peter was P1M. However, Peter assumed a P200,000
mortgage on the car. The corresponding donor’s tax was paid by Miles. Peter paid a total of
P100,000 on the mortgage in 2025 and 2026.
On November 1, 2027, Peter died. His gross estate at the time of his death amounted
to P5,000,000 including the car received from Miles valued at P700,000.
Funeral Expenses
Losses
Unpaid mortgage (including the mortgage of the car)
Unpaid taxes before death
Unpaid taxes after death
Unpaid medical expenses
Donation mortis causa to Quezon city for public purpose
How much is the vanishing deduction?
P 250,000
100,000
200,000
100,000
25,000
300,000
500,000
PRACTICE PROBLEM
VALUE TO TAKE
P700,000
LESS: MORTGAGE PAID (1st deduction)
(100,000)
Initial Basis
600,000
LESS: PROPORTIONAL DEDUCTION (2nd deduction):
600,000
X400,000 (LIT) + 500,000 (TFPU)
5,000,000
Final Basis
X Vanishing Deduction Rate
VANISHING DEDUCTION
(108,000)
492,000
60% (2 years to 3 years)
295,200
COMPOSITION OF LIT
LOSSES+ UNPAID MORTGAGE+ UNPAID TAXES Before
death = 400,000
PRACTICE PROBLEM
Assume the corresponding donors tax was not paid by Miles upon donation, how
much is the following deduction?
None, (If the donors tax or estate tax is not paid, vanishing deduction is not allowed due to the absence of
double taxation)
Assume the donation was made on Jan 25, 2010, how much is the vanishing
deduction?
None, (The donation was made more than 5 years)
Special Deductions
• Standard deduction
• Family Home
• Retirement Benefits under RA. 4917
Standard Deduction
• The law allows a standard deduction without qualification, condition nor
requisite whatsoever.
• This amount shall be allowed as an additional deduction without the need
for substantiation.
• The full amount shall be allowed as deduction for the benefit of the
decedent.
Allowable amount under the TRAIN LAW:
If the decedent is a citizen or resident - P5,000,000
If the decedent is a nonresident alien - P500,000 (Only Special deduction of the NRA)
Family Home
• The amount allowable as a deduction would be whichever is
lower of P10,000,000 or the FMV at the time of the decedent's
death, of the family home & the land on which it stands.
• It should not be temporary. Generally characterized by
permanency, that is, the place to which, whenever absent for
business or pleasure, one still intends to return
• Must be part of the properties of the absolute community or of
the conjugal partnership or of the exclusive properties of either
spouse
• A person may constitute only ONE FAMILY HOME.
Family Home
Requisites for deductibility:
1.) Married person or Head of the family (If single)
2.) Actual residential home of the decedent and his family.
3.) Certified by the barangay captain of the locality where the family
home is located.
4.) Included in the GROSS ESTATE
5.) Owned by the decedent
For married decedent, the FMV of the family home should be
divided by 2 if the same is conjugal or community property.
Family Home
Situation
FH is Exclusive
P5,000,000
FH is Exclusive
P15,000,000
FH is Conjugal
P13,000,000
FH is Conjugal
P25,000,000
FH: LAND is Exclusive.
P5M
House is conjugal P8M
Gross Estate
Decedents Interest
FH Deduction
Family Home
Situation
Gross Estate
Decedents Interest
FH Deduction
FH is Exclusive
P5,000,000
P5,000,000
P5,000,000
P5,000,000
FH is Exclusive
P15,000,000
P15,000,000
P15,000,000
P10,000
FH is Conjugal
P13,000,000
P13,000,000
P6,500,000
P6,500,000
FH is Conjugal
P25,000,000
P25,000,000
P12,500,000
P10,000,000
FH: LAND is Exclusive.
P5M
House is conjugal P8M
P13,000,000
P9,000,000
P9,000,000
Retirement Benefits under RA. 4917
• An Act Providing that Retirement Benefits of Employees of
Private Firms shall not be subject to attachment, levy, execution or
any tax whatsoever
• Provided such amount is included as part of the gross estate of the
decedent
Share of the surviving spouse (For
married decedents)
• The net share is equivalent to 1/2 or 50% of the conjugal property
after deducing the obligations chargeable (ordinary deductions
only) to such property.
• The share of the surviving spouse must be removed to ensure that
only the decedent’s interest in the estate is taxed
Share of the surviving spouse (For married decedents)
Deductions for Non-Resident Alien
•
•
•
•
•
Standard deduction = 500,000 (Only special deduction for NRA)
Proportionate LIT (Ratio is PH GE/ WORLD GE)
Vanishing Deduction
Transfer for public use
Share of surviving spouse
Mr. Ed Sheeran, single and a non resident alien, died of a heart attack in
2025, leaving the following properties in favor of his heirs.
Gross estate within the Philippines
Gross estate outside the Philippines
Funeral Expense
Judicial expenses
Medical expenses
Claims against the estate
P30,000,000
20,000,000
500,000
2,000,000
2,000,000
5,000,000
His gross estate includes family home valued at P8,000,000
Compute the estate tax due
Mr. Ed Sheeran, single and a non resident alien, died of a heart attack in
2025, leaving the following properties in favor of his heirs.
Compute the estate tax due
Gross Estate (Within)
(Ordinary Deductions)
30,000,000
LIT ( 5MX
)
P30,000,000
(Special Deduction)
(500,000)
Net taxable estate
Estate tax rate
Estate tax due
26,500,000
6%
1,590,000
50,000,000
(3,000,000)
Mr. Ed Sheeran, single (Head of the family) and a citizen of the
Philippines, died of a heart attack in 2025, leaving the following
properties in favor of his heirs.
Gross estate within the Philippines
Gross estate outside the Philippines
Funeral Expense
Judicial expenses
Medical expenses
Claims against the estate
P30,000,000
20,000,000
500,000
2,000,000
2,000,000
5,000,000
His gross estate includes family home valued at P8,000,000
Compute the estate tax due
Mr. Ed Sheeran, single (Head of the family) and a citizen of the
Philippines, died of a heart attack in 2025, leaving the following
properties in favor of his heirs.
Compute the estate tax due
Gross Estate (Within and without)
(Ordinary Deductions)
LIT
(Special Deduction)
(5,000,000+8,000,000)
Net taxable estate
Estate tax rate
Estate tax due
P50,000,000
(5,000,000)
(13,000,000)
32,000,000
6%
1,920,000
Property Relations
Property Relations
Prenuptial Agreements
• Philippine law do not require the agreement between the future
spouses to be registered in a government office to be binding between
the parties
• For security of the properties and in order to be bind third parties,
Philippine law requires the recording of prenuptial agreement in the
local civil registry and at the register of deeds.
• Marriage- is a special contract of permanent union between a man
and a woman entered into in accordance with law for the
establishment of conjugal and family life.
Property Relations
• Applicable only to married persons
• Used to distinguish a conjugal or community property from an
exclusive property.
• Under Article 74 of the family code, the property relationship
between husband and wife shall be governed in the following order:
A.) Marriage settlements executed before marriage
B.) By provisions of law
C.) By the local custom
• Modifications in the marriage settlements may be valid if the
modification is made before the celebration of the marriage.
-
• Modifications should be in writing, signed by the parties and
executed before the celebration of marriage
Ed
Types of Property relations or marriage
settlements
ACCA
•
•
•
•
A.) Absolute Community of Property
B.) Conjugal partnership of gains
C.) Complete separation of property
D.) Any other regime
Law governing property relations
• The provisions of the family code shall govern the property relations
between husband and wife whose marriage was celebrated on or after
its effectivity (August 3 1988).
-
Before August 3 1988
-
Conjugal partnership of gains
-
On or after August 3, 1988
-
Absolute Community of Property
-
Law governing property relations
 Conjugal property- owned by both spouses
 Exclusive property- owned by either the husband or wife
-
+
l
-
 Capital- exclusive property of the husband
 Paraphernal- Exclusive property of the wife
↳
n
Absolute community of property
Absolute community of property
• Most common regime in the Philippine marital property relations
• If the spouses do not have a valid marriage settlement, this system
will govern the property relations of the couple
• It is more in keeping with Philippine custom and family duty.
• Spouses became co-owners of all property they bring into the
marriage and those acquired by each or both of them during
marriage, except for some exceptions
-
Absolute community of property
• The Absolute community of property between spouses shall
commence at the precise moment that the marriage is celebrated
• Any stipulation for the commencement of the community regime at
any other time shall be void. (Article 88)
Community property under ACoP
• In general, property will be presumed to belong to the community,
unless it can be proven to be exclusive property.
• All the properties owned by the spouses at the time of celebration of
the marriage or acquired thereafter
Exclusive Property under ACoP
A.) Acquired during marriage by =
gratuitous title by either spouse and
the fruits as well as the income thereof, (Unless the donor, testator, or
In ACoP the
grantor expressly provided that it be part of community).
-
-
income follows
the source!
B.) Acquired C
before 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.
-
Exclusive Property under ACoP
-
C.) Property for personal and exclusive use of either spouse.
XPN: Jewelry shall form part of community property.
community
Personal effects or belonging such as clothing, wearing apparel, shoes, and
the like for personal and exclusive use of either spouse are considered
exclusive property regardless of what was used to acquire the property.
Property acquired during marriage by purchase with exclusive money or
exchange witgh exclusive property, shall be considered exclusive property
Conjugal partnership of gains
• Property relations between the spouses, under which the husbandand-wife place in a common fund the proceeds, products, fruits and
income from their separate properties.
-
• CPG applies when:
A.) When the spouses agreed in their marriage settlement
B.) To conjugal partnership of gains already established between
spousesC
before effectivity of the Family code (August 3, 1988),
without prejudice to vested rights.
-
-
-
Conjugal partnership of gains
• Exclusive property under CPG
A.) Brought into Marriage
B.) Acquired during marriage byC
gratuitous title
C. ) Acquired by right of redemption or by exchange with property
belonging to only one of the spouses
D. )Purchased with the exclusive money of the wife or husband
-
Conjugal partnership of gains
• Conjugal property under CPG
All property acquired during the marriage, whether the acquisition
appears to have been made, contracted or registered in the name of
one or both spouses, is presumed to be conjugal unless the contrary is
proved. (Art 116)
Art. 117. The following are conjugal partnership properties
A. ) By onerous title
B. ) obtained from labor, industry, work, or profession]
C. ) All Fruits
In CPG the fruits or income of the property will
always be classified as Conjugal property
Conjugal partnership of gains
D.) Hidden Treasure
E.) Through Occupation such as fishing or hunting
F.) Livestock existing upon the dissolution of the partnership in excess
of the number of each kind brought to the marriage by either spouse
G.) Those which are acquired by chance, such as winnings from
gambling or betting. However, losses therefrom shall be borne
exclusively by the loser-spouse
Practice
Exclusive = E
Common- C
Property
CPG
1. Properties owned by the spouses before the marriage
2. Rental income on a property acquired before marriage
3. Property acquired during marriage
4. Income on property described at #3
5. Property acquired by gift during marriage
6. Income on property described at #5
7. Property inherited before marriage
8. Property owned before marriage for personal and exclusive use of the
decedent
9. Jewelry items during marriage for personal and exclusive use
10. Car inherited during marriage
>
-
ACP
Practice
Exclusive = E
Common- C
Property
CPG
ACP
1. Properties owned by the spouses before the marriage
E
C
2. Rental income on a property acquired before marriage
C
C
3. Property acquired during marriage
C
C
4. Income on property described at #3
C
C
5. Property acquired by gift during marriage
E
E
6. Income on property described at #5
C
E
7. Property inherited before marriage
E
C
8. Property owned before marriage for personal and exclusive use of the
decedent
E
E
9. Jewelry items during marriage for personal and exclusive use
E
C
10. Car inherited during marriage
E
E
Conjugal deductions
(Whether under ACoP and CPG)
1. The support of the spouses, their common children, and legitimate children of
either spouse; however, the support of illegitimate children of either spouse shall
be governed by the provisions of the Family Code on Support (exclusive);
2. All debts and obligations contracted during the marriage by the designated
administrator-spouse for the benefit of the community, or by both spouses, or by
one spouse with the consent of the other;
3. Debts and obligations contracted by either spouse without the consent of the
other to the extent that the family may have been benefited;
4. All taxes, liens, charges and expenses, including major or minor repairs, upon
the community property;
Conjugal deductions
5. All taxes and expenses for mere preservation made during marriage upon the
separate property of either spouse used by the family;
6. Expenses to enable either spouse to commence or complete a professional or
vocational course, or other activity for self-improvement;
7. Ante-nuptial debts of either spouse insofar as they have redounded to the
benefit of the family;
8. The value of what is donated or promised by both spouses in favor of their
common legitimate children for the exclusive purpose of commencing or
completing a professional or vocational course or other activity for selfimprovement;
9. Expenses of litigation between the spouses unless the suit is found to be
groundless
Conjugal deductions
 Obligations contracted during marriage are presumed to have benefitted the family and
therefore conjugal deductions. While obligations contracted by either spouse before
marriage are exclusive deductions unless shown that the family gained benefits from the
obligations.
 Deductions are either conjugal or exclusive deductions depending on their source of
property if it is related to the conjugal or exclusive property.
 Wagering loss during marriage shall be borne by the loser, while the winnings shall form
part of conjugal property
 Fines and pecuniary damages or indemnities imposed upon either spouse shall be charges
against exclusive property.
Complete separation of property
This system regime will be used if the future spouses agree in the
marriage settlements that their property relations during the marriage
shall be governed by the regime of separation of property.
May be total or partial
To each spouse shall belong all earnings from his or her profession,
business or industry and all fruits, natural, industrial or civil, due or
received during the marriage from his or her separate property.
Complete separation of property
Both spouses shall bear the family expenses in proportion to their
income
The liability of the spouses to the creditors for family expenses shall be
solidary.
Property regime of unions without marriage
CAPACITATED TO MARRY:
-Without the benefit of marriage or void marriage, the following
rules will apply:
a.) Wages and salaries shall be owned by them in equal shares.
b.) Properties acquired by both of them through work or industry
shall be governed by the rules on co-ownership
c.) Neither party can encumber or dispose by acts inter vivos of his or
her share in the property acquired during cohabitation and owned in
common, without the consent of the other, until after the termination of
their cohabitation
-
-
Property regime of unions without marriage
INCAPACITATED TO MARRY:
A.) only the properties acquired by both of the parties through their
actual joint contribution of money, property, or industry shall be owned
by them in common in proportion to their respective contributions (If
silent assume equal shares)
B.) If one of the parties is validly married to another, his or her
share in the co-ownership shall accrue to the absolute community or
conjugal partnership existing in such valid marriage.
Share of the surviving spouse
Gross conjugal/communal properties
Less: Ordinary conjugal/communal properties
Net conjugal/ communal properties
Divide by 2
Share of the surviving spouse
PXXX
(XX)
XX
/2
XX
Illustrative examples
Illustrative examples
Illustrative examples
Illustrative examples
Practice
Case A: The following information were from the estate of a married resident
decedent who died on Jan 2025.
Properties:
Land Inherited from father during marriage two years before death;
valued at 15M when inherited
Personal property owned before marriage
Other personal property acquired during marriage
Deductions claimed:
Casualty losses
Unpaid taxes
Claims against the estate
Judicial expenses
Under Absolute community property
A.) Net exclusive property
12.4M
B.) Net community property
19.5M
c.) Share of the surviving spouse 9.75M
d.) Net taxable estate
17,150,000
P24,000,000
16,000,000
5,000,000
500,000
400,000
600,000
300,000
Practice
Case B: The following information were from the estate of a married decedent
resident who died on Jan 2025.
Properties:
Land Inherited from father during marriage two years before death;
valued at 15M when inherited
Personal property owned before marriage
Other personal property acquired during marriage
Deductions claimed:
Casualty losses
Unpaid taxes
Claims against the estate
Judicial expenses
Under Conjugal partnership of gains
A.) Net exclusive property
28.4M
B.) Net community property
3.5M
c.) Share of the surviving spouse 1.75M
d.) Net taxable estate
25,150,000
P24,000,000
16,000,000
5,000,000
500,000
400,000
600,000
300,000
Estate tax credit
And
Net Distributable Estate
.
Estate tax credit
Estate tax credit
• Deduction to the Philippine estate tax itself
• Refers to the taxpayer’s right to deduct from the tax
due the amount of tax it has paid to a foreign country
• To lessen the harshness of International double
taxation law
• Only applicable to resident citizen, Non-resident
citizen and resident alien.
Estate tax credit
• Not applicable to non-resident alien (not affected by
the harshness of indirect international double taxation
• Subject to limits
Estate tax credit
Estate Tax due
Less: Tax credit
Pxx
(XX)
(Lower between estate tax paid abroad and limit)
Philippine Estate tax payable
PXX
Limits
• If there is only one foreign country
LIMIT A
Actual Tax paid, Foreign country
Versus
Net estate, FC
Net estate, WW
Actual tax credit= Lower of the two
PXX
Limits
• If there is more than one country
STEP ONE: Compute limit A (per foreign country)
STEP TWO: compute limit B
Net estate, ALL FC
Net estate, WW
Versus
Actual tax paid (All foreign Countries)
Limit B= Lower of the two.
Step three: choose the lower amount between limit a and limit b
PXX
Problem
• A resident citizen died in 2025 leaving the following:
Taxable net estate, Philippines
P8,000,000
Taxable net estate, Japan
2,000,000
Estate tax paid, Japan
400,000
IOM
How much is the estate tax payable?
P480,000
#6
Gook
t
Ex60K
Problem
• A resident alien died in 2025 leaving the following:
Taxable net estate, Philippines
Taxable net estate, Japan
Estate tax paid, Japan
Taxable net estate, UK
Estate tax paid, UK
Net estate, Russia
How much is the estate tax payable?
480,000
P8,000,000
3,000,000
200,000
2,000,000
100,000
(1,000,000)
Problem
• A decedent died with the following data:
Gross estate
Allowable ordinary deduction
Estate tax paid
Philippines
14,200,000
6,400,000
1. How much is the estate tax payable assuming the decedent is a resident citizen?
168,000
2. How much is the estate tax payable assuming the decedent is a non-resident ALIEN?
438,000
USA
4,400,000
2,200,000
150,000
Net distributable estate
• Amount arrived at from gross estate consisting all
properties in the possession and control of the decedent
at the time of death and actual expenses, charges, and
payments from the gross estate
• Value of net estate which shall be inherited by heirs
and beneficiaries
Net distributable estate
• Include:
✓Net taxable estate
✓ Exclusions such as GSIS, SSS Etc.
add back: Vanishing deduction
add back: Special deductions
• Exclude:
XProperty left by will
XExpenses for support, medical and education
XEstate tax paid
Net distributable estate
• A resident alien decedent, head of the family died in 2025 leaving the
following:
Gross estate (Including family home of 30M)
P100,000,000
Funeral expenses
P1,000,000
Judicial expenses
P1,500,000
Medical expenses
P3,000,000
Claims against the estate
P3,000,000
Losses( 50% were incurred more than 1 year after death)
P4,000,000
A. Estate tax due 4.8 M
B. Net distributable estate 82.7 M
Donors Tax
Donation
• Art. 725. Donation is an act of liberality whereby a person disposes
gratuitously of a thing or right in favor of another, who accepts it.
• when the donor intends that the donation shall take effect during the
lifetime of the donor, though the property shall not be delivered till
after the donor's death, this shall be a donation inter vivos. The
fruits of the property from the time of the acceptance of the
donation, shall pertain to the donee, unless the donor provides
otherwise.
Nature of Donors tax
• Donor’s tax is a tax levied, assessed, collected and paid upon transfer
by any person, resident or nonresident of the property by gift.
• Imposed on the exercise of the donors right during the lifetime to
transfer property to others in form of gift
• Not a property tax but an Excise tax
• Direct tax imposed on the Donor.
Purpose of Donor’s tax
A. To prevent avoidance of estate tax.
B. To compensate for loss income tax when large estate are split by
donation.
Elements of donation
A. Consent
B. Object
C. Cause
D. Capacity of the donor
E. Intention to donate
F. Delivery of the thing donated
G. Acceptance of the donee
Capacity of the Donor
• Condition and legal competence of the donor to enter into a contract
• All person who may contract and dispose their property may make a
donation
• Capacity of the donor is determined at the perfection of the donation
Qualified Donees
• All those who are not specially disqualified by law therefor may
accept donations
• Art. 741.) Minors and others who cannot enter into a contract may
become donees but acceptance shall be done through their parents or
legal representatives.
• (Art. 742.) Donations made to conceived and unborn children may be
accepted by those persons who would legally represent them if they
were already born.
ANIMUS DONANDI
Animus donandi (Intention to
Donate)
•
Proper declaration of the legal owner of a property or right to
transfer ownership to another without consideration.
• Donative intent is required only in direct gifts
• When gift is indirect (transfer for insufficient consideration),
donative intent is not necessary.
Delivery
• Donors tax applied to a completed gift
• Completed by the delivery, either actual or constructively, of the
donated
• INCOMPLETE GIFT (Because of reserved powers) becomes a
complete gift when either
A. Donor renounces the power or
B. Donor’s right to exercise the power ceases because of the
happening of some event or contingency or the fulfillment of some
condition, other than the death of the donor.
Acceptance of gift
•
Donation is perfected not from the time of acceptance but from the
time of knowledge.
• There should be meeting of the minds between donor and done before
the donation (Contract) is perfected.
Art. 734. The donation is perfected from the moment the donor knows of the
acceptance by the donee.
• Acceptance must be made during the lifetime of the donor and donee.
Donations made to conceived and unborn children shall be accepted by
those persons who would legally represent them.
Completion and Perfection of
gift
• Donors tax shall not apply unless there is a completed gift.
• The transfer of property by gift is perfected from the moment the
donor knows of the acceptance by the donee.
• Donation is completed by delivery of the donated property to the
donee.
The date of donation is
A. Completion of the donation; when delivered
B. Perfection of the donation, when the donee accepts the donated
property
C. Perfection of the donation, from the time of knowledge of the donor
that the donee has accepted the donated property
D. Expelliarmus
The law that governs the imposition of
donors tax
• The law in force at the time of the perfection/ completion of the
donation shall govern the imposition of donors tax.
FORMALTIES
Movable property/ Personal property

≤ 5,000, with simultaneous delivery = Oral delivery

≤ 5,000, without simultaneous delivery = in writing

› 5,000 (Exceed 5,000) = In writing
If the formalities are not followed, the donation is void
FORMALTIES
• Immovable/ Real or registrable property
 must be made in public document, specifying therein the property
donated and the value of the changes which the donee must satisfy.
 Public document must specify the property donated and its value of
the charges which the donee must satisfy
 Acceptance of immovable property
A. In the same deed of donation or
B. In a separate public document
Characteristics of Donors tax
A. National Tax
B. Proportional tax
C. Ad valorem Tax
D. Privilege/ transactional tax
E. Direct tax
Classification of donation
A. From viewpoint of motive, purpose or cause
1) Simple—the cause is pure liberality
2) Remuneratory—due to past services rendered or future services or
charges and burdens
3) Onerous—burdens and charges equal to the value of the thing donated
4) Modal—consideration is less than the value of the thing donated
B. Time of taking effect (Perfection)
1) Donation inter vivos – one made between living persons, and which is perfected from the
time the donor knows of the acceptance of the done. It is subject to donor’s tax
2) Donation mortis causa –one which takes effect upon the death of the donor and, therefore
partakes of the nature of a testamentary disposition. It is subject to estate tax
Valuation of Gross Gifts
• Same as gross estate
• As a rule, donor’s tax should be based on the fair market value of the
property donated at the time the donation is completed.
Void Donations
1.) Those made between persons who were guilty of adultery or
concubinage at the time of donation
2.) Those made between persons found guilty of the same criminal
offence, in consideration thereof
3.) Those made to a public officer or his wife, descendants and
ascendants, by reason of his office
Void Donations
4.) Art. 751. Donations cannot comprehend future property.
By future property is understood anything which the donor cannot
dispose of at the time of the donation.
5.) Lack of acceptance of donee
6.) Donation of a spouse of community property without the consent of
the other (XPN: Moderate gifts for charity or family distress)
In case of disagreement, the husband’s decision shall prevail, without
prejudice to the right of the wife and subject to recourse to the court.
Void Donations
7.) Donation’s between wife and husband during marriage
XPN: Moderate gifts between the spouses are valid.
8.) Persons incapacitated (Donor only)
9.) Failure to observe proper formalities
10.) Properties that are non-existent or impossible object
Donor’s tax rate
• Beginning Jan 1, 2018 (Train law), the tax rate payable by a donor for each
calendar year shall be 6% on the basis of total gifts in excess of P250,000
exempt gift during the calendar year.
• Any contribution in cash or in kind to any candidate, political party or coalition
of parties for campaign purposes shall be governed by the election code,
hence not subject to donors tax.
Gross Gift
• "Gifts " include real and personal property, whether tangible or intangible, or
mixed, wherever situated: Provided, however, that where the donor was nonresident alien at the time of donation, his real and personal property so
transferred but which are situated outside the Philippines shall not be included
as part of " gross gift“
• The rules in computing gross estate is the same in gross gift.
Inclusions in the gross gift
1. Direct gifts
2. Gifts through creation of trust
3. Transfer for insufficient consideration
4. Condonation of debt
5. Repudiation of inheritance
6. Renunciation by the surviving spouse of his/her share in the
common property
Transfer for insufficient consideration
• Consideration received < FMV at the time of sale = subject
to donors tax
• XPN:
1.) Real property subject to capital Gains tax
2.) Bonafide transfer made in the ordinary course of business
and free from animus donandi, even if the consideration is
inadequate on account of bad bargain.
Transfer for insufficient consideration
• Consideration received < FMV at the time of sale= Donors
tax; (Include in gross gift the excess of the FMV of the
property sold over the consideration)
• Consideration received≥ 𝐹𝑀𝑉= Valid sale (No donors tax)
• If consideration is fictitious= Include in gross gift the entire
FMV
Practice problem
Ron sold his car for P1M to his friend, Hermoine. The fair
market value of the car at the time of sale was P3M.
How much is the amount of tax due?
Donation (3M-1M)
Less: Exempt gift
Taxable gift
Donors tax rate
Donors tax due
2,000,000
(250,000)
1,750,000
6%
P105,000
Practice problem
Ron sold his residential building for P1M to his friend,
Hermoine. The fair market value of the building at the time of
sale was P3M.
How much is the amount of tax due?
NONE
Real property held as
capital asset subject to
capital gains tax is not
subject to donors tax.
Practice problem
Ron sold his building used for business (Commercial) for P1M to
his friend, Hermoine. The fair market value of the building at
the time of sale was P3M.
How much is the amount of tax due?
Donation (3M-1M)
Less: Exempt gift
Taxable gift
Donors tax rate
Donors tax due
2,000,000
(250,000)
1,750,000
6%
P105,000
Real property held as
ordinary asset subject to
CGT is still subject to
donors tax
Practice problem
Ron donated his residential building for P1M to his friend,
Hermoine. The fair market value of the building at the time of
sale was P3M.
How much is the amount of tax due?
Donation (3M-1M)
Less: Exempt gift
Taxable gift
Donors tax rate
Donors tax due
2,000,000
(250,000)
1,750,000
6%
P105,000
Transaction is a donation
and clearly not a sale,
hence not subject to CGT.
Condonation or cancellation of indebtedness
• Mode of extinguishing an obligation
• By a generous act of a person who, for instance, lends
money to another with an obligation to repay, the borrower
released from such obligation, hence subject to donors tax.
Condonation or cancellation of indebtedness
• There is no condonation in the following cases:
A. Condonation is due to services
- Transaction has the effect of payment of compensation. The
debtor is therefor subject to income tax
B. Condonation was made by a corporation in favor of its
shareholders
- Transaction has the effect of payment of dividend by the
issuing corporation. Debtor is assumed to have earned a
dividend income.
• A creditor merely desires to benefit a debtor. On March 25,
2025, without any consideration from the debtor, cancels
the debt. Should the amount of debt condoned considered
as donation made by the creditor?
Answer: YAY (YES)
• On February 28, 2025, a creditor cancels the debt of a
debtor in exchange for services rendered by the latter.
Should the debt cancelled by the creditor considered as
donation?
Answer: Nay (NO)
The cancellation of debt in the case provided was in
consideration for services rendered by the debtor. Hence, such
transfer is onerous in nature, not gratuitous, therefore not
subject to donors tax.
• In 2025, EDG Corporation cancels the P100,000 debt of its
shareholder, Simon, because of a good thing done by him to
the latter. Should the amount of cancelled by the creditor as
donation.
Answer: Nay (NO)
Consider as payment of dividend by the issuing corporation.
The debtor is assumed to have earned a dividend income. (10%
Fwt)
Payment of loan by the guarantor
• A guarantee as a rule is gratuitous unless otherwise stated.
• However, if the obligation is "jointly" entered into by the
guarantor and the borrower with a creditor-bank, the
security given by the guarantor to full the obligation of the
borrower is not gratuitous because the guarantor must be
indemnified by the principal debtor in case the guarantor
pays for the debt.
• In such case, payment by the guarantor is not subject to
donor's tax
Repudiation of inheritance
• GR: General renunciation by an heir, including surviving
spouse, of his or her share in the hereditary estate left by
the decedent not subject to Donors tax
• XPN:
A. The renunciation was categorically done in favor of
identified heirs and
B. To the exclusion or disadvantage of other co-heirs
To be subject to donors tax, the 2 conditions must be
present.
Renunciation of share in common property
by the surviving spouse and repudiation of
inheritance
• Renunciation by the surviving spouse of his share or her
share in the conjugal partnership or absolute community
after the dissolution of the marriage in favor of the heirs of
the deceased spouse or any other persons is subject to
donors tax.
Summary of renunciation
• Renunciation by an Heir:
GR: excluded in gross gift
XPN: Both Categorically done in favor and exclusion of other
heirs (DONORS TAX)
• Renunciation by the spouse
Share in CPG/ACoP in favor of anyone
Included in Gross gift
Share in Estate in categorically favor of a Included in gross gift
specific person and exclusion of other coheirs
Share in Estate in favor of no one
Not included in gross gift
Partial renunciation
• General renunciation of heirs on his share is not subject to
donors tax.
• There are instances instead of all the heirs receiving their
respective shares in all the properties of the decedent, the
heirs will agree among themselves for a specific property
that each of them will receive
Partial renunciation
• There will be an heir who will receive a share lower or higher
than the value of what should have been his rightful share in
all the properties of decedent.
• In this case, there is PARTIAL RENUNCIATION since the heir is
waiving his/share to only identified properties but not to the
entire properties of the decedent
• Donors tax is imposed on the value forgone as a result of
such renunciation
Illustration Partial renunciation (RMC 942021)
• Assuming Harry died leaving the following properties to his
three heirs namely, Albus, James, and Lily. The properties
and its FMV and zonal value are the following:
FMV
Zonal Value
• Property A
1M
3M
• Property B
1.5M
2.4M
• Property C
500k
2.1M
Illustration Partial renunciation (RMC 942021)
• Property A
• Property B
• Property C
FMV
1M
1.5M
500k
Zonal Value
3M
2.4M
2.1M
Albus renounce his share from Property B and C
James renounce his share from Property A and C
Lily renounce her share from Property A and B
FMV
1M
1.5M
500k
Zonal Value
• Property A
3M
• Property B
2.4M
• Property C
2.1M
Total Value 7.5 M
Albus renounce his share from Property B and C
James renounce his share from Property A and C
Lily renounce her share from Property A and B
Albus
James
Lily
Total should be share
(7.5M/3)
2.5M
2.5M
2.5
Total Shares received
3M
2.4M
2.1M
Included in gross gift
(P2.5 vs Received)
0
100,000
400,000
Exempt gifts and/or deductions from gross
estate
• Exemptions (exclusions) are not to be treated as exclusions
from the gross gifts of the donor.
• They partake the nature of deductions and are, therefore,
deductible from the gross gifts in order to arrive at taxable
net gifts.
• Hence, the same item/amount shall likewise be presented
in the gross gifts of the donor
•
Exclusions from gross gifts
Donations not exceeding P250,000 during the year, regardless of the
relationship of the donor and the donee [Sec. 99(B) of NIRC]
•
Gifts made to or for the use of the National Government or any entity created
by any of its agencies which is not conducted for profit, or to any political
subdivision of the said Government (Sec. 101 of NIRC)
•
Gifts in favor of non-profit educational and/or charitable, religious, cultural or
social welfare corporation, institution, accredited nongovernment
organization, trust or philanthropic organization or research institution or
organization. Provided, however, that not more than 30% of said gifts shall be
used by such donee for administration purposes. (RA 1916; Sec. 101 of NRC).
Notice of donation by a donor engaged in business
•
In order to be exempt from donor's tax and to claim full deduction of the
donation given to qualified and duly accredited donee-institutions, the donor
engaged in business shall give a notice of donation on every donation worth at
least Fifty Thousand Pesos (P50,000) to the Revenue District Office (RDO)
which has jurisdiction over his place of business within thirty (30) days after
receipt of the qualified donee institution's duly issued Certificate of Donation,
which shall be attached to the said Notice of Donation, stating that not more
than thirty percent (30%) of the donation/gifts for the taxable year shall be
used by such accredited stock, non-profit corporation/NGO institution
(qualified-donee institution) for administration purposes pursuant to the
provisions of Section 101 (A)(3) and (B)(2) of the Code.
Exemptions
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Donations made to entities as exempted under special laws
a. Prizes and awards given to athletes,
b. Donation to the International Rice Research Institute.
c. Donation to the Ramon Magsaysay Award Foundation.
d. Donation to the Philippine Inventor's Commission.
e. Donation to the Integrated Bar of the Philippines.
f. Donation to the Development Academy of the Philippines.
g. Donation to the Philippine-American Cultural Foundation.
h. Donation to Philippine Health Insurance Corporation.
i. Donations of equipment, materials, services to the Task Force on human settlement
j. Donations to Intramuros Administration
k. Donations to Southern Philippines Development Administration
l. Donations to National Social Action Council
m. Donations to the Museum of Philippine Costumes
n. Donations to the Aqua-culture Department of Southeast Asia Fisheries Development Center of the
Philippines
O. Exempt donations under bayanihan act
Deductions
•
Encumbrances on the property donated if assumed by donee.
•
Diminutions
Reduction in the value of the donated property as provided by the
donor. It refers to the decrease in the value of the donated property
as a result of a condition made by a donor to the donee
Practice problem
•
On November 25, 2025, Aslan made donations to Peter and Mj, son
and daughter-in-law, on account of marriage, of real property with a
fair market value of P3,000,000. The property was mortgaged for
P500,000 assumed by the donees.
•
Determine the donors tax due
•
P135,000
Computation of Donors tax due
COMPUTATION OF DONORS TAX SHALL BE ON CUMULATIVE BASIS (ON GIFTS
MADE WITHIN THE SAME CALENDAR YEAR).
•
to arrive at the taxable base, all the gift previously made in the same
calendar year must be added to the present gift. However, the gift taxes
paid on the previous donations are allowed as tax credits on the tax due.
For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the
transfer that accrues to the donee
Computation of Donors tax due
FIRST DONATION OF THE YEAR
Subsequent donations
For purposes of the donor’s tax, “NET GIFT” shall mean the net economic benefit from the
transfer that accrues to the donee
Practice problem
•
•
•
•
Harry donated the following during the current year:
Jan 10 – To his friend, Ron, P800,000
May 15 – To his uncle, Sirius, P700,000
September 15 – To his cousin, Voldemort P900,000
•
Determine the donors tax payable on Jan 10, May 15 and September
15.
•
•
•
Jan 10= 33,000
May 15= 42,000
September 15= 54,000
Donation made by spouses
•
For purposes of the donor’s tax, husband and wife are considered
as separate and distinct taxpayers
•
Gift from common property= Gift is taxable one half to each spouse
• Donation between spouses during the marriage
General rule: the gift is not taxable
Exception: Moderate gifts between the spouses are valid
•
Practice problem
Mr. and Mrs. Smith made the following donation during 2025
• March 25:
Vacation house and lot in Zamboanga city worth P40,000,000 to their grandson
Paul. The property was mortgaged for P20,000,000 (Unpaid at the time of
donation), ½ was assumed by Paul.
• Oct 25
Jewelry (Capital property of Mr. Smith) worth P5M to Aba. They agreed Ana will be
the one to pay the donors tax thereon.
A. How much is the donors tax due of Mrs Smith on March 25? 885,000
B. How much is the donors tax due of Mr. Smith on October 25? 300,000
Donations made by foreign corporation
• Subject to donor’s tax only if the property donated is located
in the Philippines
• Donation of a foreign corporation of its own shares of stocks
in favor of a resident employee is not subject to donor’s tax.
It is assumed as compensation for services rendered under
an employer-employee relationship, hence, subject to
income tax
Splitting of gift
• tax minimization scheme (TAX AVOIDANCE) which is done by
spreading the gift over numerous calendar years to avail of
lower tax liability.
• Under the train law. The first P250,000 donation during the
calendar year is exempt. Therefore, splitting the gift into
several years may result to a lower tax due.
Tax credit for foreign donors tax
• Same rules in Gross estate
Practice
A resident citizen taxpayer made the following gifts to his
relatives:
Philippines
Japan
Palestine
Malaysia
Gross Gift
750,000
500,000
250,000
500,000
Deduction
250,000
200,000
150,000
150,000
25,000
12,000
10,000
Tax paid
How much is the donors tax payable?
P30,800
Administrative Provisions
• Filing of Return- BIR 1800
• The return shall be filed within thirty (30) days after the gift
(donation) is made.
• A separate return is filed for each gift (donation) made on
different dates during the year reflecting therein any
previous net gifts made in the same calendar year.
• Only one return shall be filed for several gifts (donations) by
the donor to the different donees on the same date
• This return shall be filed in triplicate by any person,
natural or juridical, resident or non-resident, who
transfers or causes to transfer property by gift, whether
in trust or otherwise, whether the gift is direct or
indirect and whether the property is real or personal,
tangible or intangible.
Administrative Provisions
• Contents of the donor’s tax return:
a. Each gift made during the calendar year which is to be
included in computing net gifts;
b. The deductions claimed and allowable;
c. Any previous net gifts made during the same calendar year;
d. The name of the donee; and
e. Such other information as may be required by rules and
regulations made pursuant to law.
Administrative Provisions
• Time for filing of return
The donor’s tax return shall be filed, either electronically or
manually, within thirty (30) days after the
date the gift is made or completed.
Administrative Provisions
• Place of filing of return (EOPTA)
Except in cases where the Commissioner otherwise permits, the
return shall be filed and the tax paid,
either electronically or manually, to:
a) Any authorized agent bank,
b) Revenue District Office through Revenue Collection Officer,
or
c) Authorized tax software provider.
Administrative Provisions
• Notice of donation by a donor engaged in business
• The donor engaged in business shall give a notice of
donation on every donation worth at least P50,000 to the
RDO which has jurisdiction over his place of business within
30 days after receipt of the qualified donee institution’s duly
issued Certificate of Donation, which shall be attached to the
said Notice of Donation, stating that not more than 30% of
the said donations/gifts for the taxable year shall be used for
administration purposes.
CERTIFCATE OF
DONATION (BIR 2322)
-Submit within 30 days after
the receipt of donation
Three Copies
1.) Donor
2.) BIR
3.) Donee
END OF DONORS TAX
Practice
Kevin made the following donation in June 2025:
Car- to his friend, Anora, the car is worth P1,500,000, registered
in UK. A donors tax worth P60,000 was paid in UK.
Cash- to his brother, Adrian, worth P500,000 on account of
marriage.
Compute the donors tax after tax credit
45,000
Practice
CAR
CASH
Total Gross gift
Deductions
Net gift
Exemption
Net taxable gift
Rate
Donors tax due
Less: Tax credit
Donors tax after tax credit
P1,500,000
500,000
2,000,000
(0)
2,000,000
(250,000)
1,750,000
6%
105,000
(60,000)
45,000
Tax credit Limit:
Actual: 60,000 (LOVVER)
1,500,000
Limit: 105,000X
78,750
2,000,000
Practice
Marika made the following donations during the year
March 5- To Malenia, legitimate child on account of marriage bank deposit with BDO worth
P600,000
To Miquella, her son, car in Japan worth P400,000, Donors tax paid in Japan is P18,000
August 5- To Messmer, her son, property worth P250,000 in Manila.
A.) Compute the donors tax due after tax credit on March 5
B.) Compute the donors tax due after tax credit on August 5
27,000
15,000
Practice
March 5
Bank Deposit
Car
Gross gift
Deductions
Net Gift
Exemption
Net taxable gift
Rate
Donors Tax due
Less Tax credit
Tax after credit
600,000
400,000
1,000,000
(0)
1,000,000
(250,000)
750,000
6%
45,000
(18,000)
27,000
Tax Credit
Actual Paid: 18,000
400,000
1,000,000
Limit: 45,000X
LOVVER: 18,000
=18,000
Practice
August 5
Current Gross gift
Deductions
Net Gift
Prior net gift:
Total Net Gift
Exemption
Net taxable gift
Rate
Donors Tax due
Less: Tax paid previously
Less Tax credit
Tax after credit
250,000
(0)
250,000
1,000,000
1,250,000
(250,000)
1,000,000
6%
60,000
(27,000)
(18,000)
15,000
Tax Credit
Actual Paid: 18,000
400,000
1,250,000
Limit: 60,000X
LOVVER: 18,000
=19,200
Practice
Kevin made the following donation in June 2025:
Car- to his friend, Anora, the car is worth P1,500,000, registered
in UK. A donors tax worth P60,000 was paid in UK.
Cash- to his brother, Adrian, worth P500,000 on account of
marriage.
Compute the donors tax after tax credit
45,000
Practice
CAR
CASH
Total Gross gift
Deductions
Net gift
Exemption
Net taxable gift
Rate
Donors tax due
Less: Tax credit
Donors tax after tax credit
P1,500,000
500,000
2,000,000
(0)
2,000,000
(250,000)
1,750,000
6%
105,000
(60,000)
45,000
Tax credit Limit:
Actual: 60,000 (LOVVER)
1,500,000
Limit: 105,000X 2,000,000 78,750
Practice
Marika made the following donations during the year
March 5- To Malenia, legitimate child on account of marriage bank deposit with BDO worth
P600,000
To Miquella, her son, car in Japan worth P400,000, Donors tax paid in Japan is P18,000
August 5- To Messmer, her son, property worth P250,000 in Manila.
A.) Compute the donors tax due after tax credit on March 5
B.) Compute the donors tax due after tax credit on August 5
27,000
15,000
Practice
March 5
Bank Deposit
Car
Gross gift
Deductions
Net Gift
Exemption
Net taxable gift
Rate
Donors Tax due
Less Tax credit
Tax after credit
600,000
400,000
1,000,000
(0)
1,000,000
(250,000)
750,000
6%
45,000
(18,000)
27,000
Tax Credit
Actual Paid: 18,000
400,000
Limit: 45,000X1,000,000=18,000
LOVVER: 18,000
Practice
August 5
Current Gross gift
Deductions
Net Gift
Prior net gift:
Total Net Gift
Exemption
Net taxable gift
Rate
Donors Tax due
Less: Tax paid previously
Less Tax credit
Tax after credit
250,000
(0)
250,000
1,000,000
1,250,000
(250,000)
1,000,000
6%
60,000
(27,000)
(18,000)
15,000
Tax Credit
Actual Paid: 18,000
400,000
Limit: 60,000X1,250,000=19,200
LOVVER: 18,000